# Netflix splits into two services - NOT!



## Chris Blount (Jun 22, 2001)

An e-mail went out to members of Netflix announcing that the company is splitting its services into two separate entities. Netflix will be for online service and Qwikster will be for DVD/Blu-Ray rental.

Here is the text of the e-mail:

________________________________________________________________

I messed up. I owe you an explanation.

It is clear from the feedback over the past two months that many members felt we lacked respect and humility in the way we announced the separation of DVD and streaming and the price changes. That was certainly not our intent, and I offer my sincere apology. Let me explain what we are doing.

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 â€" like AOL dialup or Borders bookstores â€" do not become great at new things people want (streaming for us). So we moved quickly into streaming, but I should have personally given you a full explanation of why we are splitting the services and thereby increasing prices. It wouldnâ€™t have changed the price increase, but it would have been the right thing to do.

So here is what we are doing and why.

Many members love our DVD service, as I do, because nearly every movie ever made is published on DVD. DVD is a great option for those who want the huge and comprehensive selection of movies.

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 need to focus on rapid improvement as streaming technology and the market evolves, without maintaining compatibility with our DVD by mail service.

So we realized that streaming and DVD by mail are really becoming two different businesses, with very different cost structures, that need to be marketed differently, and we need to let each grow and operate independently.

Itâ€™s hard to write this after over 10 years of mailing DVDs with pride, but we think it is necessary: In a few weeks, we will rename our DVD by mail service to â€œQwiksterâ€. We chose the name Qwikster because it refers to quick delivery. We will keep the name â€œNetflixâ€ for streaming.

Qwikster will be the same website and DVD service that everyone is used to. It is just a new name, and DVD members will go to qwikster.com to access their DVD queues and choose movies. 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, but now that DVD by mail has its own team, we are finally getting it done. Other improvements will follow. A negative of the renaming and separation is that the Qwikster.com and Netflix.com websites will not be integrated.

There are no pricing changes (weâ€™re done with that!). If you subscribe to both services you will have two entries on your credit card statement, one for Qwikster and one for Netflix. The total will be the same as your current charges. We will let you know in a few weeks when the Qwikster.com website is up and ready.

For me the Netflix red envelope has always been a source of joy. The new envelope is still that lovely red, but now it will have a Qwikster logo. I know that logo will grow on me over time, but still, it is hard. I imagine it will be similar for many of you.

I want to acknowledge and thank you for sticking with us, and to apologize again to those members, both current and former, who felt we treated them thoughtlessly.

Both the Qwikster and Netflix teams will work hard to regain your trust. We know it will not be overnight. Actions speak louder than words. But words help people to understand actions.

Respectfully yours,

-Reed Hastings, Co-Founder and CEO, Netflix

p.s. I have a slightly longer explanation along with a video posted on our blog, where you can also post comments.


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## Nick (Apr 23, 2002)

Qwikster will also be adding Wii, PS3 and Xbox 360 games rentals by mail for an aditional charge.



> "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, but now that DVD by mail has its own team, we are finally getting it done."


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## Athlon646464 (Feb 23, 2007)

Nick said:


> Qwikster will also be adding Wii, PS3 and Xbox 360 games rentals by mail for an aditional charge.


I'm trying to wrap my mind around why they would create a new name, when the existing one is nearly synonymous with DVD rental by mail. Kind of like 'Kleenex' is to 'facial tissue'.

Pure speculation on my part, but:

1) He kept Netflix for the piece he sees as the most viable long term. He most likely thinks DVD's, much like vinyl records and CD's will begin to disappear eventually. So, he kept the 'brand' for the most viable piece.

2) He plans on selling one or the other. Split the operation, build them back up and sell one or both. Huge profits in it if he can build each piece to even 80% of what the whole was. He'd be at 160% of where they were 6 months ago. May not be as difficult as it sounds, as the competition can't do it as well for less.

Interesting move.

(I got the email today as well.)


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## Chris Blount (Jun 22, 2001)

I'm not really sure what to think about it right now. Initially I'm not all that pleased because I liked having both services in one place. 

I have been with Netflix since the beginning. I love the service. I just hope he knows what he's doing. It might be too soon. While the streaming content is getting better, its nowhere near where is should be. Every time I go in and look for a new movie to watch, I'm bombarded with a bunch of off-the-wall independent films which I don't particularly care for. The streaming service will never truly be valuable until new release DVD's are available. Almost always I end up on Apple TV and spending $4.99 on a new release.

Where Netflix does shine is in TV. I have been using the heck out of that part of the service.


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## oldschoolecw (Jan 25, 2007)

I think I will be upgrading to the Video game rentals part of this service as well, if it's reasonably priced


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## Athlon646464 (Feb 23, 2007)

Because of the brick & mortar tax laws in most states, this makes a lot of sense:

Story Here


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## bonscott87 (Jan 21, 2003)

Well, finally did the deal and canceled Netflix all together. I already went to disc's only but I want nothing to do with Qwickster or whatever stupid name they are calling it now. Between movie channels I get with Uverse and RedBox I got it all covered.


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## Chris Blount (Jun 22, 2001)

bonscott87 said:


> Well, finally did the deal and canceled Netflix all together. I already went to disc's only but I want nothing to do with Qwickster or whatever stupid name they are calling it now. Between movie channels I get with Uverse and RedBox I got it all covered.


 Yeah, I would like to cut Netflix as well but I'm having too much fun re-watching a few TV shows I haven't seen in a long time.


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## Chris Blount (Jun 22, 2001)

Well, it looks like it won't happen. Got his e-mail this morning:
_________________________________________

It is clear that for many of our members two websites would make things more difficult, so we are going to keep Netflix as one place to go for streaming and DVDs.

This means no change: one website, one account, one passwordâ€¦in other words, no Qwikster.

While the July price change was necessary, we are now done with price changes.

We're constantly improving our streaming selection. We've recently added hundreds of movies from Paramount, Sony, Universal, Fox, Warner Bros., Lionsgate, MGM and Miramax. Plus, in the last couple of weeks alone, we've added over 3,500 TV episodes from ABC, NBC, FOX, CBS, USA, E!, Nickelodeon, Disney Channel, ABC Family, Discovery Channel, TLC, SyFy, A&E, History, and PBS.

We value you as a member, and we are committed to making Netflix the best place to get your movies & TV shows.

Respectfully,

The Netflix Team


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## oldschoolecw (Jan 25, 2007)

Chris Blount said:


> Well, it looks like it won't happen. Got his e-mail this morning:
> _________________________________________
> 
> It is clear that for many of our members two websites would make things more difficult, so we are going to keep Netflix as one place to go for streaming and DVDs.
> ...


Yeah, I got it too, NetFlix has been through the ringer over the past few months, and I plan on sticking with them. I do hope they still add a video game section.


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## Nick (Apr 23, 2002)

As a 'streaming-only' sub I really didn't care either way, but this step backward is, IMO, a step in the right direction for Netflix. Like the old saying goes, "If it ain't broke, don't fix it!"


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## AlbuquerqueJohn (May 30, 2009)

Now if they had cut the price increase by 50% I could handle it a lot a better. We still pay TWICE the price for rental and streaming. 

Now that the costs of creating QWACKSTER will not be an issue - I'm sure they could cut the combined price by at least 25% and most likely more.

I'm still not sold on the game they are playing.


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## Nick (Apr 23, 2002)

AlbuquerqueJohn said:


> Now if they had cut the price increase by 50% I could handle it a lot a better. We still pay TWICE the price for rental and streaming...


You're paying for two services because you're getting two services.


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