Netflix chopping off its DVD arm, renamed Qwikster

Netflix scrambles to hang onto shareholders, but customers fail to see the bright side

Update: We previously said that Netflix's new DVD business is called "Quikster" when, in fact, it's actually "Qwikster."  Still a lame name.

Netflix took to its blog late Sunday night in an attempt to stanch the flow of bailing shareholders.  In a startlingly humble post, CEO Reed Hastings opens up with a blunt: “I messed up.”  He goes on to write that he should have been more communicative when Netflix raised its prices by 60%, and that he should’ve explained that Netflix is trying to keep up with the digital revolution.  His answer to the problem: Netflix is chopping off its DVD arm.

After cutting its subscriber forecast by one million last week, Netflix’s stock took a nosedive, closing at $155 on Friday from $208 on Wednesday.  As the company hemorrhages stock, it’s clearly scrambling to right itself—which it thinks it can do by getting rid of its DVD business altogether and focusing exclusively on its streaming business.

The new DVD business, Qwikster, will be run as an entirely separate entity from Netflix, complete with its own CEO, Andy Rendich, who has been working on Netflix’s DVD service for 12 years and has been leading it for the last four years.  

While Qwikster (which Hastings said will be up in a few weeks) will be run as a subsidiary of Netflix, it will not share user information with Netflix, which means if you’re a Netflix streaming subscriber and you want to get a title that Netflix doesn’t yet carry as a streaming title (which will probably happen frequently, given the fact that it’s struggling to hang onto content partners), you’ll have to create a separate account at Qwikster.com, re-enter your credit card information, and so on.  Also, if you review a movie on one site, your review will not show up on the other site.

So, in summary: Reed Hastings’ solution to his lack of communication is to create two separate websites that won’t communicate with one another.  At least, they won’t communicate on your behalf.

“Our view is with this split of the businesses, we will be better at streaming, and we will be better at DVD by mail,” wrote Hastings in his blog post.  “It is possible we are moving too fast – it is hard to say. But going forward, Qwikster will continue to run the best DVD by mail service ever, throughout the United States. Netflix will offer the best streaming service for TV shows and movies, hopefully on a global basis.”

He added that Netflix has a “substantial” amount of new streaming content on the way. He also notes that there will be no price change: “we’re done with that!” 

The meager upside: Qwikster’s DVD rental business will now include video games.

Netflix subscribers are not amused by the split. 

“Seriously, you thought a good idea to make up for miscommunications was to separate the websites and make it more complicated for us to manages our queues? Really?” one person commented.

“Wait, how is this better?  Now we have to go to two sites and pay the same price that you are allegedly apologizing for??” another wrote.

And my favorite: “Netfail!”

Hastings has responded to a couple of commenters to reiterate: “We think the separate websites (a link away from each other) will enable us to improve both faster than if they were single websites.”

Qwikster's new DVD business will have the same iconic red envelope, but with a simple name change. Check it out in the video below.

Netflix stock was up 1.2% to $157 Monday morning at opening.

Image source: siliconbeat.com