Netflix Splits DVD and Streaming Business ➝

Netflix CEO, Reed Hastings:

So 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. It’s hard for me to write this after over 10 years of mailing DVDs with pride, but we think it is necessary and best: In a few weeks, we will rename our DVD by mail service to “Qwikster”.

On the surface this seems like an incredibly huge announcement, Netflix is officially splitting their DVD and streaming business in two. But, at second glance this is just the next logical step. Netflix doesn’t want to rent DVDs forever and eventually they’ll have a big enough streaming library to end DVD rentals for good. And, I think splitting their business in two will keep their customers happier in the long run.

There’s still a lot of people that don’t use the streaming service and only rent DVDs. Splitting the business in two will allow them to focus on improving the experience for each type of customer. If you’re still a fan of DVD rentals, it’s going to improve. If you really love Netflix streaming, it’s only going to get better.

Reed Hastings on an improvement to the DVD rental service:

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. 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.

If anything, I feel a lot happier about my decision to cancel my GameFly subscription.

Also, I think it was smart to keep the name “Netflix” on their streaming business but they really couldn’t come up with anything better than Qwikster?

(Via TechCrunch.)