10 ms·

Netflix Splits DVD And Streaming Businesses

301 points by ssclafani 15y ago

whichdan 15y ago
I wonder what Netflix will show for search results that are only available on Qwikster.
- wmf 15y ago
  Probably nothing; they've been removing that kind of functionality (e.g. add to DVD queue from the streaming UI) for a while.
  - mirkules 15y ago
    I remember that when a movie became available for streaming if it was in your DVD queue, you would get notified in the UI. I don't know if that is true anymore?
- loganlinn 15y ago
  Hastings replied to that question in the Netflix blog post's comments: [1] Question: "If a film I search for on Netflix is not available for streaming, will the website still tell me if the DVD is available? Or must I search twice?" Reply: "ouch. You'd have to search the second place if we didn't have it in the first place." [1] http://blog.netflix.com/2011/09/explanation-and-some-reflections.html http://blog.netflix.com/2011/09/explanation-and-some-reflect...
  - Klinky 15y ago
    That's pretty bad. You'd think they could integrate an API system that at least allowed for the two services to interact with each other.
aaronbrethorst 15y ago
This decision was not made over night, and this change has been coming for quite a while. In fact, if you go look at this post on Netflix's API blog dated 27 June 2011[1], you'll see: As of Oct. 14th, 2011, the Netflix API will be focused exclusively on offering content and functionality from the streaming catalog. As a result, we will be discontinuing the support of DVD-related features in the Open API. They go on to say that this is to support long term goals around internationalization, but that does not, by any means, preclude this split. [1] http://developer.netflix.com/blog/read/Upcoming_Changes_to_the_Open_API_Program http://developer.netflix.com/blog/read/Upcoming_Changes_to_t...
- ethank 15y ago
  Qwikster.com was registered in May 2010. This was not an overnight decision and I doubt even the contrition in the blog post wasn't well planned.
  - waterlesscloud 15y ago
    I strongly suspect it's related to negotiating royalties for streaming based on streaming subscriber numbers, not the combined numbers. That was the reason behind the original split in the services, so it's probably why they're actually splitting the accounts.
    - elq 15y ago
      > That was the reason behind the original split in the services No. Not at all. The plans were split in preparation for the company split. This has been in planning for a long time.
      - biot 15y ago
        And the company split isn't "related to negotiating royalties for streaming based on streaming subscriber numbers, not the combined numbers" as waterlesscloud indicated? The public explanation of better focus for each business is sensible, but I think there is a not insignificant impact to licensing that drove the decision as well.
- mortenjorck 15y ago
  I know the Netflix name was chosen from the beginning to be compatible with a future streaming business, but seeing this chrysalis-style business plan unfold now is quite astounding in its long-term thinking.
ByteMuse 15y ago
This seems like an act of desperation.
hesdeadjim 15y ago
I read this and my brain immediately thought it had to be an April Fools joke. It took a second or two to remember it is September. Regardless, my hat is off to them for betting the company's name on their streaming business. I know that's the only part of their service I use anymore -- I've had the same DVD checked out for over a year because I couldn't be bothered to deal with the perceived hassle of managing my queue and planning what I want to watch in advance.
- outside1234 15y ago
  me as well. i thought: this can't possibly be real its so user hostile.
- morrow 15y ago
  Same here - I actually caught myself looking up at the date on the taskbar before realizing the same thing. I think the ridiculousness of the 'Qwikster' brand name was what made me doubt it at first.
bryanh 15y ago
In my opinion, this is definitely the obvious and correct move. It isn't a surprise that Netflix wanted to head towards a stream only business model, but this makes it crystal clear that Netflix is (at the moment) a premium streaming video company. I mean look at them, thats all they do now! The still face some big hurdles with all their streaming content deals, and the outcome will likely be what makes or breaks the Netflix we all know and love. Premium content providers (HBO, Starz, and now AMC, etc...) will always hold the upper hand here, and many already have streaming products in place. If not, its rather trivial to create nowadays. My prediction: Netflix becomes an original content powerhouse that harnesses the sort of democratic whimsey of the web. "House of Cards" is their toe in the water. I really see no other direction that is feasible with content providers fragmenting into their space and hoarding their popular original content.
- jeromeparadis 15y ago
  Interesting prediction. It would make a lot of sense to produce/fund more original content. It's definitely the direction the streaming business has to follow. If cool and original stuff is on Netflix only, it will be good for them and other original content producers may be more inclined to be there.
- timr 15y ago
  "this makes it crystal clear that Netflix is a premium streaming video company. I mean look at them, thats all they do now!" Yeah, well...now they're providing a commodity service. Renting DVDs through the mail has/had a huge infrastructure advantage for the established player. Streaming video over the internet? There are dozens of sites that do it well. The technical advantage is far less sustainable, because it isn't nearly as difficult. Once you're running a streaming-video business, the only differentiating advantage is content -- and you're in a weak position to negotiate for that content. Whereas before, the studios needed Netflix to distribute their content to consumers, the internet has turned the tables.
  - sthatipamala 15y ago
    Delivering streaming media content has some infrastructure costs as well. Bandwidth is not free (it will get worse if Net-neutrality dies) and one also needs to have a CDN to effectively deliver content to different geographies.
Lukeas14 15y ago
The elephant in the streaming office is the lack of blockbuster titles, many of which are only available through their DVD by mail business. If they're betting everything on streaming i'm guessing (hoping) that they've also figured out a solution to this problem. Otherwise, they've lost the big benefit of credibility that DVD by mail brought to their service.
- earbitscom 15y ago
  This split might be what they needed in order to secure more streaming deals. Time will tell.
- pkulak 15y ago
  Eh. I'll just use Redbox for that. Faster anyway.
  - twodayslate 15y ago
    Redbox is great. I love it. Redbox + Netflix Streaming + Hulu Plus should get you most of the movies and TV shows that you need.
- MatthewPhillips 15y ago
  The answer to getting new releases is obvious and I'm surprised they haven't done it already: pay-per-view. 3.99 for new releases, back catalog is free. What Amazon does, except they would have the advantage of the massive customer base. They could probably work out some deals with the studios where if a movie makes X amount on PPV it gets to move to the back catalog for a minimum of 6 months. Having that customer base would give them the leverage to make those types of deals.
eternalmatt 15y ago
What an absolutely awful name "Qwikster". I'm still frowning in disgust.
- MartinCron 15y ago
  Totally agree, I know first-hand how hard it is to come up with a good name coupled to an available domain name, but I would expect better from Netflix.
- lancewiggs 15y ago
  It makes me immediately think of "Quitster", not the best given the circumstances.
- sandieman 15y ago
  DVDflix!
- Klinky 15y ago
  I think 2003 called & they want Netflix to return their buzzword. Reminds me of two other failed businesses "Napster" & "Friendster"...
- mirkules 15y ago
  Honestly, I have to believe that it is some sort of homage to The Simpsons' Qwik-e-Mart. Otherwise, it is probably the worst name I have heard in a very long time, probably since Motorola's consonant craze started by RAZR (ROKR, PEBL, etc)
barrybe 15y ago
Side note: TechCrunch got back to doing real news. Good for them!
TomOfTTB 15y ago
I think this is a good move simply because the two divisions have contradictory goals at this point. For example, the Qwikster division should be looking at finding ways to deliver DVDs quicker (Kiosks for example). But that's not something that would ever occur to Netflix because they're focused on streaming as the future. Which is where the contradiction comes in. It is hard to run a business unit when the goal of the company overall is to kill off your unit. That said I think announcing it today is foolish. Even if it was their original plan to do so announcing it right after a stock drop makes the decision look rash. IMHO they should have put this announcement off for a couple weeks.
- earbitscom 15y ago
  I don't think any shareholders of consequence are going to think they just made this decision a day ago. Maybe they announced it after the stock plummeted because the assumption is it won't go down that much further, where a 2nd announcement after it rebounded might send it down yet again.
- barista 15y ago
  Also I don't get the creating of a new brand altogether. Netflix is a popular brand and a household name. Who knows qwikster? Looks indicative of a future split up of the company to me.
- Aron 15y ago
  In terms of stock timing, I have a hard time believing that this kind of move was completely held secret. This takes a lot of prep work, and whispering has to go on, and rumors spread fast to connected people who can profit. I suspect the excessive reaction last week to the news of that week may have actually been boosted by inside knowledge about this move today. So if any of that's true, you can't exactly assume that last week's stock move would have been the same in an alternate world where they weren't going to announce this today. At any rate, appearances generally give way to fact eventually.
krashidov 15y ago
I researched Netflix for a project back when they had around 8 million subscribers and the biggest part of their business was direct mail DVD. The strides they've come to have the Netflix brand as more than just a DVD rental service are immense. My only worry about this move is that they lose all of that brand recognition with "Qwikster."
sandieman 15y ago
Biggest downfall here will potentially be the separation of ratings. Dvd and streaming customers will have to rate dvd first and then see it as unwatched in streaming later? I think of Netflix as my repository for "what I have watched" and teller of "what you will want to watch". I don't tie the brand to a specific delivery mechanism (dvd or streaming).
morrow 15y ago
