Netflix Splitting Streaming and Rental Services into Two Companies

In a desperate attempt to rebound from falling membership and plummeting stock prices, Netflix is creating Quikster to handle DVD and videogame rentals.

Reed Hastings, the founder and CEO of movie streaming and rental giant Netflix, made a post on his blog late Sunday night announcing a massive restructuring of the business. Netflix will soon be a company that deals only in the media streaming business; the rent-by-mail service long associated with Netflix will be operated by a new company entirely, going by the name of Quikster.

The post makes clear that Hastings believes that the drop in membership and customer backlash at the company’s recent price hikes and plan restructuring shows that the two services are hurting each other. “I messed up,” he said. “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.”

To make the change more attractive, Quikster will rent not only movies, but will feature an upgraded service that will allow the rental of videogames for the Wii, PS3, and Xbox 360. “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,” said Hastings.

The new company will have a separate website, separate queue, and separate monthly charges, but the price remain the same as the current DVD-only service. Quikster will be headed by Andy Rendich, the current head of the DVD service at Netflix, who plans on keeping the iconic red envelope, albeit with a new logo.

Already, the change is drawing flak from users, who are citing the inability to search both services at the same time, the unnecessary complexity of using two separate services, and the inability to share ratings between Quikster and Netflix as primary concerns, on top of the still-present anger at the price hikes and loss of content.

What with the current feeling of the users, the shakey financial situation, the loss of streaming content, and now a rebranding and massive service change, I can’t help but shake the feeling that Netflix’s rough patch is far from over.

Source: Netflix Blog