[Infowarrior] - Netflix to split into two businesses

[Richard Forno]

Netflix to split into two businesses

By Hayley Tsukayama

http://www.washingtonpost.com/blogs/faster-forward/post/netflix-to-split-into-two-businesses/2011/09/19/gIQA09iueK_blog.html?hpid=z4

Netflix is set to split into two businesses, one for DVDs and one for streaming video, chief executive Reed Hastings announced in a blog post late Sunday. The change will take place in a few weeks, Hastings wrote.

Hastings apologized to all Netflix subscribers for not being clearer about the company’s plans, particularly in regards to pricing. In July, Netflix faced a wave of customer backlash over changes it made to its pricing structure, losing the company around 1 million of its subscribers.

“I messed up. I owe everyone an explanation,” Hastings wrote.

The company’s DVD business will be renamed Qwikster, and will also include an optional upgrade to include video game rentals. Customers using Netflix’s DVD site will be able to retain their accounts and queues, but will access the service through quikster.com.

The streaming business will remain the same, Hastings wrote, adding that the company is expecting to add “substantial” streaming content to the service in the coming months. The company recently ended its contract with the Starz media group, losing about 8 percent of its streaming content.

Hastings promised there would be no further changes to pricing, though he said he did not regret the company's decision to change the structure.

“[Netflix] 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,” he wrote.

Netflix stock, which fell heavily on the news that it had lost subscribers last week, was down slightly in pre-market trading — just under one percent.