Netflix separates streaming and DVD services by announcing Qwikster

The popular DVD rental and internet streaming service Netflix has announced that it will split itself into two separately operated businesses. Netflix will continue to stream movies and television shows through its website while its new Qwikster website will operate the DVD rental side of things. Users who currently receive DVDs by mail will have to register a new account with Qwikster, which will cost $7.99 for basic service. Basically subscribers will have to manage two separate sites independently if they want both streaming and DVDs by mail. This news comes shortly after the company announced that prices would be increasing for those who purchase both streaming and DVD services. In addition, the new Qwikster service will be adding video games to its inventory of rental DVDs to try to attract a larger audience.

Netflix CEO Reed Hastings took to his official blog on Sunday to speak directly with customers and apologize for the way in which the company has handled its price increase announcement and backed up his decision to split Netflix into two separate entities, saying that by splitting the service, “we will be better at streaming, and we will be better at DVD by mail.” Hopefully this will end up being better for the consumer.

Not everyone agrees with him, however. Wedbush Securities analyst Michael Pachter says, "These guys did three things bad. They raised prices. They offered lower-quality content, and they made it more complicated." Consumers apparently agree with him as stock prices for Netflix dropped more than seven percent on Monday. The company has also lost nearly one million subscribers since they announced the changing of prices. With the announcement of the split, no doubt more subscribers will follow suit in dropping the service. This gives other rental companies such as Redbox a chance to take some consumers away from them and increase their market share. Over the past few years, Netflix has been the king of rental services and has rarely made a misstep. With this two announcements comes uncertainty about the company’s future.

Personally, I think it’s an alright decision. I am currently a streaming-only subscriber to Netflix and have had no intention to get DVDs by mail so I have been unaffected by both recent announcements. If this split makes the streaming services better in the long run, then I welcome it. I’m also a gamer, so having the option to rent from Qwikster in the future is enticing as well. DVDs are a dying breed as more and more people move on to Blu-ray and digital media. By splitting the service, Netflix can focus on the more important of the two and put most of its resources to bettering the streaming services, even if they don’t want to blatantly admit it.