Netflix CEO Reed Hastings announced on Sunday the reasoning behind the big shifts in their service options. To bring everyone up-to-date quickly, Netflix is dividing itself into two companies. Netflix will handle streaming video; Qwikster the DVD mail service.
Here’s the bottom line: “. . . we realized that streaming and DVD by mail are becoming two quite different businesses, with very different cost structures, different benefits that need to be marketed differently, and we need to let each grow and operate independently.” said Hastings in his blog entry, “An Explanation and Some Reflections.”
To avoid the trap of Blockbuster, Borders and other companies who didn’t take seriously the technological changes impacting their product, Netflix is segmenting their original cash cow — DVD rentals by snail mail — for the heart of what their business is — delivery of entertainment content to the customer.
Netflix hopes to appease and please DVD rental customers aka the new Qwiksters “. . . by adding video games (as an) upgrade option . . . for those who want to rent Wii, PS3 and Xbox 360 games.” Customers have long been interested in game rentals.
Will there be a big bump? Yes.
“. . . 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.”
Is this separation the best way to go? Probably.
Netflix can focus on the rapidly expanding streaming technologies while Qwikster maintains and supports the older DVD technology for its foreseeable future.
We’ll stick around for the final film credits to see how this all plays out. Just like watching a great movie.