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Netflix splits off DVD service as Qwikster, adds video games

updated 07:45 am EDT, Mon September 19, 2011

Netflix drops physical movies from core business

Netflix chief Reed Hastings in a statement late Sunday revealed that the company was forking its traditional physical disc service out under the Qwikster name. All Blu-ray and DVD rentals will now go under the new banner while Netflix is reserved solely for Internet streaming. While the service will give users two account locations, it should also provide a route for significant improvements now that disc rentals have a dedicated team, Hastings said.

The first change would be a long-requested addition of video games. Subscribers will have the option of paying extra for PS3, Wii, and Xbox 360 title rentals similar to a service such as Gamefly, albeit without the ownership option. More extras would be coming, Netflix's CEO said.

Costs for upgrading to games haven't been detailed, but prices are expected to remain the same when Qwikster is ready in the next few weeks, with any existing DVD rentals split off on a separate bill. "We're done with that," according to Hastings.

DVD operations head Andy Rendich would be the CEO of Qwikster.

The revelation was also accompanied by an apology. The company founder explained that he hadn't been "extra-communicative" and considered that his main fault. He admitted that even the Qwikster decision might be "moving too fast" but justified it by promising "substantial" additions to streaming. It was better to move too fast than to move too slow, he said, taking an indirect jab at companies like Starz or movie studios that were trying to shelter their physical movie businesses.

"Most companies that are great at something -- like AOL dialup or Borders bookstores -- do not become great at new things people want (streaming for us) because they are afraid to hurt their initial business," the CEO wrote. "Eventually these companies realize their error of not focusing enough on the new thing, and then the company fights desperately and hopelessly to recover. Companies rarely die from moving too fast, and they frequently die from moving too slowly."

The deal is as likely to be a hedge against any changes in DVD rentals. The recent price hikes, which charge as much as $16 for a mix of DVD and streaming access, has led some to cut back and choose the $8 streaming-only option. Qwikster will let Netflix operate its Internet streaming more independently even if discs are no longer sustainable. The Internet component is already as much as 64 percent of US digital video, according to NPD figures, beating out pay-per-title services like iTunes as well as newcomer subscription options like the Internet Video component of Amazon Prime.



By Electronista Staff
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Comments

  1. kavok

    Fresh-Faced Recruit

    Joined: May 2010

    +8

    Um...

    Wasn't Netflix originally DVD only? I guess they've finally come full-circle. How long will it be before Qwikster starts streaming video on it's own? Couldn't they have picked a better name for the service?

  1. climacs

    Junior Member

    Joined: Sep 2001

    +3

    dumb name

    interesting the difference that clear communication can make...

    Netflix should have been more up-front like they are now, it would have made the price change easier to understand and swallow. Evidently they meant to split off the DVD service eventually; this is just moving it up. But without that context, it sure seemed like they were trying to soak us. I think customers were offended that there was no 'package deal' discount for maintaining both DVD-by-mail and streaming.

    Likewise, the Final Cut Pro X debacle could have been largely avoided if Apple had more clearly communicated what was coming and why, rather than just throwing it over the wall.

  1. prl99

    Forum Regular

    Joined: Mar 2009

    +1

    want more titles

    I got my letter this morning and will try and figure out how to respond to Reed. I want the streaming service but it is severely limited in its movie selections. I would drop the DVD part if every DVD was available for streaming but I bet there's some kind of restriction on this or Netflix just can't keep up with technology to create streaming versions of the latest DVD titles.

  1. coffeetime

    Junior Member

    Joined: Nov 2006

    +3

    not so sure...

    of their plan will succeed. After they split, I would rather go for Qwuikenster than Netflix because Netflix's streaming selections are weak. All the 99% of new DVD titles available only on DVD. I might even re-consider Blockbuster since their $10 including DVD and "streaming". Blockbuster's "streaming" works differently because it downloading first then you watch (kind of like iTunes). Therefore Blockbuster streaming App for iOS is not possible because iOS forbids third party saving media file onto iOS hard drive.... that's the downside of Blockbuster.

  1. facebook_Al

    Via Facebook

    Joined: Sep 2011

    +2

    Won't be subscribing to Qwikster

    I too received the letter from Reed Hastings, and it was a bit of a mea culpa for not doing a better job of explaining the rate increases that Netflix rolled out. I'm not at all clear as to why Netflix felt the need to abandon such a great brand in order to split out their DVD rental business from their streaming business. That's the way it is right now, before they roll out the Qwikster service. You have the option of selecting the streaming video subscription, plus several different DVD options. This seems like a huge mistake to me, and the 7,000 individuals (as of early this morning) who left comments on the Netflix blog, all of which were overwhelmingly negative.

    I, for one, will not be subscribing to Qwikster. I don't rent as many DVDs as I used to, so it will probably be less expensive for me to rent them à la carte from a store, vending machine, or another online source.

  1. brainiac

    Fresh-Faced Recruit

    Joined: Sep 2003

    +2

    The next great thing

    Yes, AOL and Borders did something great, but they didn't follow-up with something great. At least Netflix is following up with... wait a minute... I can pay $8.99 more, not get any new releases, Starz which seemed to be the only meaningful source of new releases is leaving... never mind. Well, I guess it is good because they have a lot of cartoons and content for children so parents will be able to set their children in front of the TV any time they don't want to interact with them like after school, weekends, holidays, and such.

    Kind of like releasing FCP or a limited iPad competitor (copy and paste in the next release) and saying it will be the next great thing but you need to wait for awhile until the compelling features are added.

    At least the DVD service finally has a unique and innovative name that represents the half-week turnaround on discs.

  1. rvhernandez

    Fresh-Faced Recruit

    Joined: Apr 2005

    +5

    Final Straw

    This was it. I cancelled my account. It is absolutely stupid that I would have to manage two websites and lists. Sorry Netflix, this was just about the stupidest move I've ever seen a company do.

  1. aristotles

    Grizzled Veteran

    Joined: Jul 2004

    +1

    Speaking of dumb names...

    Netflix did not make much sense as a rental company for physical media through the "mail". When I first heard of "Netflix", I thought it was a streaming service.

  1. jrflorance

    Fresh-Faced Recruit

    Joined: Nov 2001

    0

    Validation

    This just seems like a validation of Jobs' vision that physical media is going away. Netflix is agreeing with it and dumping their physical media side.

  1. vintagegeek

    Fresh-Faced Recruit

    Joined: May 2007

    +1

    Hmmmm

    What happens when Comcast, or Time-Warner eventually offer 90% of the movies via their OnDemand? Comcast Broadband is probably carrying 35% of the Netflix Streaming already. ............Waat Wooh.

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