Netflix splits DVD and streaming service
- 19 September 2011
- From the section Technology
Netflix has decided to split its DVD-by-post business from its movie streaming service.
The streaming service will keep the name Netflix but the postal DVD rental business will be renamed Qwikster.
The announcement comes two months after US firm Netflix bumped up the price of the combined renting and streaming service by 60%.
The price hike is thought to be behind the sharp drop in subscriber numbers Netflix has seen.
In July, Netflix reported that it had about 25 million subscribers. In an earnings report last week it said it now expected subscribers to number 24 million at the end of September.
The news caused shares in the firm to drop 19% which brought the total decline in its share price to almost 50% following the July price rise.
Netflix boss Reed Hastings took to the company's blog in a bid to calm the ongoing furore by explaining its reasoning behind the changes.
He said problems had arisen as Netflix evolved from the DVD rental business that spurred its initial growth to a company in which most of its customers were streaming movies via the web.
"...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," Mr Hastings wrote.
This was the reason it split DVD rental and streaming into separate businesses and charged for both, he said.
After the split, customers will be charged for each service they use and their bank and credit card statements will show separate payments. In addition, any feedback they give on good or bad movies via one service will not be mirrored on the other.
"Arrogance" based on past success meant the company neglected to keep its customers informed, he said.
"I messed up," he wrote. "I owe everyone an explanation."