Netflix Splitting Streaming and Rental Services into Two Companies

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Netflix Splitting Streaming and Rental Services into Two Companies

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In a desperate attempt to rebound from falling membership and plummeting stock prices, Netflix is creating Quikster to handle DVD and videogame rentals.

Reed Hastings, the founder and CEO of movie streaming and rental giant Netflix, made a post on his blog late Sunday night announcing a massive restructuring of the business. Netflix will soon be a company that deals only in the media streaming business; the rent-by-mail service long associated with Netflix will be operated by a new company entirely, going by the name of Quikster.

The post makes clear that Hastings believes that the drop in membership and customer backlash at the company's recent price hikes and plan restructuring shows that the two services are hurting each other. "I messed up," he said. "Streaming and DVD by mail are becoming two quite different businesses, with very different cost structures, different benefits that need to be marketed differently, and we need to let each grow and operate independently."

To make the change more attractive, Quikster will rent not only movies, but will feature an upgraded service that will allow the rental of videogames for the Wii, PS3, and Xbox 360. "Members have been asking for video games for many years, and now that DVD by mail has its own team, we are finally getting it done," said Hastings.

The new company will have a separate website, separate queue, and separate monthly charges, but the price remain the same as the current DVD-only service. Quikster will be headed by Andy Rendich, the current head of the DVD service at Netflix, who plans on keeping the iconic red envelope, albeit with a new logo.

Already, the change is drawing flak from users, who are citing the inability to search both services at the same time, the unnecessary complexity of using two separate services, and the inability to share ratings between Quikster and Netflix as primary concerns, on top of the still-present anger at the price hikes and loss of content.

What with the current feeling of the users, the shakey financial situation, the loss of streaming content, and now a rebranding and massive service change, I can't help but shake the feeling that Netflix's rough patch is far from over.

Source: Netflix Blog

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Good info to know. I currently don't subscribe to Netflix, but was hoping to once I moved out come spring so I didn't have to pay a lot of money for things like HBO that I barely use.

I do wonder how this is going to affect their sales. Here's hoping they don't croak before I'm able to use them.

I think Netflix's mistake is having the company goal of slowly fading out their physical DVD rental service. Not everyone has a connection strong enough to support the streaming of digital content or the download of digital content in a timely manner.

I was actually considering signing up for Netflix when I moved away to university, but then I read about how they were trying to get rid of their physical DVD rental service (the service I was actually interested in) and decided against it. If their business model was going to be trying to make it harder and harder for me to get a physical rental from them (because the bandwidth here at the dorms can't support streaming of any kind and takes at least half an hour to download files of only a few megabytes) then why should I give them my money?

I think what we're seeing is the result of their want to move away from mailing out physical copies. In their attempt to discourage people from using that service their pissing off everyone by make things unpleasant across the board. I would certainly say that splitting off into two companies is a mistake. Though from what I understand cable companies don't like Netflix since it's muscling in on their turf, so companies like Comcast are working to make the operating costs of Netflix so high it eventually runs them out of business. This might be their efforts finally paying off.

Ahh the dumb get dumber...

"Hey everyone hated us because we fucked everything up once, lets do it AGAIN! This will make them happy, right? Right..?"

And the whole "hey nao we rentz gamez!" idea is kind of interesting... until you consider that they will probably charge more still for that.

Now, if netflix offered game streaming like Onlive, now THAT might make the streaming version worth while!

Heh.

Thats what you get for limiting your market.

They missed the point. I switched to blockbuster to try to protest the price hike and found that Netflix is a great service for 2 reasons. First streaming is ridiculously important to add on every subscription. Also the very fast and accurate shipping. Blockbuster had blurays and games but that is worthless without streaming and quick shipping.

