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Annenberg School of Communication and Journalism University of Southern California

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Netflix Splits DVD Service Into New Company Qwikster

Netflix announced the division of its company Sunday into two separate companies, Netflix and Qwikster.

Netflix has restructured its business by divorcing its movie-streaming feature from its DVD-by-mail service.  The new system will charge customers seprately for the two services, where before it was all included under one price.

AP
AP

The newly independent DVD-by-mail service has been renamed Qwikster.  Qwikster is a subsidiary of Netflix and operates from a separate website.  Netflix will remain a movie-streaming website. 

Qwikster's launch announcement was buried in a blog post by CEO Reed Hastings in which he apologized to customers for the terrible stock performances when share prices crashed 19%.  The plummet came as a result of Netflix's sudden price increase from $10 per month to $16.

Hastings explained in his blog post that the creation of Qwikster was the reason behind the price hike that so infuriated customers.

"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," Hastings said.

He went on to try to placate customers by describing the benefits of the new system, one of which includes an expanded selection of videogame titles for multiple console systems.

"One improvement we will make at launch is to add a video games upgrade option, similar to our upgrade option for Blu-ray, for those who want to rent Wii, PS3 and Xbox 360 games," Hastings said. " Members have been asking for video games for many years, and now that DVD by mail has its own team, we are finally getting it done."

 

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