Netflix CEO Reed Hastings made a huge announcement late last night. In a few weeks (no firm date yet), Netflix will be split into two entities. Streaming services will continue to be offered by Netflix, while DVD-by-mail will be offered under the name Qwikster. The announcement was made in two parts, a video (below) and a statement posted to the Netflix blog (also emailed to subscribers).
[yframe url=’http://www.youtube.com/watch?v=c8Tn8n5CIPk’]
Outside the over-emphasized immediate reaction from Wall Street, the biggest question at this point is whether Netflix’s streaming service will continue to grow while the DVD service, now dubbed Qwikster, will continue to shrink.
One clever mitigation of Netflix/Qwikster’s shrinkage problem is the addition of Nintendo Wii, PS3, and Xbox 360 video games to the mail service with an additional charge. As Hastings said in his statement, people have been clamoring for video games for a long time. Adding it now is a great way to hold onto subscribers, even possibly adding new ones currently using other video game rental services.
For the first time in months, Hastings has struck the right tone with this press release; not because of the apology, but because he didn’t wait until pitchforks were fetched and torches lit to offer a thorough explanation. I’m hopeful that he and Qwikster CEO Andy Rendich continue to employ this style of open communication during the coming transition.
P.S. They probably should have made sure the name Qwikster wasn’t already being used on Twitter. Something tells me that kid’s going to get a nice check real soon.
I am happy for the idea of game rental but wonder how much more it’ll cost. The name ‘qwikster’ is so Y2K though. I hate it.
Yeah, they need to drop that W now. It’s already driving me crazy.
This has “the board made me do it” all over it. Not surprising, considering how big of a hit Netflix stock has taken. Probably an over-reaction.
I bet they are splitting them so Qwikster can basically wallow as Netflix, circa 2000. All new features and bells and whistles will still go to Netflix, and they won’t touch Qwikster. That, or they’ll sell it off entirely and wash their hands of it.
He hasn’t “struck the right tone.” He’s badly bungled the entire affair. If I have to search twice and use two different web sites anyway, why would I bother sticking with Netflix? This just gives me more reasons to look into their competitors.
He even has the audacity to flat out lie to us, claiming that making the services more expense and less convenient is somehow better for us.
Hopefully when the board fires Hastings, they’ll replace him with someone competent who actually cares about retaining customers.