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September 19, 2011

No, It's Not April 1st: Netflix Drops DVD Service, Spinning It Off into New Brand 'Qwikster'

When Netflix recently raised prices and separated out their DVD-by-mail and streaming pricing, there was a minor revolt among users. So many cancelled their service, in fact, that Netflix's stock took a 15% hit. Still, I don't think anyone saw this coming: from now on, Netflix will only offer streaming titles. If you still want DVDs by mail, they're going to come from a new brand: Qwikster. Wow. Here's the announcement:

The official word from Netflix CEO Reed Hastings:

Many members love our DVD service, as I do, because nearly every movie ever made is published on DVD, plus lots of TV series. We want to advertise the breadth of our incredible DVD offering so that as many people as possible know it still exists, and it is a great option for those who want the huge and comprehensive selection on DVD. DVD by mail may not last forever, but we want it to last as long as possible.

I also love our streaming service because it is integrated into my TV, and I can watch anytime I want. The benefits of our streaming service are really quite different from the benefits of DVD by mail. We feel we need to focus on rapid improvement as streaming technology and the market evolve, without having to maintain compatibility with our DVD by mail service.

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”.

Some initial knee-jerk analysis in a retweet:

Link: An Explanation and Some Reflections - the Netflix Blog

Your Comment

17 Comments

Wow, well i suppose that's one option..

September 19, 2011

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Nate

They own a movie distribution channel and their video looks like it was shot on a VX1000. Weird.

September 19, 2011

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Redbox here I come!

September 19, 2011

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SPG

People are starting to speculate that it's a move towards eventually selling off the DVD portion of their business or, at the least, using the spinoff as a way to separate the financial risk of running the DVD portion. We'll see.

September 19, 2011

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Angelo

to me, it looks like the studios are pushing harsher and harsher conditions in order to lend them the rights to stream their titles (make sure only one title is streaming to each account at any moment, pay separately for streaming and DVD rental, etc)

and it may be a mistake: all they have is a gift from their customers, and trying to screw them doesn't look like a good long-term strategy

netflix is arriving here in Spain in a few months; we have a very pro-piracy culture here, but still lots of people would welcome a service like netflix; I hope it gets some traction and shows the copyright owners that a more progressive attitude can lead to higher profits

September 19, 2011

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When Netflix split service they would have been better off lowering the price a buck or two. Then in a year or two a $1 price increase wouldn't be such a big deal. Now they look like a bunch of monkeys trying to hump a football. Whoever came up with "Quikster" should be fired. What a totally stupid move. Those willing to pay for DVD & streaming no have to visit two sites and manage two ques.

September 19, 2011

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I agree that this is an annoying thing for those people who're keeping both services. While I didn't like price hikes, I was bothered more by how it was approached than that it was done. Overall, because I had the 2 bluray plan, my rate remained almost the same.

Now, I'll have to log into 2 accounts to manage things, which is somewhat annoying. Fortunately, I have so many things in my queue, that I don't have to log in that often. Now, let's see how much they charge for adding games...

September 19, 2011

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i for one am glad netflix is doing this. face it, dvds are dead. blu ray is dead. optical media as a whole... dead. with these changes, i'm sure netflix will be investing more in bandwidth, growing the streaming library, and improve stream quality. in time, only good can come of this.

September 19, 2011

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dave

That's ok to discard all together DVD as long as the HD streaming service is up to spec.

I see 2 major issues so:
1. Internet provider may decide to put a cap on the amount of data downloaded per month, the way the cell companies are currently doing. With a cap, all HD streaming will be dead unless the peer pressure push Congress to act.
2. It's nice to have streaming service as long as there are movies on it. Just as a reminder, startZ is removing their listing from Netflix... and it seems October 1st is the date. Using Netflix on my ps3, it is clearly stated for some streaming movies will only be available until October 1st.... This is not withstanding the fact that the catalogue on streaming is pretty lame except if you want to see old movies or very low rate movies.

September 19, 2011

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elm

i wouldnt be surprised if more and more content providers pull their stuff from netflix. its not just a distribution machine now, its also a content producer. (see: house of cards). starz wouldn't put their content on HBO would they? all these services... netflix, hulu plus, itunes, the amazon prime one - they're ALL essentially premium channels. in time they will be more recognized as content producers too.

regarding the bandwidth caps, that may happen. i wouldn't put it past greedy corporations and inept / corrupt government agencies to muck up the free internet movement. what i DO think will happen either way though is that unlimited bandwidth services will be provided, albeit for a premium rate.

September 19, 2011

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dave

I agree. The future is streaming, but they should have dropped the price for streaming instead of making this poor quality video with crappy sound.

September 23, 2011

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The guy who came up with the name for this must be the same guy who came up with Cakesters.

September 19, 2011

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David

and he didn't even check whether the name was available, or was in fact home to a weed smoking elmo
https://twitter.com/#!/Qwikster

September 19, 2011

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haha... "Qwikster."
One thing is for sure.
No one at Netflix smokes enough weed...

September 20, 2011

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Cleon

Not a surprise, especially if you saw the 60 Minutes piece done on Netflix. How do you stop spending millions a year on shipping, slow that down to an eventual halt. It's a no brainer. File based delivery is the future, welcome to the new world.

September 20, 2011

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Steve M.

Here's an interesting article on the split:
http://www.wired.com/epicenter/2011/09/netflix-qwikster-split-licensing/
He suggests that the issue is licensing, and it makes a lot of sense. Netflix had a backdoor into VOD through Starz, but that's expiring in February. Everyone sees VOD on the horizon, and currently Netflix has a monopoly by default, so everyone's playing hardball with them. This gives them some leverage on that front.

September 23, 2011

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I had no problems with the fee increases, as much as so many others complained about. They are totally different business models...even though physically shipping isn't cheap, it's the royalties/licensing that costs more with streaming. The fact that the mail takes a day or two just means they aren't having to pay as much b/c of the physical wait time (excluding those very few paying for more than 2 discs out at a time, but they're paying enough to make up for it)...with streaming, people can and do stream more movies more often and Netflix quickly realized it.

I only got annoyed when they announced the Qwikster spin-off...b/c now I have to go thru two lists from two companies. I know I'm in the minority here as an image quality freak who hates most streaming b/c of the sacrifices here, but as a bluray fan, setting up my queue is *way* easier with one company...I only stream (or watch DVD's) of either crap that doesn't matter much on a visual level or are unavailable on bluray. I can watch something like Superbad or Date Night on a lesser format (usually in the kitchen on my laptop while cooking, or while working out or whatever, but if Darius Khondji or Roger Deakins shot it, you can bet I'm watching bluray on the 46".

I feel bad for more than halfway turning my back on the indie video stores (b/c netflix has such a selection at a decent price)...but I'm heading back now as much as feasible. They made it both easy and cheap to switch to them and they're also making it easier now to switch away from them.

September 25, 2011

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Daniel Mimura