"...the Qwikster.com and Netflix.com websites will not be integrated. So if you subscribe to both services, and if you need to change your credit card or email address, you would need to do it in two places. Similarly, if you rate or review a movie on Qwikster, it doesn’t show up on Netflix, and vice-versa." Wow. I had previously thought that their pricing change was forcing consumers to effectively choose between streaming and disc-based services, but didn't expect that they'd actually go this far and completely cut the cord between the two. Considering the how much less efficient it is to mail movies than it is to download them in an age of high gas prices and fast internet, Netflix killing or spinning-off it's dvd service was an inevitability. I'm just not sure that right now the streaming service by itself has the selection to keep subscription numbers high enough to maintain sufficient leverage with content providers. Momentum is very important with the type of model they have: the more content Netflix loses to studios who start their own streaming services, the less appealing the Netflix service becomes to subscribers, which both weakens the argument for studios to stick with them due to the size of their subscriber base and also sets a positive example of succeeding without Netflix that other studios can follow.
- deleted 15y ago
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- evandena 15y ago
  My guess is that the logical split has to do with future contract negotiations. Netflix has no ties to DVD rentals, so maybe this aids them in the deals they are able to make.
  - pyre 15y ago
    As I understand it, most of the deals between Netflix and the studios are revenue sharing deals. So the studios have a vested interest in increasing whatever metrics they are basing the revenue sharing on. They could see streaming availability as hurting the DVDs 'sales.' Though this would apply industry-wide anyways, so I don't know if this would really put the streaming side of things in a better negotiation position.
- ABCD_FUFU 15y ago
icefox 15y ago
"Qwikster will also now offer video game rentals through the mail" While I wouldn't sign up full time for a game rental service I would be interested in getting a game now and then rather than a dvd. Suffice it to say for my needs a dvd in the mail fit my needs exactly and I will continue paying for that. Edit: not to mention from what I hear games always have a long waiting list on other services. I am more than happy to put a game at the top of my list and getting it at some point in the next two months, but meanwhile getting dvd's that I want.
- enjo 15y ago
  I'm hoping it comes with the requisite netflix...err qwikster... efficiency that I've come to expect. We tried Blockbuster for this, and it was a nightmare. Getting a game from them was an exercise in patience. We were with them for two months and didn't receive a single one:)
  - elq 15y ago
    I believe speed was one of the things Netflix wanted to communicate with the otherwise unfortunate name "Qwikster".
deleted 15y ago
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steve8918 15y ago
Gasp, this is turning into a joke! I had Netflix for a few months, I used it to watch the entire Battlestar Galactica. After that, I went through and searched for 30 different movies to watch, and they weren't available, and I'm not talking about new movies. None of the Indiana Jones', Star Wars', Rockies, Bladerunner, etc. Now with the Starz debacle, and with content providers getting ready to pound them with price increases, Netflix is in real trouble. Yes, streaming is the way to do it. I love streaming. But I don't think it will be through Netflix. This sounds like a company in its death throws. I simply don't understand why they would split themselves up into 2 companies. The only reason why I can think of why they would cut themselves into 2 companies, is so that the content providers can't use the DVD business' cash flow to pay for the content. So content providers can't charge an arm and a leg because the cash flow of the streaming side would be much smaller. However, the miscalculation here is that content providers can simply make their own content available themselves through streaming. Which is already happening in other continents, and even in the US through Google, Facebook etc. I think Netflix has severely miscalculated itself, and this may be the end.
- seanalltogether 15y ago
  The only reason why I can think of why they would cut themselves into 2 companies, is so that the content providers can't use the DVD business' cash flow to pay for the content. My thoughts exactly, I assumed the original separation was done so hollywood couldn't bargain over dvd profits, perhaps this move was done to make that wall even stronger. I fear for the future of netflix, it's an easy choice to have a subscription now, but what happens when the major studios get involved and start demanding serious money for their content.
outside1234 15y ago
what a terrible idea. the best part of Netflix is that it was integrated between DVD and streaming queues. dfm. how much does Amazon cost with Prime?
- metageek 15y ago
  Prime is $79/year.
- akat 15y ago
  I too think its a terrible idea but, What a stupid question. (how much does Amazon cost with Prime?) I hope you realize that if you cannot figure out an answer to that questions in like 10 seconds yourself, you probably shouldn't be commenting things like companies pivoting. (And an equally stupid answer. Prime is $79/year if you are not a (mom or a dad or a student))
badclient 15y ago
Make your bet. Two years from now, is Netflix still going to be doing DVDs in some form--whether via Qwikster or otherwise? I say yes.
crgt 15y ago
I'll throw it out as a side note, because in all the discussions I've read on Netflix of late no one seems to mention it: Netflix has FANTASTIC kids content available for streaming. My kids would revolt if we cancelled our service. That alone guarantees my business until there is a truly compelling replacement. I cannot believe we're the only family like this. And while this is probably not a large enough market to sustain them (let alone power growth), they do seem to have a pretty good sense of how people engage with their content - and my guess is that their deep long-tail of streaming content actually holds more appeal than might be guessed. To be honest, my only frustration with them of late has been the fact that my streaming queue is overrun with "Bob the Builder" & "Caillou" when I'm actually looking for something to watch. Perhaps this new, sharper focus on the streaming side will enable them to improve things like this? Here's hoping they survive this transformation and emerge stronger for it.
- JeffDClark 15y ago
  Totally agree. It was a no brainer to cancel the DVD side of our subscription, but the streaming, no way.
  - foobarbazoo 15y ago
    Amazon Prime streaming is more than enough for children, and most families already have it. And the kids don't care at all who they get the shows from. I expect Amazon to continue to aggressively compete in this area, not to mention Apple and someday, Google. Netflix is giving away their core advantage -- a huge content library and DVD/Blu-ray backup for anything not-yet streamed. No one else has that. Now they're just like everyone else.
    - kahirsch 15y ago
      > Amazon Prime streaming is more than enough for children, and most families already have it. The estimates I saw from February were 4-5 million Amazon Prime customers. That's much smaller than Netflix, much less "most families".
    - 15y ago
JeffDClark 15y ago
I think that everyone is missing the really big thing here, the US Post Office is screwed...
zachcb 15y ago
Video: http://mashable.com/2011/09/19/netflix-reed-hastings-video/?utm_source=twitterfeed&utm_medium=twitter&utm_campaign=Feed%3A+Mashable+%28Mashable%29 http://mashable.com/2011/09/19/netflix-reed-hastings-video/?...
badclient 15y ago
To reduce risk, I think they could have pushed the Quickster brand within the Netflix UI harder before putting all this on its own domain.
beagledude 15y ago
has everyone forgotten how limited the streaming service is? They should have waited until they at least have a selection. I'm going DVD service, and Amazon for streaming.
- learc83 15y ago
  It may be limited if you only watch movies, but If you like, say...British detective shows, there's enough episodes to keep you busy for a while.
  - bbgm 15y ago
    Or Dr. Who, or all seven seasons of Star Trek Voyager.
    - jamesgeck0 15y ago
      Until you want to watch the latest season of Doctor Who, which is currently available on DVD, but not on streaming.
- loso 15y ago
  And that is my main problem right there. Netflix streaming is good for finding old niche content but for general mainstream content, not so much. And now with Starz leaving.... The blog posting by the CEO was good but he still didn't answer questions about the content problem with streaming. He gave it a one liner at the end as if it was an afterthought. I am going to keep Netflix for now but I am on the edge. I know one thing, I'm far from an enthusiastic customer.
dr_ 15y ago
In theory, however, Qwikster doesn't have to limit itself to DVD's in the future. If it's real focus is shipping speed for items that are rented (or more likely purchased), it could expand into other product lines. Speed of shipping is a process in and of itself, something that very few companies, like Amazon, have gotten down.
bethling 15y ago
I kept my account even after planning on dropping it when the price increase happened, but now I don't really see any reason to keep my streaming account. At least when they were integrated, searching in one place, and having all my reviews in one place provided some additional benefit for me. Now I don't really see any benefit at all for keeping the streaming portion over Amazon Prime (which I have) and maybe adding Hulu Plus. I'll have to see if having the game option makes it useful for me to keep the DVD portion of my account. As soon as the sites split, NetFlix looses a great deal of value to me as a customer. Before it was a single place where I could pick movies to see - whether streaming or on DVD, now it becomes a repository of a bunch of okay television shows and (esp. once they lose Starz Play), a mediocre movie selection.
jjm 15y ago
Clearly this will be disheartening to the true user such as myself. By splitting functionality as to prevent easy access to either material nor allowing usage of existing ratings they're continuing the trend toward customer alienation. I say this almost all the time, but even if Netfix renegotiates for retaining Starz it is still not yet an adequate amount of viewing content for me to wholely dismiss DVD by mail, regardless of where I even stand on the matter in terms of philosophy. In the end I still gain a larger bill, continued limited streaming content, and a split in usability. And what of netflix when Hollywood continues to charge into extinction taking Netflix with them?
superkinz 15y ago
People always go up in arms about change of price like this. For a long time, the prices at Netflix mostly stayed the same because they started with DVDs, and later added streaming. The streaming catalog wasn't built out enough for them to monetize it with confidence. So what did they do? They gave us a break and let us have free streaming. Now that it's a significant catalog, they want us to pay for the service... which they have to license! And it aint cheap for them to do that. Now that it's doubled, people feel it's outrageous! But it's not because of the value they're receiving, it's because they're conditioned to expect one price and it's now higher. They lost a million subscribers, but Netflix will get those back after people realize they were being idiots. Let me ask you a question, would you rather pay $15 a month for unlimited streaming and DVDs, or $50 to Comcast for basic cable? In my book, $15 is a pretty damn reasonable price.
