Netflix Abandons Plan to Rent DVDs on Qwikster

[Nemesis]

Yahoo Finance.

 

Abandoning a break-up plan it announced last month, Netflix said Monday morning that it had decided to keep its DVD-by-mail and online streaming services together under one name and one Web site.

The company admitted that it had moved too fast when it tried to spin-off the old-fashioned DVD service into a new company called Qwikster.

"We underestimated the appeal of the single web site and a single service," Steve Swasey, a Netflix spokesman, said in a telephone interview. He quickly added: "We greatly underestimated it."

Mr. Swasey said that the Netflix chief executive Reed Hastings declined an interview request. But in a statement, Mr. Hastings said, "Consumers value the simplicity Netflix has always offered and we respect that. There is a difference between moving quickly -- which Netflix has done very well for years -- and moving too fast, which is what we did in this case."

Mr. Swasey declined to comment on any involvement by the Netflix board in the decision to keep the two services together.

 

Netflix said it never actually separated the services or started Qwikster. But the Sept. 18 announcement that it intended to do so stoked anger among Netflix customers, some of whom were already incensed by a price hike.

In a blog post that day about the plan, Mr. Hastings wrote, "Companies rarely die from moving too fast, and they frequently die from moving too slowly." His implication was that Netflix had to act aggressively to expand its fast-growing streaming service by severing its older, slower DVD-by-mail arm.

In a sentence that now seems like a bit of foreshadowing, Mr. Hastings also wrote, "It is possible we are moving too fast - it is hard to say."

Netflix said that day that the separation would take effect in a few weeks. But tens of thousands spoke out against the plan on Netflix's Web site and others, and Netflix stock slid sharply.

Three days after the announcement, Mr. Hastings wrote in a Facebook status update, "In Wyoming with 10 investors at a ranch/retreat. I think I might need a food taster. I can hardly blame them."

The planned break-up was rooted in Mr. Hastings' and Netflix's belief that DVDs and online streams have different cost structures and different consumer demographics.

In July, to address the structural underpinnings of the business, Netflix announced that it would start charging $8 a month for both its streaming service and its DVD service, a total of $16 a month for the combination.

Previously, DVDs were a $2 add-on to the $8 streaming service. Of course, subscribers who only wanted one service or the other -- most new subscribers only want the online streams -- saw no price hike, but that fact was drowned out by the outcry.

Netflix expected some of its 25 million subscribers to cancel in the wake of the price change, but the cancellation rate exceeded expectations. The company said in mid-September that it expected to report a quarterly decline of about one million in the third quarter, which ended on Sept. 30.

But that guidance was given before the break-up was announced; Mr. Swasey said Netflix would not comment on whether the quarterly losses would exceed the already-lowered expectations. The company will report earnings and subscriber figures on Oct. 24.

On Sunday night, Mr. Swasey sought to reiterate what Mr. Hastings tried to say last month when he announced Qwikster: that Netflix had failed to communicate effectively about the price changes. "We had to look at the reality of what it cost" to mail multiple DVDs to households each month, Mr. Swasey said, noting that the round-trip postage alone for one DVD cost almost $1.

Under the plan announced on Monday, the price change will remain in effect, but the two services will not be untethered. That means that subscribers who want both online streams and DVDs won't have to manage two accounts and pay two bills each month, after all.

Netflix tried to be crystal-clear about it, issuing a press release that was titled "DVDs Will Be Staying At Netflix.com" and sending e-mails to subscribers about the news.

"Netflix said in a Sept. 18 blog post that its DVD by mail service would operate at Qwikster.com," the press release read. "Instead, U.S. members will continue to use one website, one account and one password for their movie and TV watching enjoyment under the Netflix brand."

A plan for Qwikster to rent video games may or may not move forward; Mr. Swasey said it was "to be determined."

Netflix, meanwhile, still has to concentrate on its online streaming service, which is widely considered to be its core business.

Next February, it is expected to lose the right to stream films from Walt Disney Studios and Sony Pictures Entertainment as a result of a failed renegotiation with the premium cable channel Starz. But it announced a deal last month with DreamWorks Animation to stream that studio's films starting in 2013. Last week, it announced a deal with AMC Networks to stream old episodes of TV shows like "The Walking Dead."

Netflix also remains interested in paying for the production of new TV shows. Earlier this year it ordered its first original drama, "House of Cards," which is expected to have its premiere in late 2012. Now it is in talks to distribute new episodes of two cancelled TV series, "Arrested Development," formerly of the Fox network, and "Reno 911," formerly of Comedy Central. The past seasons of both shows can be streamed via Netflix -- and can be rented on DVD, too.

[bloodbath09]

I laughed when I read this. I thought it was a stupid idea in the first place.

[Red0ctobeR]

I didn't care that they were changing services. I did care that they were jacking up proces for the same service. Their online service is lousy. I would be willing to pay for services if there was more of a current selection online.

 

Also I wanted up to date releases of the DVD's and they were almost a month behind. Freaking rediculous.

[bloodbath09]

Ya I just have netflix streaming. It blows.

[IRISH BULL]

Ya I just have netflix streaming. It blows.

 

They didn't update their streaming section even after they separated the services?!!

[FacelessButcher]

They are fucking milking us, I'm researching competitors.

[iDnTyX]

They are fucking milking us, I'm researching competitors.

 

Blockbuster is the way to go.

 

14.95 for two disc monthly subscription. For DvD,Blue Ray and Games. That beats gamefly. They also have On Demand instant view but not sure how it works if its another subscription via dish network or something. Does anyone have it?

https://www.blockbuster.com/signup/m/plan

 

This is the email they sent to customers

 

Dear Joseph,

It is clear that for many of our members two websites would make things more difficult, so we are going to keep Netflix as one place to go for streaming and DVDs.

This means no change: one website, one account, one password…in other words, no Qwikster.

While the July price change was necessary, we are now done with price changes.

We're constantly improving our streaming selection. We've recently added hundreds of movies from Paramount, Sony, Universal, Fox, Warner Bros., Lionsgate, MGM and Miramax. Plus, in the last couple of weeks alone, we've added over 3,500 TV episodes from ABC, NBC, FOX, CBS, USA, E!, Nickelodeon, Disney Channel, ABC Family, Discovery Channel, TLC, SyFy, A&E, History, and PBS.

We value you as a member, and we are committed to making Netflix the best place to get your movies & TV shows.

Respectfully,

The Netflix Team

Edited October 11, 2011 by iDnTyX