Netflix Splits DVD & Streaming Business, Spins Off Into Qwikster

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Amid changes in the media-consumer landscape in the country, Netflix is announcing a big, bold business move. The company is splitting into two, with Netflix retaining its video-streaming service, and the DVD and game rental company being called Qwikster.

“I messed up. I owe everyone an explanation,” Netflix CEO Reed Hastings blogs. This might be a strange message coming from a company CEO, but with the company’s stock rapidly declining and with customers clamoring for better service prices, this executive feels he does need to explain some things, particularly why Netflix decided to charge for both streaming access and DVD rentals.

Hastings does not apologize for the streaming service price increases, though. Instead he announces a big, bold change in how the company is run — and how it deals with its customers. Hastings says that companies need to evolve, and goes on to give a few examples of how firms that were strong in their core business competency lost out to newer ways of doing business, like how AOL was the leading dial-up provider but is struggling in today’s broadband-dominated world.

As such, Netflix may be the leading DVD-by-mail provider today, but it wants to likewise excel at its streaming business. However, the company now realizes that it cannot focus on both businesses.

[W]e realized that 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. It’s hard for me to write this after over 10 years of mailing DVDs with pride, but we think it is necessary and best: In a few weeks, we will rename our DVD by mail service to “Qwikster”.

Hastings says they chose the name because it refers to quick delivery. Meanwhile, the “Netflix” name is still very much appropriate for a movie streaming service (“network” and “flicks”). Further, there will be no pricing changes, and members who are already signed up for both services will have their credit card bills reflecting two services — one for Netflix and one for Qwikster.

Long-time Netflix employee Andy Rendich, who has likewise been managing on the company’s DVD service for the past four years is named CEO of Qwikster. Hastings says the new Qwikster.com website will be up in a few weeks, although it will be very much like the current Netflix DVD rental site, but only rebranded. Qwikster will also offer video game rentals by mail, which is said to be a long-requested service from the company.