Netflix Splits: Qwikster DVD Separated From Streaming

Netflix has scythed its DVD and streaming businesses apart, with DVD by mail splitting off to form the basis of new service Qwikster. Admitting on the official Netflix blog that "I messed up," Netflix CEO Reed Hastings agreed with critics of the recent price hike that he "owe[s] everyone an explanation"; according to the outspoke chief exec, Netflix's evolution took place faster than its communications kept up. Now, Qwikster will offer Xbox 360, PS3 and Wii games as part of its mail service, while pricing for both it and the streaming-only Netflix will remain the same.

"For the past five years, my greatest fear at Netflix has been that we wouldn't make the leap from success in DVDs to success in streaming. Most companies that are great at something – like AOL dialup or Borders bookstores – do not become great at new things people want (streaming for us) because they are afraid to hurt their initial business. Eventually these companies realize their error of not focusing enough on the new thing, and then the company fights desperately and hopelessly to recover. Companies rarely die from moving too fast, and they frequently die from moving too slowly.

When Netflix is evolving rapidly, however, I need to be extra-communicative. This is the key thing I got wrong" Reed Hastings, CEO, Netflix

Those who currently subscribe to both mail and streaming services will now see two charges on their credit cards, one for Netflix and one for Quikster. The company has copied across each user's movie ratings and reviews so that there's a version on each site, but since those sites will be operating independently any future ratings won't be synchronized. So, if you rate a movie you streamed through Netflix, that rating won't automatically educate your Quikster suggestions.

As you might expect, the company's decision has not been met with universal approval. Hastings' comments that "There are no pricing changes (we're done with that!)" should at least act as some sort of reassurance that pricing for the two options isn't likely to change in at least the near future, while the suggestion that "The additional streaming content we have coming in the next few months is substantial" may pacify many who'd simply prefer quicker access to more media.