I'll have to agree they were killing themselves trying to have both physical and streaming since they were essentially competing against each other after the split and price hike, everyone I know who had netflix dropped one service simply due to the cost, maybe splitting the sides along with restructuring will allow them to pick back up I did enjoy the service when I had it and do plan on picking it back up since it really is quite cheap even at the new price point I rented a few movies from the local store 12.30 for 4 movies for 2 nights. Of course this move probably won't win back any of the people who left due to the price increase but I don't think anything besides the almost unheard of price drop would bring them back and even that seems iffy.

KeyMaster45:
I think Netflix's mistake is having the company goal of slowly fading out their physical DVD rental service. Not everyone has a connection strong enough to support the streaming of digital content or the download of digital content in a timely manner.

Unfortunately for them (and the people who use their physical rental). Getting things mailed to you is becoming harder and harder. In the US, they still use the USPS. The USPS has been leaking money like a sieve, and is constantly having to raise rates and cancel delivery dates during the week. Snail mail is dead and it's slowly killing the regular mail system with it.

Dear Netflix,

Nice try but we're honestly not that stupid.

Signed,
A soon to be cancelled Netflix user

an alternative to Gamefly's crappy service? YES PLEASE!!!

FelixG:
Ahh the dumb get dumber...

"Hey everyone hated us because we fucked everything up once, lets do it AGAIN! This will make them happy, right? Right..?"

And the whole "hey nao we rentz gamez!" idea is kind of interesting... until you consider that they will probably charge more still for that.

Now, if netflix offered game streaming like Onlive, now THAT might make the streaming version worth while!

Resist the Cloud. Resist Onlive.

FelixG:
Ahh the dumb get dumber...

"Hey everyone hated us because we fucked everything up once, lets do it AGAIN! This will make them happy, right? Right..?"

Well, surely if one stupid and controversial decision didn't work, the solution is another!

I will never understand why people get so pissy about netflixs price hike. Its still cheaper to get netflix for a month then to rent two movies almost anywhere else. The selection has also gone up leaps and bounds over the past six months especially recently.

I think seperating the streaming and mail services even more is a great idea. Adding in games to the mail is only going to make that service better. I would never get the mail one myself but it does seem like a good deal especially if you have a bandwidth cap on your internet.

Guys who are crying and are butt hurt over this, im sorry to tell you, but other them that dvd that is hard to find, i can get any new release from red box for a dollar a day RIGHT NOW, i don't have to wait three or four days, longer if i ask for them in the weakened.

StraightToHeck:
an alternative to Gamefly's crappy service? YES PLEASE!!!

The announcement only named the Wii, 360 and PS3, though. No handhelds or previous gen games.

Personally, I think I'm willing to stay with a slower service with a larger library.

Will the current DVD subscriptions carry over to the new company, or do we need to cancel our Netflix ones, and then make a new one at this Quikster place?

This is a dumb idea on Netflix's part. That sound you hear has got to be their stock falling through the floor.

Also... it's Qwikster. With a W.

And I think that's part of the problem.

I only subscribe to netflix streaming now because of the economics of the situation. I can get a movie or game for $1 a night at a redbox. Selection is not as good as netflix but for the most part fulfills my needs. At $8 a month for DVD by mail,that means I need to get at least watch 9 movies a month by DVD from netflix to make it worthwhile compared to redbox. That doesn't happen at all. At best there is a 3 business day turnaround for each DVD if I watch it the day I get it and mail it out the next day. That means I need 27 business days in a month to get my money's worth. That just doesn't happen. Streaming I do great with, but that's because I love watching the older tv shows.

Provided that qwikster has some way of notifying it's Netflix members when a DVD in their queue is available for streaming, this seems like great news for DVD by mail subscribers (provided the gaming service is reasonably priced)

As a streaming only member I still feel that I'm unapologetically getting the shaft.

Sorry double post

Splitting up the two services just makes things more inconvenient for customers. I can't see how this is a good thing and the video game thing could have been done under the Netflix brand.

It isn't cute to purposely misspell a word to create your company name and it's even worse when the best name you could come up with is Qwikster. Did they have a brand name contest for 2nd graders?