- Stratoscope 15y ago
  It's not the change of price that has everyone upset tonight. That already happened. What has people upset tonight is what customers will lose in this change: the convenience of a single website to find interesting movies and TV shows and arrange to view them by whichever delivery means is available.
- hdctambien 15y ago
  I still have to pay $50 to comcast so I can connect to the internet and stream my netflix.
- tomjen3 15y ago
  It would be if you could get everything they have on dvd streamed as well. Until that happens, neither of your two offerings are worth considering. Those who are more deviously than me would say that rapidshare.com is the best alternative right now.
- nirvdrum 15y ago
  They actually have been steadily raising prices. It's been really bad for those getting BRDs -- they've had 3 or 4 price increases. I think this is just the proverbial straw that broke the camel's back. We're getting no extra value for the increased price.
meemo 15y ago
The real question to ask is: Is this good for customers? It doesn't matter if the goals of the two businesses are different. What matters is how it affects customers. Do customers consider the services as separate entities or as two parts of the same whole? I think they'll lose a few customers who like both services, but feel awkward about dealing with two companies now instead of one (like me).
deleted 15y ago
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finin 15y ago
Netflix steaming is the new Blockbuster. I disliked Blockbuster because their stores had many copies of currently popular movies and not much else. I liked Netflix because it had an enormous catalog that let me work on seeing all of the great films that had been made in the last 100 years that I'd missed. Netflix streaming is like Blockbuster. At any given time it lets me access only a fraction of its catalog and that fraction is biased toward what is popular. Netflix steaming is the new Blockbuster. :-(
- pkulak 15y ago
  I'd love it if Netflix streamed popular movies.
hrasm 15y ago
A poorly thought out point: a defensive move against the whole company folding due to some reason?
cek 15y ago
That Netflix needs to keep making these changes is simply a symptom of a brutal endemic problem: In general, subscription business suck. Most subscription businesses suck because they are dependent on CAC (customer acquisition costs; the cost required to land a new sub) and churn (the percentage of subs that leave the service). For example, a typical gross CAC for a business like netflix is $200. At $10/mo the subscriber has to stay a sub for almost 2 years before any profit is made. Meanwhile the company had to spend the $200 up front, burning through capital. Also, meanwhile, 15-20% of the customers leave every month. Those customers will never pay off the costs the company spent to aquire them. It's an never-ending spiral of death. As seen by Vonage, Netflix, etc... But Netflix has another endemic problem: They are the bitch of the content providers. Netflix owns NOTHING (especially in their streaming only biz). All it takes is one content provider to balk (Starz) and the only way they'll get new subs is to spend more on marketing which raises CAC. Which accelerates death. Name a few successful subscription businesses. Successful (in my mind) means PROFITABLE. Revenue does not mean sh. Come-on, name 'em. (Those that you do name will have some sort of monopoly or exclusive right to a physical asset). This is why, as an investor, I will never invest in companies that think they can be successful with a subscription business model. This is also why Apple is kicking ass. Apple gets paid up front. The only way to go.
- jexe 15y ago
  Interesting, I would have argued the opposite: well thought-out subscription businesses are goldmines. Once you have a customer, you aren't billing them a single time -- often, you're billing them repeatedly for the option to use your service, whether or not they actually use your service. A customer has to take an additional action to stop paying you. Are you arguing that non-subscription businesses don't have customer acquisition costs? Or just that CAC for subscriptions are higher? "Name a few successful subscription businesses. Successful (in my mind) means PROFITABLE. Revenue does not mean sh. Come-on, name 'em. (Those that you do name will have some sort of monopoly or exclusive right to a physical asset)." What about most SAAS businesses? Or most magazines? Hosting providers? World of Warcraft? But I totally agree with you about the content providers like Starz calling the shots and ultimately deciding whether Netflix lives or dies.
- 15y ago
Jun8 15y ago
It seems I'm in the minority who thinks this is an over the top reaction to Wall Street pressure. It was clear for a number of years now that Netflix saw streaming as the future. But cutting off the DVD business like that... it's extreme. A lot of the movies are not available for streaming. Yes, their streaming portfolio is probably still the best (and has excellent children's content, my son watches it every night) but why force your users to decide? The problems, as I see them: 1. The two parts (DVD & streaming) had different characteristics (bigger collection vs. instant gratification) that balanced each other. This synergy is now gone. 2. The attack surface for other companies has just doubled. Netflix's DVD handling is super streamlined (they have special sorters in postal centers) but there are other strong players like Redbox here. The streaming biz is nothing unique, Amazon can easily get to that level of collection in a short time. Divide and conquer? They just did it to themselves! 3. As others have pointed out, the reviews, and user histories will be split. From a subscriber perspective this is most undesirable, now I have to deal with two sites. 4. The quality of recommendations will suffer with less data (they weren't great to start with) after the split. 5. How will this affect developers using the Netflix API? 6. What will happen to Netflix's original content creation efforts, this will be a huge distraction to those. And they are vital. Overall, this has a heavy handedness to it that makes you wish for the comfort of the likes of Amazon. EDIT: This also makes my suspicions that Amazon is gearing up to a massive upgrade of their offering soon. Netflix probably tried to focus on streaming and stay ahead in the game. How? I don't know.
- omarchowdhury 15y ago
  Another thing. Not all users have a device connected to their TV that works with Netflix (like an Xbox). Nor do those same people want to watch a movie or a TV show on their computer. Those people request DVDs. I don't see the issue with keeping everything under one brand. Netflix became popular because of their DVD-in-the-mail service. It's a shame to spin that off into a sub-par seeming brand. Just keep it all under one house but emphasize the streaming service. It's not like they can't design their one site to give users an option on what they want (streaming or DVD-in-the-mail). Keep it simple, stupid. If they are doing this because of the economics of the DVD and streaming service, then nevermind.
foobarbazoo 15y ago
Qwikster is a terrible name, and this is a terrible move. Hastings is now in competition with that guy running HP to see who can destroy their company first. Maybe Ballmer will get in the game and spin off Windows/Office from Microsoft, and rebrand them "Facetown", while proclaiming Bing to be the future of the company. Unbelievable. Update: I predict Qwikster is dead and buried within 5 years, and someone else pushes past Netflix on the streaming side to be the leader there. This move is unbelievably stupid. Any trust I had in Netflix over the long haul is gone.
- commandar 15y ago
  >I predict Qwikster is dead and buried within 5 years This is the direction the physical DVD side of Netflix's business was going anyway.
- arithmetic 15y ago
  Netflix employee here. I've been reading all the comments here and at Reed's blog to understand what everyone has to say about the split. Internally, we've known about the split for some time now. Why do you think this is a terrible move? Your comment has a lot of unflattering comparisons, but doesn't explain why the move is stupid. Also, you're probably right that DVD as a service will not last forever, and Reed understands that too (he mentions this in the post as well - http://blog.netflix.com/2011/09/explanation-and-some-reflections.html http://blog.netflix.com/2011/09/explanation-and-some-reflect...). DVD service may not last very long, but right now, it is a growing business.
  - metageek 15y ago
    > Why do you think this is a terrible move? Because the two services work well together. There are lots of movies and shows that you can't stream, but you can get on disc. Your data about what discs I rent improves your recommendations on the streaming side; and having one UI for both services makes me more likely to get them both from you. If Qwikster fully splits from Netflix, it'll have to compete on its own with other disc-only solutions. Maybe you're going to radically improve your streaming library Real Soon Now; but, if so, the time to split is after that improvement, when streaming can better stand on its own.
biot 15y ago
For those who think Netflix has been smoking a bong with this move: https://mobile.twitter.com/Qwikster https://mobile.twitter.com/Qwikster
cmelbye 15y ago
I really wish they would address the lack of many movies and TV shows for streaming. I'd love to just subscribe to Netflix instead of Qwikster, but the streaming catalogue is just not there right now.
dustyreagan 15y ago
Why is Netflix performing seppuku?
ollysb 15y ago
The greatest opportunity for netflix is to become the global leader in streaming films. They've been slow to expand in this regard. I've been waiting for netflix to hit the UK for a long time. By dropping DVDs they avoid any expectation of a service that requires significant investment in infrastructure. This presumably also makes negotiations far simpler and faster. With a race to penetration in each new market this could be critical.
pcj 15y ago
Something just doesn't seem right here. Netflix could have easily worked on both DVD and streaming and each team could have focused on strengthening their services without causing any inconvenience (2 separate websites and queues?) to the customers. Had this been an Merger between two companies who were in DVD and streaming business, markets would've hailed the decision (just because of the synergy). I am sure Hastings is not naive enough to not think about these obvious things, which makes me think, how does this help them? I can't think of even one angle where splitting the companies makes sense?
encoderer 15y ago
