Big, long awaited news from Netflix:
Erick Schonfeld via Techcrunch
Netflix CEO Reed Hastings just dropped a bombshell. In the wake of a rapid decline in Netflix’s stock price last week, Hastings is taking a bold step by separating the DVD and video streaming services. The DVD-by-mail service will now be called Qwikster, and the streaming service will maintain the Netflix brand. That’s right: the new business (streaming) will keep the existing name.
Why people think this is a ‘bombshell’ is beyond me. It’s an obvious move, as I said two months ago when they made major price changes:
Stowe Boyd via stoweboyd.com
Since the plans changed, I realized that I had let my DVD queue go empty several times in the past months, so I just don’t need as many DVDs as I originally did. Just one at a time for the occasional movie that is not stream-configured yet.
So I think Netflix will lose some money from people like me defecting from discs, and gain some from people signing up for unlimited streaming with a disk or two at a time.
But both the DVD-only and streaming only businesses can make money at the lower tiers, which must have been a loss leader for one or both services, before.
And by breaking out the team managing the DVDs, Netflix might be preparing to spin it out:
Jessie Becker via Netflix blog
Last November when we launched our $7.99 unlimited streaming plan, DVDs by mail was treated as a $2 add on to our unlimited streaming plan. At the time, we didn’t anticipate offering DVD only plans. Since then we have realized that there is still a very large continuing demand for DVDs both from our existing members as well as non-members. Given the long life we think DVDs by mail will have, treating DVDs as a $2 add on to our unlimited streaming plan neither makes great financial sense nor satisfies people who just want DVDs. Creating an unlimited DVDs by mail plan (no streaming) at our lowest price ever, $7.99, does make sense and will ensure a long life for our DVDs by mail offering. Reflecting our confidence that DVDs by mail is a long-term business for us, we are also establishing a separate and distinct management team solely focused on DVDs by mail, led by Andy Rendich, our Chief Service and Operations Officer and an 11 year veteran of Netflix.
And the future CEO of DVDFlix?
So, I was wrong about the name, but otherwise, this was an inevitable step to move away from the legacy tail of shipping DVDs. And Andy Rendich is the CEO, obviously part of the plan.
I don’t think Hastings was responding to market moves: he had planned this all along.
Update: 7:06am EST - Amazingly negative response on the Netflix blog, with many users complaining about the increased headaches of managing two queues. But we already were managing two queues, one for the DVD and one for the streaming titles, so I don’t get that. Personally, I have been using InstantWatcher as the UI for the streaming service, and only adding things to the DVD queue that I can’t find.