Netflix announced today that it has reconsidered its decision to spinoff its DVD rental business into a new company called “Qwikster” and will instead, allow customers to continue to rent DVDs via the mail from Netflix. The move means that both its DVD mailing business and growing online streaming service will remain under one company name.
The move appears to be an attempt on the company—which just six months ago was a darling of Wall Street as one of the fastest growing media companies in the world—to reverse a tide of recent PR disasters (and a stock that is priced half of what it was at the beginning of the year), starting with its announcement in July that it would increase the monthly fees of its DVD rental/streaming service by 60 percent. That announcement enraged subscribers and resulted in a large number of cancellations. The announcement last month that it would spin off its DVD rental business into a separate company called “Qwikster” just fed the flames, as subscribers and pundits alike not only ridiculed the company’s decision but the name itself. “Some members will likely feel that we shouldn’t split the businesses, and that we shouldn’t rename our DVD by mail service,” Netflix CEO Reed Hastings said in the company’s Sept. 18 announcement. “Our view is with this split of the businesses, we will be better at streaming, and we will be better at DVD by mail. It is possible we are moving too fast – it is hard to say.”
Today’s announcement signals that perhaps Hastings agreed with his earlier sentiment, but the earlier decision to raise prices remains intact. “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,” Hastings said in today’s blog. “That means no change: one website, one account, one password… in other words, no Qwikster. While the July price change was necessary, we are now done with price changes.”
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