I posted this on their blog before I saw the thread here: Remember the quote by Henry Ford? It went more or less like: "If I asked customers what they wanted, they'd have told me a faster horse." The truth is, all the customers here -- myself included -- are probably the least qualified people to say this is a bad idea. I do think that some communication between the 2 sites is important. But it's not as if that's off the table. Once they get around to developing it, it won't be hard to have an "Available On Netflix" link beside entries on your Qwikster queue. In fact, doing so would be effective cross-promotion. The truth to me seems to be this: These really are very different businesses. And it's true streaming is the future. I expect Blu Ray to be the last optical disc player people ever buy. From there on, it's all streaming. A future we could've faced is one where Netflix devotes more and more resources to streaming license fees and data centers, they close regional netflix warehouses, dvd delivery goes back to 2+ days instead of the 1 day it currently is for most the US population. In general, the DVD service is choked of leadership talent within the company and capital improvements. Now, there's a CEO of DVD's by mail. A man who has full budgetary powers over just the DVD business. A business NFLX KNOWS how to run profitably and repeatably. It's a franchise. They've got that stuff DOWN. I'm not an apologist. I currently opted to pay for both services and I'm not happy about the price increase. But, I'll wait and see. In 6-12 months, if we don't see some big improvements in stream selection, I'll probably chose to cancel that side of my account, and use Hulu Plus and Amazon instead. But for now, I respect the hard decisions businesses make when they see the need to pivot.
mschonfeld 15y ago
I wonder what they'll do with customers who are already signed up for both...
nhangen 15y ago
As a once happy customer turned unhappy customer for a variety of reasons, I believe this signals the beginning of the end for Netflix. By the way, thanks for destroying Blockbuster on the way down. I had more options 2 years ago than I do now.
- erichocean 15y ago
  It's interesting that they save the big price hike until after they bankrupted Blockbuster. Well played, in an evil-genius sort of way.
scdc 15y ago
This reminds me of Apple killing the floppy. Anyway, this is all about negotiations to get more content in the streaming service. If newer movies and more tv shows appear in the streaming service, no one will care about DVDs by mail.
- erichocean 15y ago
  Really? This reminds me of Tivo, who thought they had a great way to monetize the middle between content and the cable companies. Netflix is on it's way out, just like Tivo. They have ZERO leverage and are doing everything they can to turn away customers (price hike, worse service, god-awful PR...).
dotBen 15y ago
Seems pretty obvious that the plan here is to sell the DVD business (perhaps to PE), raise capital, and use it to do a combination of original content creation and for leveraged with the main studios to get the same premium titles into the streaming service that would already be available on the DVD service. However if I'm right the CEO Reed isn't being any more forthcoming or communicative about his true plans then he was before.
nihilocrat 15y ago
For the record, since Netflix Canada launched sometime last year, it has been a streaming-only service. We have a kind of sucky selection that is getting better as time passes, but I can understand why they went streaming-only. From this perspective, it's pretty odd seeing people disapproving of the choice or showing attachment to the DVD service.
- xinsight 15y ago
  Totally agree. There is so much to hate about the DVD watching experience - the menus, unskippable ads/trailers, poor image quality, getting stuck on a scratch - I can't wait for them to disappear. But, i'm guessing the DVD fans are actually arguing for the larger catalog, not for plastic discs.
  - WalterBright 15y ago
    For me, it most definitely is the large catalog size, easily 10x the streaming size.
mrbill 15y ago
I never signed up for Netflix until they offered the streaming service, and then never used the physical DVD delivery option - and changed to streaming-only as soon as they made it available. Some of us don't want physical discs. Having such a wide variety of content - even if it's not as varied as the physical media selection - for less than $10 a month is awesome.
antidaily 15y ago
Sidenote: http://instantwatcher.com http://instantwatcher.com is a great companion site to Netflix streaming.
dennisgorelik 15y ago
Looks like Netflix is killing its DVD branch and focuses on streaming branch. It's hard to say yet how it would work out.
lliles 15y ago
Question for anybody more familiar with the content licensing business: How does Netflix becoming stream-only affect their negotiating position with the content license holders? One comment points out that both Netflix and content holders can't lean on the DVD mailing business to supplement licensing costs. Is it really the case that content providers could hold Netflix to higher licensing costs or more catalog restrictions if they (both sides) know Netflix has the DVD mailing business to supplement the streaming business? I wonder if there are other reasons behind this split more directly tied to licensing. Would content providers be more willing to open up their content catalogs with a stream-only business?
aninteger 15y ago
Does anyone else see ISPs putting caps on bandwidth restrictions in the future and thus hampering Netflix (and other streaming companies) effors? I thought some residential internet plans already have caps in place.
fatdogs12 15y ago
This move is simply idiotic. It doesn't matter what netflix wants, it matters what the customers want. Now I have to go somewhere else to manage DVD's by mail? With a horrible name like kwikster?! Are you serious? Why do I need netflix again? They don't have the budget to get the best movies and now they are making my life harder. They are like the opposite of Apple. I didn't mind the price increase from a couple moths back at all, I know it costs money to have a good selection. But now they have basically said "Oh hey we made a really stupid decision before so we're gonna make things better by making a worse decision." I now hate netflix, I can cancel everything and move to amazon's streaming service. I think it's hilarious that an employee of netflix on HN said that netflix excels by being very focused. That makes no sense. You can't just treat your customers like crap and expect them to love you. I shorted their stock before the 20% and I can't wait to watch it go down further.
9999 15y ago
As a user of their service, I found it very frustrating when they removed the ability to add movies to your dvd queue that were not available via their streaming service from within the streaming service interface on the ps3, xbox 360, etc. A further separation will probably just force me to drop the disc by mail service altogether, since I really, really, don't want to put up with the hassle of logging into an entirely different site to manage my queue.
davidjade 15y ago
Every time I've looked at my Netflix queue and seen how few of the items in it are available via streaming, I've question whether to drop Netflix streaming now that it's a separate plan. Now that it's a separate non-integrated service, it's an easier decision for me. I wonder is this is part of the plan though? If you can't add non-streaming content to the streaming queue in the first place you're not constantly being reminded of what's missing or how little is available to stream. Every conversation of late about Netflix streaming seems to focus on the lack or pending lack of content when the Starz deal expires. A streaming service that didn't make lack of streaming content front and center to the user experience would seem to have a better chance of succeeding, especially for new users that quickly try and build up a queue only to find that particular item they now browsing isn't available to stream. Once you separate out the everything's availability of a huge DVD catalog, perhaps user won't miss what's not there quite as much. I also wonder if those users that care about DVDs primarily care about having access to more than just recent movies and content that will never stream via Netflix (HBO shows?) and that perhaps the future of streaming is more about more recent movies and TV shows. However, if Netflix streaming doesn't progress to the point where it has a catalog breadth like the current DVD catalog, I worry what that means for those who enjoy having access to all of that long-tail content, especially now that local DVD stores with large catalogs are pretty much non-existent.
losvedir 15y ago
Just for posterity's sake, I'll join in on the "this is a great move" side. I know there's a lot of wailing and gnashing of teeth by current Netflix customers with established movie watching habits who will now face more inconvenience. However, I use Netflix exclusively for the streaming, so I'm very excited about the future here. If they can sell off the Quikster (sp? dumb name) business and then use that capital for all sorts of good streaming stuff, then that's good for me. I remember reading an interview with Hastings a long time ago where he said his vision was all about streaming content (hence the name, "Netflix" from the start, and nothing locking him down to DVDs, which he felt would someday be obsolete leaving his company with an anachronistic name). At that time, though, so many people only had dial-up that it just wasn't feasible. It's interesting and somewhat amusing to me that the interim "send DVDs by mail" business got to be so huge and successful, but I see Hastings as finally trying his hand at his initial dream. More power to him, I say, as a decade or two down the line, it will be streaming all the way, no doubt.
WalterBright 15y ago
To me, dvd+streaming is worth more combined than separate. I guess Netflix will find that out. Without the DVDs, Netflix is just another streaming company with little to differentiate it. There will no longer be any barriers for me to switch to another streaming service, like Amazon. 80% of what I want to see is DVD only. It is far, far too soon to dump that - I'd dump the streaming first.
fastspring 15y ago
I'm buying NFLX shares at $147. Down from $300, I think people are overdoing how much impact the recent issues will have on the company value and future prospects.
brigadier 15y ago
Early morning my phone buzzed that i got this email from: Reed Hastings, Co-Founder. only reading the title, i thought poor prince of Nigeria...
urbanturbanguy 15y ago
Whatever happens this will make a B-school case study very soon. The case where a company decided to be pro-active in picking a market vertical based on incomplete data. Weather case will have a positive spin or a negative one, only time will tell. As a streaming customer I hope they will work on enriching their library.
jontsai 15y ago
tldr; I read through probably half of the comments and then skimmed the rest, so sorry if this was already mentioned: What if Netflix streaming service improves A LOT, and their movie collection grows to encompass pretty much every movie out there? A lot of the discussion has assumed that Netflix would remain the same, but with their focusing exclusively on streaming, I could see how they would have more leverage to negotiate with content owners to license movies--for one, they could charge a higher subscription fee and offer more revenue share for streaming and a more comprehensive catalog, something that I'd be very happy to pay an extra $5 for (I currently only have the streaming plan)