Thats dumb. In the UK we use LoveFilm, which is the same service. If they split i bet they will charge and it will cost you more in the long run. Also will cost them more money. How can splitting save money? That makes no sense to me.

You see, this could either be a catastrophically bad idea, or a really good one. I love Netflix, I use it everyday, especially the streaming. At home, where I have a lightning fast internet connection (I'm a commuter) I can watch all the anime I want via streaming. However, I'm the president of an anime club at my university. A very BIG anime club and we want to be able to watch our anime. Unfortunately, the internet connection of our university sucks and it's almost impossible to stream the anime we want (and since we're officially recognized, it all has to be legal streaming). So, we've been using Netflix's DVD service. It's been really nice until, all of a sudden, they decide they want to start eliminating the DVD service and removing series they promised to have available. This is a major problem because then we have to spend the money to purchase the anime, instead.

Now to my point. If this "Qwikster," or whatever, is going to be a 100% DVD driven service, that could be good. But to do this, they need to replensih their supply of movies, series, etc. All of the selection promised on Netflix, whether available or not, needs to be available. Otherwise, it's just a major inconvenience to the customer. I wouldn't mind cancelling half of my subscription to Netflix and switching it over to Qwikster if I had a gurantee that they'd be more reliable. The fact is, DVD's are not dead. They still are sold in retail, they're still a very big part of our economy and not everyone has the power to stream. Perhaps, someday, everyone will have inifite bandwidth and we'll be able to download an episode or two within a second, but that's not the case right now.

All you same people were bitching at netflix before, and now you are bitching again when they try to do something about it.

Streaming started out small, then got rediculously popular. Over what they thought would happen. Bandwidth=$$$ so they had to charge more. People BITCHED oh how they whined. So they say alright, dont want streaming we will make it seperate. People BITCH oh how they moan.

I wonder how this will affect gamefly...have to see the pricing teirs before I make my choices.

Satsuki666:
I will never understand why people get so pissy about netflixs price hike.

Netflix themselves addressed this. They were complete and utter dicks about it, and it bit them in the ass.

Saying "it's still cheaper" is missing the point, and it's pretty much the point that dropped their membership and stock prices.

bombadilillo:
All you same people were bitching at netflix before, and now you are bitching again when they try to do something about it.

Pay more attention. They're not trying to do something about it.

Streaming started out small, then got rediculously popular. Over what they thought would happen. Bandwidth=$$$ so they had to charge more. People BITCHED oh how they whined. So they say alright, dont want streaming we will make it seperate. People BITCH oh how they moan.

They already made it separate. This is not that move. Try and keep up.

Bandwidth? Not that expensive. Especially since it takes weight off the more expensive physical shipping options. You know, the reasons companies want to do it in the first place.

I don't know, maybe you're trolling, with the PEOPLE BITCH every five seconds, but I'm treating you as legit and uninformed. Call it benefit of the doubt. If you are going to revel in people "bitching" at least try and be up to date on what's actually happening.

Zachary Amaranth:

Satsuki666:
I will never understand why people get so pissy about netflixs price hike.

Netflix themselves addressed this. They were complete and utter dicks about it, and it bit them in the ass.

Saying "it's still cheaper" is missing the point, and it's pretty much the point that dropped their membership and stock prices.

What point? I seriously do not understand why people are whining about it. All I hear is things like this./ "They missed the point" Do you have a point?

Zachary Amaranth:

Satsuki666:
I will never understand why people get so pissy about netflixs price hike.

Netflix themselves addressed this. They were complete and utter dicks about it, and it bit them in the ass.

Saying "it's still cheaper" is missing the point, and it's pretty much the point that dropped their membership and stock prices.

That still doesnt explain anything. Before the price hike it was an absolutely insanely amazing deal. After the price hike it was still an amazing deal. They kept adding more and more content and didnt increase the price. I thought it was extremely obvious that they were going to be forced to raise their price and oh look they did. Then again I work in cost accounting so I understand that you cant keep adding more and more costs to a service without eventually raising the price for it.

