Article taken from New Edge. A publication of NTCA.
Via a blog post issued Sunday evening, Netflix CEO Reed Hastings announced that the company has decided to split into two separate entities: Netflix for its subscription-based online streaming service and Qwikster for DVD rentals by mail.
This decision comes on the heels of a recent price hike that had Netflix subscribers taking to industry blogs to voice their frustrations with the changes. Some subscribers also canceled their subscriptions, which led to a decline in stock price.
In the same blog post, Hastings issued an apology for the company’s strategic communications errors. “I messed up. I owe everyone an explanation,” he wrote. “In hindsight, I slid into arrogance based upon past success. We have done very well for a long time by steadily improving our service, without doing much CEO communication….But now I see that given the huge changes we have been recently making, I should have personally given a full justification to our members of why we are separating DVD and streaming, and charging for both. It wouldn’t have changed the price increase, but it would have been the right thing to do.”
Moving forward, each business will have its own distinct website and subscribers will need to manage their library queues and billing information via the separate portals.
In practical terms, Qwikster will be the same familiar Web interface and DVD service that existing customers are used to. However, DVD members will now be directed to visit www.qwikster.com. The company says the new website will be up and running in a few weeks. At launch, the company also plans to improve upon the site with a video games upgrade option, similar to its upgrade option for Blu-ray but directed at those customers who want to rent Wii, PS3 and Xbox 360 games. Other improvements are said to be forthcoming.
Andy Rendich, who has been working with the DVD service for 12 years, will take the helm as the new CEO of Qwikster.
In explaining the strategic decision, Hastings said that the online company needs to focus on rapid improvement as streaming technology and the market evolve, without having to maintain compatibility with its DVD by mail service.
“For the past five years, my greatest fear at Netflix has been that we wouldn’t make the leap from success in DVDs to success in streaming. 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. 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.”
Hastings hinted that the company will reveal substantial new streaming content in the next few months.
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