301 points by ssclafani 15y ago

whichdan 15y ago

I wonder what Netflix will show for search results that are only available on Qwikster.

wmf 15y ago
Probably nothing; they've been removing that kind of functionality (e.g. add to DVD queue from the streaming UI) for a while.
- mirkules 15y ago
  I remember that when a movie became available for streaming if it was in your DVD queue, you would get notified in the UI. I don't know if that is true anymore?
loganlinn 15y ago
Hastings replied to that question in the Netflix blog post's comments: [1] Question: "If a film I search for on Netflix is not available for streaming, will the website still tell me if the DVD is available? Or must I search twice?" Reply: "ouch. You'd have to search the second place if we didn't have it in the first place." [1] http://blog.netflix.com/2011/09/explanation-and-some-reflections.html http://blog.netflix.com/2011/09/explanation-and-some-reflect...
- Klinky 15y ago
  That's pretty bad. You'd think they could integrate an API system that at least allowed for the two services to interact with each other.

aaronbrethorst 15y ago

This decision was not made over night, and this change has been coming for quite a while. In fact, if you go look at this post on Netflix's API blog dated 27 June 2011[1], you'll see: As of Oct. 14th, 2011, the Netflix API will be focused exclusively on offering content and functionality from the streaming catalog. As a result, we will be discontinuing the support of DVD-related features in the Open API. They go on to say that this is to support long term goals around internationalization, but that does not, by any means, preclude this split. [1] http://developer.netflix.com/blog/read/Upcoming_Changes_to_the_Open_API_Program http://developer.netflix.com/blog/read/Upcoming_Changes_to_t...

ethank 15y ago
Qwikster.com was registered in May 2010. This was not an overnight decision and I doubt even the contrition in the blog post wasn't well planned.
- waterlesscloud 15y ago
  I strongly suspect it's related to negotiating royalties for streaming based on streaming subscriber numbers, not the combined numbers. That was the reason behind the original split in the services, so it's probably why they're actually splitting the accounts.
  - elq 15y ago
    > That was the reason behind the original split in the services No. Not at all. The plans were split in preparation for the company split. This has been in planning for a long time.
    - biot 15y ago
      And the company split isn't "related to negotiating royalties for streaming based on streaming subscriber numbers, not the combined numbers" as waterlesscloud indicated? The public explanation of better focus for each business is sensible, but I think there is a not insignificant impact to licensing that drove the decision as well.
mortenjorck 15y ago
I know the Netflix name was chosen from the beginning to be compatible with a future streaming business, but seeing this chrysalis-style business plan unfold now is quite astounding in its long-term thinking.

ByteMuse 15y ago

This seems like an act of desperation.

hesdeadjim 15y ago

I read this and my brain immediately thought it had to be an April Fools joke. It took a second or two to remember it is September. Regardless, my hat is off to them for betting the company's name on their streaming business. I know that's the only part of their service I use anymore -- I've had the same DVD checked out for over a year because I couldn't be bothered to deal with the perceived hassle of managing my queue and planning what I want to watch in advance.

outside1234 15y ago
me as well. i thought: this can't possibly be real its so user hostile.
morrow 15y ago
Same here - I actually caught myself looking up at the date on the taskbar before realizing the same thing. I think the ridiculousness of the 'Qwikster' brand name was what made me doubt it at first.

bryanh 15y ago

In my opinion, this is definitely the obvious and correct move. It isn't a surprise that Netflix wanted to head towards a stream only business model, but this makes it crystal clear that Netflix is (at the moment) a premium streaming video company. I mean look at them, thats all they do now! The still face some big hurdles with all their streaming content deals, and the outcome will likely be what makes or breaks the Netflix we all know and love. Premium content providers (HBO, Starz, and now AMC, etc...) will always hold the upper hand here, and many already have streaming products in place. If not, its rather trivial to create nowadays. My prediction: Netflix becomes an original content powerhouse that harnesses the sort of democratic whimsey of the web. "House of Cards" is their toe in the water. I really see no other direction that is feasible with content providers fragmenting into their space and hoarding their popular original content.

jeromeparadis 15y ago
Interesting prediction. It would make a lot of sense to produce/fund more original content. It's definitely the direction the streaming business has to follow. If cool and original stuff is on Netflix only, it will be good for them and other original content producers may be more inclined to be there.
timr 15y ago
"this makes it crystal clear that Netflix is a premium streaming video company. I mean look at them, thats all they do now!" Yeah, well...now they're providing a commodity service. Renting DVDs through the mail has/had a huge infrastructure advantage for the established player. Streaming video over the internet? There are dozens of sites that do it well. The technical advantage is far less sustainable, because it isn't nearly as difficult. Once you're running a streaming-video business, the only differentiating advantage is content -- and you're in a weak position to negotiate for that content. Whereas before, the studios needed Netflix to distribute their content to consumers, the internet has turned the tables.
- sthatipamala 15y ago
  Delivering streaming media content has some infrastructure costs as well. Bandwidth is not free (it will get worse if Net-neutrality dies) and one also needs to have a CDN to effectively deliver content to different geographies.

Lukeas14 15y ago

The elephant in the streaming office is the lack of blockbuster titles, many of which are only available through their DVD by mail business. If they're betting everything on streaming i'm guessing (hoping) that they've also figured out a solution to this problem. Otherwise, they've lost the big benefit of credibility that DVD by mail brought to their service.

earbitscom 15y ago
This split might be what they needed in order to secure more streaming deals. Time will tell.
pkulak 15y ago
Eh. I'll just use Redbox for that. Faster anyway.
- twodayslate 15y ago
  Redbox is great. I love it. Redbox + Netflix Streaming + Hulu Plus should get you most of the movies and TV shows that you need.
MatthewPhillips 15y ago
The answer to getting new releases is obvious and I'm surprised they haven't done it already: pay-per-view. 3.99 for new releases, back catalog is free. What Amazon does, except they would have the advantage of the massive customer base. They could probably work out some deals with the studios where if a movie makes X amount on PPV it gets to move to the back catalog for a minimum of 6 months. Having that customer base would give them the leverage to make those types of deals.

eternalmatt 15y ago

What an absolutely awful name "Qwikster". I'm still frowning in disgust.

MartinCron 15y ago
Totally agree, I know first-hand how hard it is to come up with a good name coupled to an available domain name, but I would expect better from Netflix.
lancewiggs 15y ago
It makes me immediately think of "Quitster", not the best given the circumstances.
sandieman 15y ago
DVDflix!
Klinky 15y ago
I think 2003 called & they want Netflix to return their buzzword. Reminds me of two other failed businesses "Napster" & "Friendster"...
mirkules 15y ago
Honestly, I have to believe that it is some sort of homage to The Simpsons' Qwik-e-Mart. Otherwise, it is probably the worst name I have heard in a very long time, probably since Motorola's consonant craze started by RAZR (ROKR, PEBL, etc)

barrybe 15y ago

Side note: TechCrunch got back to doing real news. Good for them!

TomOfTTB 15y ago

I think this is a good move simply because the two divisions have contradictory goals at this point. For example, the Qwikster division should be looking at finding ways to deliver DVDs quicker (Kiosks for example). But that's not something that would ever occur to Netflix because they're focused on streaming as the future. Which is where the contradiction comes in. It is hard to run a business unit when the goal of the company overall is to kill off your unit. That said I think announcing it today is foolish. Even if it was their original plan to do so announcing it right after a stock drop makes the decision look rash. IMHO they should have put this announcement off for a couple weeks.

earbitscom 15y ago
I don't think any shareholders of consequence are going to think they just made this decision a day ago. Maybe they announced it after the stock plummeted because the assumption is it won't go down that much further, where a 2nd announcement after it rebounded might send it down yet again.
barista 15y ago
Also I don't get the creating of a new brand altogether. Netflix is a popular brand and a household name. Who knows qwikster? Looks indicative of a future split up of the company to me.
Aron 15y ago
In terms of stock timing, I have a hard time believing that this kind of move was completely held secret. This takes a lot of prep work, and whispering has to go on, and rumors spread fast to connected people who can profit. I suspect the excessive reaction last week to the news of that week may have actually been boosted by inside knowledge about this move today. So if any of that's true, you can't exactly assume that last week's stock move would have been the same in an alternate world where they weren't going to announce this today. At any rate, appearances generally give way to fact eventually.

krashidov 15y ago

I researched Netflix for a project back when they had around 8 million subscribers and the biggest part of their business was direct mail DVD. The strides they've come to have the Netflix brand as more than just a DVD rental service are immense. My only worry about this move is that they lose all of that brand recognition with "Qwikster."

sandieman 15y ago

Biggest downfall here will potentially be the separation of ratings. Dvd and streaming customers will have to rate dvd first and then see it as unwatched in streaming later? I think of Netflix as my repository for "what I have watched" and teller of "what you will want to watch". I don't tie the brand to a specific delivery mechanism (dvd or streaming).