I guess they could have gone about it a better way but really I didnt think it was a very complicated matter to understand. They had three options available to them, raise the prices, split the service or go bankrupt.

Zachary Amaranth:

bombadilillo:
All you same people were bitching at netflix before, and now you are bitching again when they try to do something about it.

Pay more attention. They're not trying to do something about it.

Streaming started out small, then got rediculously popular. Over what they thought would happen. Bandwidth=$$$ so they had to charge more. People BITCHED oh how they whined. So they say alright, dont want streaming we will make it seperate. People BITCH oh how they moan.

They already made it separate. This is not that move. Try and keep up.

Bandwidth? Not that expensive. Especially since it takes weight off the more expensive physical shipping options. You know, the reasons companies want to do it in the first place.

I don't know, maybe you're trolling, with the PEOPLE BITCH every five seconds, but I'm treating you as legit and uninformed. Call it benefit of the doubt. If you are going to revel in people "bitching" at least try and be up to date on what's actually happening.

Really? Streaming hundred of thousands of high def movies every month "isnt that expensive"? Normal sites that are text and pictures use insane bandwidth. You are dismissing that pretty offhand. Explain to me how netflix bandwitdh cost hasnt gone up since they started streaming and its popularity took off. Try and keep up.

Go read any netflix netws story and see every comment whining about netflix.

Some guy just said "As a Streaming only customer I am getting screwed?" 1. How is he getting screwed. 2. How is that not bitching about something that doesnt even affect him.

Streaming is more convenient. Streaming is the future. The problem is that currently the library of stream available movies is pitifully small. Most of the movies I'm interested is mail in only. This needs to change, otherwise the streaming isn't worth paying for.

On a related note I think that Netflix's hands are tied. There are legal issues that keep the majority of the dvd only content off of the streaming list. Mostly contracts with on demand services. Stream-only movies will only be fully realized once these contracts giving companies exclusive rights to the most popular properties expire.

My fix is for Netflix to go back to the previous model, namely DvD and streaming for one reasonable price. Until they can bring the popular stuff over to stream-only its a compromise for everyone.

I can understand the need to do this but ultimately it seems like it does more to damage net-flicks then really help them.

Dendio:
Streaming is more convenient. Streaming is the future. The problem is that currently the library of stream available movies is pitifully small. Most of the movies I'm interested is mail in only. This needs to change, otherwise the streaming isn't worth paying for.

On a related note I think that Netflix's hands are tied. There are legal issues that keep the majority of the dvd only content off of the streaming list. Mostly contracts with on demand services. Stream-only movies will only be fully realized once these contracts giving companies exclusive rights to the most popular properties expire.

My fix is for Netflix to go back to the previous model, namely DvD and streaming for one reasonable price. Until they can bring the popular stuff over to stream-only its a compromise for everyone.

You do realise they had to raise prices because the rights to stream movies is expensive right? Your solution is to make it get the service for cheaper? Huh how novel.

You do realise they had to raise prices because the rights to stream movies is expensive right? Your solution is to make it get the service for cheaper? Huh how novel.

I say raise the prices once most of the dvd-only movies are up for streaming. Currently most of the popular movies are not available for streaming. Its my opinion that streaming currently is filled with older/B quality movies and shows that are not worth paying for. I'll be cancelling next billing cycle. But there are those who enjoy the older stuff and B quality horror films ( my girlfriend's sister for one) so to each their own.

You could say Hastings couldn't apologize fast enough.

Even with the price raise, it's still a good value but making it two completely different services is pretty stupid: wouldn't it have been easier/cheaper to just shut down the mail out service or sell it to Blockbuster?

I still think the prices are still reasonable but there is definitely a convenience to having one search for streaming and dvd. I've gone looking to rent a dvd and found that it streams. Now I'm going to have to check two separate sites. I'm not going to flip out about it but it's weird that they're trying to move it away from convenience when it's a service based on convenience. It will only encourage people to explore competitors. If it's not all on the same site, what's the difference?

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