morrow 15y ago

"...the Qwikster.com and Netflix.com websites will not be integrated. So if you subscribe to both services, and if you need to change your credit card or email address, you would need to do it in two places. Similarly, if you rate or review a movie on Qwikster, it doesn’t show up on Netflix, and vice-versa." Wow. I had previously thought that their pricing change was forcing consumers to effectively choose between streaming and disc-based services, but didn't expect that they'd actually go this far and completely cut the cord between the two. Considering the how much less efficient it is to mail movies than it is to download them in an age of high gas prices and fast internet, Netflix killing or spinning-off it's dvd service was an inevitability. I'm just not sure that right now the streaming service by itself has the selection to keep subscription numbers high enough to maintain sufficient leverage with content providers. Momentum is very important with the type of model they have: the more content Netflix loses to studios who start their own streaming services, the less appealing the Netflix service becomes to subscribers, which both weakens the argument for studios to stick with them due to the size of their subscriber base and also sets a positive example of succeeding without Netflix that other studios can follow.

deleted 15y ago
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evandena 15y ago
My guess is that the logical split has to do with future contract negotiations. Netflix has no ties to DVD rentals, so maybe this aids them in the deals they are able to make.
- pyre 15y ago
  As I understand it, most of the deals between Netflix and the studios are revenue sharing deals. So the studios have a vested interest in increasing whatever metrics they are basing the revenue sharing on. They could see streaming availability as hurting the DVDs 'sales.' Though this would apply industry-wide anyways, so I don't know if this would really put the streaming side of things in a better negotiation position.
ABCD_FUFU 15y ago

icefox 15y ago

"Qwikster will also now offer video game rentals through the mail" While I wouldn't sign up full time for a game rental service I would be interested in getting a game now and then rather than a dvd. Suffice it to say for my needs a dvd in the mail fit my needs exactly and I will continue paying for that. Edit: not to mention from what I hear games always have a long waiting list on other services. I am more than happy to put a game at the top of my list and getting it at some point in the next two months, but meanwhile getting dvd's that I want.

enjo 15y ago
I'm hoping it comes with the requisite netflix...err qwikster... efficiency that I've come to expect. We tried Blockbuster for this, and it was a nightmare. Getting a game from them was an exercise in patience. We were with them for two months and didn't receive a single one:)
- elq 15y ago
  I believe speed was one of the things Netflix wanted to communicate with the otherwise unfortunate name "Qwikster".

deleted 15y ago

[deleted]

steve8918 15y ago

Gasp, this is turning into a joke! I had Netflix for a few months, I used it to watch the entire Battlestar Galactica. After that, I went through and searched for 30 different movies to watch, and they weren't available, and I'm not talking about new movies. None of the Indiana Jones', Star Wars', Rockies, Bladerunner, etc. Now with the Starz debacle, and with content providers getting ready to pound them with price increases, Netflix is in real trouble. Yes, streaming is the way to do it. I love streaming. But I don't think it will be through Netflix. This sounds like a company in its death throws. I simply don't understand why they would split themselves up into 2 companies. The only reason why I can think of why they would cut themselves into 2 companies, is so that the content providers can't use the DVD business' cash flow to pay for the content. So content providers can't charge an arm and a leg because the cash flow of the streaming side would be much smaller. However, the miscalculation here is that content providers can simply make their own content available themselves through streaming. Which is already happening in other continents, and even in the US through Google, Facebook etc. I think Netflix has severely miscalculated itself, and this may be the end.

seanalltogether 15y ago
The only reason why I can think of why they would cut themselves into 2 companies, is so that the content providers can't use the DVD business' cash flow to pay for the content. My thoughts exactly, I assumed the original separation was done so hollywood couldn't bargain over dvd profits, perhaps this move was done to make that wall even stronger. I fear for the future of netflix, it's an easy choice to have a subscription now, but what happens when the major studios get involved and start demanding serious money for their content.

outside1234 15y ago

what a terrible idea. the best part of Netflix is that it was integrated between DVD and streaming queues. dfm. how much does Amazon cost with Prime?

metageek 15y ago
Prime is $79/year.
akat 15y ago
I too think its a terrible idea but, What a stupid question. (how much does Amazon cost with Prime?) I hope you realize that if you cannot figure out an answer to that questions in like 10 seconds yourself, you probably shouldn't be commenting things like companies pivoting. (And an equally stupid answer. Prime is $79/year if you are not a (mom or a dad or a student))

badclient 15y ago

Make your bet. Two years from now, is Netflix still going to be doing DVDs in some form--whether via Qwikster or otherwise? I say yes.

crgt 15y ago

I'll throw it out as a side note, because in all the discussions I've read on Netflix of late no one seems to mention it: Netflix has FANTASTIC kids content available for streaming. My kids would revolt if we cancelled our service. That alone guarantees my business until there is a truly compelling replacement. I cannot believe we're the only family like this. And while this is probably not a large enough market to sustain them (let alone power growth), they do seem to have a pretty good sense of how people engage with their content - and my guess is that their deep long-tail of streaming content actually holds more appeal than might be guessed. To be honest, my only frustration with them of late has been the fact that my streaming queue is overrun with "Bob the Builder" & "Caillou" when I'm actually looking for something to watch. Perhaps this new, sharper focus on the streaming side will enable them to improve things like this? Here's hoping they survive this transformation and emerge stronger for it.

JeffDClark 15y ago
Totally agree. It was a no brainer to cancel the DVD side of our subscription, but the streaming, no way.
- foobarbazoo 15y ago
  Amazon Prime streaming is more than enough for children, and most families already have it. And the kids don't care at all who they get the shows from. I expect Amazon to continue to aggressively compete in this area, not to mention Apple and someday, Google. Netflix is giving away their core advantage -- a huge content library and DVD/Blu-ray backup for anything not-yet streamed. No one else has that. Now they're just like everyone else.
  - kahirsch 15y ago
    > Amazon Prime streaming is more than enough for children, and most families already have it. The estimates I saw from February were 4-5 million Amazon Prime customers. That's much smaller than Netflix, much less "most families".
  - 15y ago

JeffDClark 15y ago

I think that everyone is missing the really big thing here, the US Post Office is screwed...

zachcb 15y ago

Video: http://mashable.com/2011/09/19/netflix-reed-hastings-video/?utm_source=twitterfeed&utm_medium=twitter&utm_campaign=Feed%3A+Mashable+%28Mashable%29 http://mashable.com/2011/09/19/netflix-reed-hastings-video/?...

badclient 15y ago

To reduce risk, I think they could have pushed the Quickster brand within the Netflix UI harder before putting all this on its own domain.

beagledude 15y ago

has everyone forgotten how limited the streaming service is? They should have waited until they at least have a selection. I'm going DVD service, and Amazon for streaming.

learc83 15y ago
It may be limited if you only watch movies, but If you like, say...British detective shows, there's enough episodes to keep you busy for a while.
- bbgm 15y ago
  Or Dr. Who, or all seven seasons of Star Trek Voyager.
  - jamesgeck0 15y ago
    Until you want to watch the latest season of Doctor Who, which is currently available on DVD, but not on streaming.
loso 15y ago
And that is my main problem right there. Netflix streaming is good for finding old niche content but for general mainstream content, not so much. And now with Starz leaving.... The blog posting by the CEO was good but he still didn't answer questions about the content problem with streaming. He gave it a one liner at the end as if it was an afterthought. I am going to keep Netflix for now but I am on the edge. I know one thing, I'm far from an enthusiastic customer.

dr_ 15y ago

In theory, however, Qwikster doesn't have to limit itself to DVD's in the future. If it's real focus is shipping speed for items that are rented (or more likely purchased), it could expand into other product lines. Speed of shipping is a process in and of itself, something that very few companies, like Amazon, have gotten down.

bethling 15y ago

I kept my account even after planning on dropping it when the price increase happened, but now I don't really see any reason to keep my streaming account. At least when they were integrated, searching in one place, and having all my reviews in one place provided some additional benefit for me. Now I don't really see any benefit at all for keeping the streaming portion over Amazon Prime (which I have) and maybe adding Hulu Plus. I'll have to see if having the game option makes it useful for me to keep the DVD portion of my account. As soon as the sites split, NetFlix looses a great deal of value to me as a customer. Before it was a single place where I could pick movies to see - whether streaming or on DVD, now it becomes a repository of a bunch of okay television shows and (esp. once they lose Starz Play), a mediocre movie selection.

jjm 15y ago

Clearly this will be disheartening to the true user such as myself. By splitting functionality as to prevent easy access to either material nor allowing usage of existing ratings they're continuing the trend toward customer alienation. I say this almost all the time, but even if Netfix renegotiates for retaining Starz it is still not yet an adequate amount of viewing content for me to wholely dismiss DVD by mail, regardless of where I even stand on the matter in terms of philosophy. In the end I still gain a larger bill, continued limited streaming content, and a split in usability. And what of netflix when Hollywood continues to charge into extinction taking Netflix with them?

superkinz 15y ago

People always go up in arms about change of price like this. For a long time, the prices at Netflix mostly stayed the same because they started with DVDs, and later added streaming. The streaming catalog wasn't built out enough for them to monetize it with confidence. So what did they do? They gave us a break and let us have free streaming. Now that it's a significant catalog, they want us to pay for the service... which they have to license! And it aint cheap for them to do that. Now that it's doubled, people feel it's outrageous! But it's not because of the value they're receiving, it's because they're conditioned to expect one price and it's now higher. They lost a million subscribers, but Netflix will get those back after people realize they were being idiots. Let me ask you a question, would you rather pay $15 a month for unlimited streaming and DVDs, or $50 to Comcast for basic cable? In my book, $15 is a pretty damn reasonable price.

Stratoscope 15y ago
It's not the change of price that has everyone upset tonight. That already happened. What has people upset tonight is what customers will lose in this change: the convenience of a single website to find interesting movies and TV shows and arrange to view them by whichever delivery means is available.
hdctambien 15y ago
I still have to pay $50 to comcast so I can connect to the internet and stream my netflix.
tomjen3 15y ago
It would be if you could get everything they have on dvd streamed as well. Until that happens, neither of your two offerings are worth considering. Those who are more deviously than me would say that rapidshare.com is the best alternative right now.
nirvdrum 15y ago
They actually have been steadily raising prices. It's been really bad for those getting BRDs -- they've had 3 or 4 price increases. I think this is just the proverbial straw that broke the camel's back. We're getting no extra value for the increased price.

meemo 15y ago

The real question to ask is: Is this good for customers? It doesn't matter if the goals of the two businesses are different. What matters is how it affects customers. Do customers consider the services as separate entities or as two parts of the same whole? I think they'll lose a few customers who like both services, but feel awkward about dealing with two companies now instead of one (like me).

deleted 15y ago

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finin 15y ago

Netflix steaming is the new Blockbuster. I disliked Blockbuster because their stores had many copies of currently popular movies and not much else. I liked Netflix because it had an enormous catalog that let me work on seeing all of the great films that had been made in the last 100 years that I'd missed. Netflix streaming is like Blockbuster. At any given time it lets me access only a fraction of its catalog and that fraction is biased toward what is popular. Netflix steaming is the new Blockbuster. :-(

pkulak 15y ago
I'd love it if Netflix streamed popular movies.

hrasm 15y ago

A poorly thought out point: a defensive move against the whole company folding due to some reason?

cek 15y ago

That Netflix needs to keep making these changes is simply a symptom of a brutal endemic problem: In general, subscription business suck. Most subscription businesses suck because they are dependent on CAC (customer acquisition costs; the cost required to land a new sub) and churn (the percentage of subs that leave the service). For example, a typical gross CAC for a business like netflix is $200. At $10/mo the subscriber has to stay a sub for almost 2 years before any profit is made. Meanwhile the company had to spend the $200 up front, burning through capital. Also, meanwhile, 15-20% of the customers leave every month. Those customers will never pay off the costs the company spent to aquire them. It's an never-ending spiral of death. As seen by Vonage, Netflix, etc... But Netflix has another endemic problem: They are the bitch of the content providers. Netflix owns NOTHING (especially in their streaming only biz). All it takes is one content provider to balk (Starz) and the only way they'll get new subs is to spend more on marketing which raises CAC. Which accelerates death. Name a few successful subscription businesses. Successful (in my mind) means PROFITABLE. Revenue does not mean sh. Come-on, name 'em. (Those that you do name will have some sort of monopoly or exclusive right to a physical asset). This is why, as an investor, I will never invest in companies that think they can be successful with a subscription business model. This is also why Apple is kicking ass. Apple gets paid up front. The only way to go.

jexe 15y ago
Interesting, I would have argued the opposite: well thought-out subscription businesses are goldmines. Once you have a customer, you aren't billing them a single time -- often, you're billing them repeatedly for the option to use your service, whether or not they actually use your service. A customer has to take an additional action to stop paying you. Are you arguing that non-subscription businesses don't have customer acquisition costs? Or just that CAC for subscriptions are higher? "Name a few successful subscription businesses. Successful (in my mind) means PROFITABLE. Revenue does not mean sh. Come-on, name 'em. (Those that you do name will have some sort of monopoly or exclusive right to a physical asset)." What about most SAAS businesses? Or most magazines? Hosting providers? World of Warcraft? But I totally agree with you about the content providers like Starz calling the shots and ultimately deciding whether Netflix lives or dies.
15y ago

Jun8 15y ago

It seems I'm in the minority who thinks this is an over the top reaction to Wall Street pressure. It was clear for a number of years now that Netflix saw streaming as the future. But cutting off the DVD business like that... it's extreme. A lot of the movies are not available for streaming. Yes, their streaming portfolio is probably still the best (and has excellent children's content, my son watches it every night) but why force your users to decide? The problems, as I see them: 1. The two parts (DVD & streaming) had different characteristics (bigger collection vs. instant gratification) that balanced each other. This synergy is now gone. 2. The attack surface for other companies has just doubled. Netflix's DVD handling is super streamlined (they have special sorters in postal centers) but there are other strong players like Redbox here. The streaming biz is nothing unique, Amazon can easily get to that level of collection in a short time. Divide and conquer? They just did it to themselves! 3. As others have pointed out, the reviews, and user histories will be split. From a subscriber perspective this is most undesirable, now I have to deal with two sites. 4. The quality of recommendations will suffer with less data (they weren't great to start with) after the split. 5. How will this affect developers using the Netflix API? 6. What will happen to Netflix's original content creation efforts, this will be a huge distraction to those. And they are vital. Overall, this has a heavy handedness to it that makes you wish for the comfort of the likes of Amazon. EDIT: This also makes my suspicions that Amazon is gearing up to a massive upgrade of their offering soon. Netflix probably tried to focus on streaming and stay ahead in the game. How? I don't know.

omarchowdhury 15y ago
Another thing. Not all users have a device connected to their TV that works with Netflix (like an Xbox). Nor do those same people want to watch a movie or a TV show on their computer. Those people request DVDs. I don't see the issue with keeping everything under one brand. Netflix became popular because of their DVD-in-the-mail service. It's a shame to spin that off into a sub-par seeming brand. Just keep it all under one house but emphasize the streaming service. It's not like they can't design their one site to give users an option on what they want (streaming or DVD-in-the-mail). Keep it simple, stupid. If they are doing this because of the economics of the DVD and streaming service, then nevermind.

foobarbazoo 15y ago

Qwikster is a terrible name, and this is a terrible move. Hastings is now in competition with that guy running HP to see who can destroy their company first. Maybe Ballmer will get in the game and spin off Windows/Office from Microsoft, and rebrand them "Facetown", while proclaiming Bing to be the future of the company. Unbelievable. Update: I predict Qwikster is dead and buried within 5 years, and someone else pushes past Netflix on the streaming side to be the leader there. This move is unbelievably stupid. Any trust I had in Netflix over the long haul is gone.

commandar 15y ago
>I predict Qwikster is dead and buried within 5 years This is the direction the physical DVD side of Netflix's business was going anyway.
arithmetic 15y ago
Netflix employee here. I've been reading all the comments here and at Reed's blog to understand what everyone has to say about the split. Internally, we've known about the split for some time now. Why do you think this is a terrible move? Your comment has a lot of unflattering comparisons, but doesn't explain why the move is stupid. Also, you're probably right that DVD as a service will not last forever, and Reed understands that too (he mentions this in the post as well - http://blog.netflix.com/2011/09/explanation-and-some-reflections.html http://blog.netflix.com/2011/09/explanation-and-some-reflect...). DVD service may not last very long, but right now, it is a growing business.
- metageek 15y ago
  > Why do you think this is a terrible move? Because the two services work well together. There are lots of movies and shows that you can't stream, but you can get on disc. Your data about what discs I rent improves your recommendations on the streaming side; and having one UI for both services makes me more likely to get them both from you. If Qwikster fully splits from Netflix, it'll have to compete on its own with other disc-only solutions. Maybe you're going to radically improve your streaming library Real Soon Now; but, if so, the time to split is after that improvement, when streaming can better stand on its own.

biot 15y ago

For those who think Netflix has been smoking a bong with this move: https://mobile.twitter.com/Qwikster https://mobile.twitter.com/Qwikster

cmelbye 15y ago

I really wish they would address the lack of many movies and TV shows for streaming. I'd love to just subscribe to Netflix instead of Qwikster, but the streaming catalogue is just not there right now.

dustyreagan 15y ago

Why is Netflix performing seppuku?

ollysb 15y ago

The greatest opportunity for netflix is to become the global leader in streaming films. They've been slow to expand in this regard. I've been waiting for netflix to hit the UK for a long time. By dropping DVDs they avoid any expectation of a service that requires significant investment in infrastructure. This presumably also makes negotiations far simpler and faster. With a race to penetration in each new market this could be critical.

pcj 15y ago

Something just doesn't seem right here. Netflix could have easily worked on both DVD and streaming and each team could have focused on strengthening their services without causing any inconvenience (2 separate websites and queues?) to the customers. Had this been an Merger between two companies who were in DVD and streaming business, markets would've hailed the decision (just because of the synergy). I am sure Hastings is not naive enough to not think about these obvious things, which makes me think, how does this help them? I can't think of even one angle where splitting the companies makes sense?

encoderer 15y ago

I posted this on their blog before I saw the thread here: Remember the quote by Henry Ford? It went more or less like: "If I asked customers what they wanted, they'd have told me a faster horse." The truth is, all the customers here -- myself included -- are probably the least qualified people to say this is a bad idea. I do think that some communication between the 2 sites is important. But it's not as if that's off the table. Once they get around to developing it, it won't be hard to have an "Available On Netflix" link beside entries on your Qwikster queue. In fact, doing so would be effective cross-promotion. The truth to me seems to be this: These really are very different businesses. And it's true streaming is the future. I expect Blu Ray to be the last optical disc player people ever buy. From there on, it's all streaming. A future we could've faced is one where Netflix devotes more and more resources to streaming license fees and data centers, they close regional netflix warehouses, dvd delivery goes back to 2+ days instead of the 1 day it currently is for most the US population. In general, the DVD service is choked of leadership talent within the company and capital improvements. Now, there's a CEO of DVD's by mail. A man who has full budgetary powers over just the DVD business. A business NFLX KNOWS how to run profitably and repeatably. It's a franchise. They've got that stuff DOWN. I'm not an apologist. I currently opted to pay for both services and I'm not happy about the price increase. But, I'll wait and see. In 6-12 months, if we don't see some big improvements in stream selection, I'll probably chose to cancel that side of my account, and use Hulu Plus and Amazon instead. But for now, I respect the hard decisions businesses make when they see the need to pivot.

mschonfeld 15y ago

I wonder what they'll do with customers who are already signed up for both...

nhangen 15y ago

As a once happy customer turned unhappy customer for a variety of reasons, I believe this signals the beginning of the end for Netflix. By the way, thanks for destroying Blockbuster on the way down. I had more options 2 years ago than I do now.

erichocean 15y ago
It's interesting that they save the big price hike until after they bankrupted Blockbuster. Well played, in an evil-genius sort of way.

scdc 15y ago

This reminds me of Apple killing the floppy. Anyway, this is all about negotiations to get more content in the streaming service. If newer movies and more tv shows appear in the streaming service, no one will care about DVDs by mail.

erichocean 15y ago
Really? This reminds me of Tivo, who thought they had a great way to monetize the middle between content and the cable companies. Netflix is on it's way out, just like Tivo. They have ZERO leverage and are doing everything they can to turn away customers (price hike, worse service, god-awful PR...).

dotBen 15y ago

Seems pretty obvious that the plan here is to sell the DVD business (perhaps to PE), raise capital, and use it to do a combination of original content creation and for leveraged with the main studios to get the same premium titles into the streaming service that would already be available on the DVD service. However if I'm right the CEO Reed isn't being any more forthcoming or communicative about his true plans then he was before.

nihilocrat 15y ago

For the record, since Netflix Canada launched sometime last year, it has been a streaming-only service. We have a kind of sucky selection that is getting better as time passes, but I can understand why they went streaming-only. From this perspective, it's pretty odd seeing people disapproving of the choice or showing attachment to the DVD service.

xinsight 15y ago
Totally agree. There is so much to hate about the DVD watching experience - the menus, unskippable ads/trailers, poor image quality, getting stuck on a scratch - I can't wait for them to disappear. But, i'm guessing the DVD fans are actually arguing for the larger catalog, not for plastic discs.
- WalterBright 15y ago
  For me, it most definitely is the large catalog size, easily 10x the streaming size.

mrbill 15y ago

I never signed up for Netflix until they offered the streaming service, and then never used the physical DVD delivery option - and changed to streaming-only as soon as they made it available. Some of us don't want physical discs. Having such a wide variety of content - even if it's not as varied as the physical media selection - for less than $10 a month is awesome.

antidaily 15y ago

Sidenote: http://instantwatcher.com http://instantwatcher.com is a great companion site to Netflix streaming.

dennisgorelik 15y ago

Looks like Netflix is killing its DVD branch and focuses on streaming branch. It's hard to say yet how it would work out.

lliles 15y ago

Question for anybody more familiar with the content licensing business: How does Netflix becoming stream-only affect their negotiating position with the content license holders? One comment points out that both Netflix and content holders can't lean on the DVD mailing business to supplement licensing costs. Is it really the case that content providers could hold Netflix to higher licensing costs or more catalog restrictions if they (both sides) know Netflix has the DVD mailing business to supplement the streaming business? I wonder if there are other reasons behind this split more directly tied to licensing. Would content providers be more willing to open up their content catalogs with a stream-only business?

aninteger 15y ago

Does anyone else see ISPs putting caps on bandwidth restrictions in the future and thus hampering Netflix (and other streaming companies) effors? I thought some residential internet plans already have caps in place.

fatdogs12 15y ago

This move is simply idiotic. It doesn't matter what netflix wants, it matters what the customers want. Now I have to go somewhere else to manage DVD's by mail? With a horrible name like kwikster?! Are you serious? Why do I need netflix again? They don't have the budget to get the best movies and now they are making my life harder. They are like the opposite of Apple. I didn't mind the price increase from a couple moths back at all, I know it costs money to have a good selection. But now they have basically said "Oh hey we made a really stupid decision before so we're gonna make things better by making a worse decision." I now hate netflix, I can cancel everything and move to amazon's streaming service. I think it's hilarious that an employee of netflix on HN said that netflix excels by being very focused. That makes no sense. You can't just treat your customers like crap and expect them to love you. I shorted their stock before the 20% and I can't wait to watch it go down further.

9999 15y ago

As a user of their service, I found it very frustrating when they removed the ability to add movies to your dvd queue that were not available via their streaming service from within the streaming service interface on the ps3, xbox 360, etc. A further separation will probably just force me to drop the disc by mail service altogether, since I really, really, don't want to put up with the hassle of logging into an entirely different site to manage my queue.

davidjade 15y ago

Every time I've looked at my Netflix queue and seen how few of the items in it are available via streaming, I've question whether to drop Netflix streaming now that it's a separate plan. Now that it's a separate non-integrated service, it's an easier decision for me. I wonder is this is part of the plan though? If you can't add non-streaming content to the streaming queue in the first place you're not constantly being reminded of what's missing or how little is available to stream. Every conversation of late about Netflix streaming seems to focus on the lack or pending lack of content when the Starz deal expires. A streaming service that didn't make lack of streaming content front and center to the user experience would seem to have a better chance of succeeding, especially for new users that quickly try and build up a queue only to find that particular item they now browsing isn't available to stream. Once you separate out the everything's availability of a huge DVD catalog, perhaps user won't miss what's not there quite as much. I also wonder if those users that care about DVDs primarily care about having access to more than just recent movies and content that will never stream via Netflix (HBO shows?) and that perhaps the future of streaming is more about more recent movies and TV shows. However, if Netflix streaming doesn't progress to the point where it has a catalog breadth like the current DVD catalog, I worry what that means for those who enjoy having access to all of that long-tail content, especially now that local DVD stores with large catalogs are pretty much non-existent.

losvedir 15y ago

Just for posterity's sake, I'll join in on the "this is a great move" side. I know there's a lot of wailing and gnashing of teeth by current Netflix customers with established movie watching habits who will now face more inconvenience. However, I use Netflix exclusively for the streaming, so I'm very excited about the future here. If they can sell off the Quikster (sp? dumb name) business and then use that capital for all sorts of good streaming stuff, then that's good for me. I remember reading an interview with Hastings a long time ago where he said his vision was all about streaming content (hence the name, "Netflix" from the start, and nothing locking him down to DVDs, which he felt would someday be obsolete leaving his company with an anachronistic name). At that time, though, so many people only had dial-up that it just wasn't feasible. It's interesting and somewhat amusing to me that the interim "send DVDs by mail" business got to be so huge and successful, but I see Hastings as finally trying his hand at his initial dream. More power to him, I say, as a decade or two down the line, it will be streaming all the way, no doubt.

WalterBright 15y ago

To me, dvd+streaming is worth more combined than separate. I guess Netflix will find that out. Without the DVDs, Netflix is just another streaming company with little to differentiate it. There will no longer be any barriers for me to switch to another streaming service, like Amazon. 80% of what I want to see is DVD only. It is far, far too soon to dump that - I'd dump the streaming first.

fastspring 15y ago

I'm buying NFLX shares at $147. Down from $300, I think people are overdoing how much impact the recent issues will have on the company value and future prospects.

brigadier 15y ago

Early morning my phone buzzed that i got this email from: Reed Hastings, Co-Founder. only reading the title, i thought poor prince of Nigeria...

urbanturbanguy 15y ago

Whatever happens this will make a B-school case study very soon. The case where a company decided to be pro-active in picking a market vertical based on incomplete data. Weather case will have a positive spin or a negative one, only time will tell. As a streaming customer I hope they will work on enriching their library.

jontsai 15y ago

tldr; I read through probably half of the comments and then skimmed the rest, so sorry if this was already mentioned: What if Netflix streaming service improves A LOT, and their movie collection grows to encompass pretty much every movie out there? A lot of the discussion has assumed that Netflix would remain the same, but with their focusing exclusively on streaming, I could see how they would have more leverage to negotiate with content owners to license movies--for one, they could charge a higher subscription fee and offer more revenue share for streaming and a more comprehensive catalog, something that I'd be very happy to pay an extra $5 for (I currently only have the streaming plan)