Netflix to exit DVD business; CEO Hastings apologizes for rate hike fiasco

Netflix to exit DVD business; CEO Hastings apologizes for rate hike fiasco
Big news from Netflix tonight. First, CEO Reed Hastings issued a mea culpa about how Netflix handled the recent rate increase. Hastings admits to mishandling the rate hike fiasco, but will not go back on his plans despite complaints from customers. Hastings, in a video, apologized to customers for not explaining the thought process that went into the rate hikes for those customers who want both physical DVD discs and the ability to stream video over a mobile device. Hastings says he is not apologizing for the actual rate hike, just the fact that he was not totally clear in explaining the action.

Speaking of plans, Netflix says it will exit the DVD rentals business and concentrate on the streaming of videos to handsets, game consoles and video boxes. Netflix will spin off the DVD rentals business to a new company named Qwikster. The split will happen "sooner than later"  and Netflix adds that its streaming service is going to become more attractive in the near future. As Hastings says, "The additional streaming content we have coming in the next few months is substantial." Hastings says that both DVD and streaming will benefit from the separation. Andy Rendich was named the CEO of Qwikster. Until Qwikster is spun off or sold, it will remain a separate unit of Netflix.

As far as what will happen to those with current Netflix DVD accounts, we assume that they will be receiving some word from the company about how they will be converted to being a Qwikster customer. In reality, it should be just a matter of crossing out Netflix on the invoice and writing in the new company name. One change that will make many happy is that Qwikster intends to add video games to its rentals lineup.

source: YouTube via AllThingsD

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33 Comments

1. Krishaun27 unregistered

I use the dvd rental much more than streaming anyway, streaming consumes too much data.

11. jogutier

Posts: 324; Member since: Feb 12, 2010

Looks like blockbuster will be making a come back after all.lol

20. c.hack

Posts: 614; Member since: Dec 09, 2009

Yup. I switched from Netflix to BB Xpress. Lots of free rental codes out there too. Amazon Prime for streaming. I dropped Netflix 2 months ago after they announced the price increase and don't miss it one bit.

29. ZayZay

Posts: 571; Member since: Feb 26, 2011

That's why you should have Sprint.

2. Wesley P unregistered

OH WOW! I wonder what is going to happen to Netflix now...This is the beginning of a new era for movie rentals. I don't believe that this is the best move for Netflix. How are they going to fix contracts with the streaming partners?

3. kingjr243

Posts: 31; Member since: Jun 06, 2011

They need to upgrade the quality of the movies they put out cause mostly all of them are old

32. Sellcell

Posts: 118; Member since: Mar 16, 2010

I completely agree with you. It seems like they put movies on there for the retirement homes.

4. Mr.Mr.Upgrade

Posts: 474; Member since: Aug 30, 2011

Well,well well, how many stupid business people in the world, netflix word of advice, don't put Ur self above Ur customers, specially when u not the only top dog in town, vudu,redbox,and even, video game stores, and don't forget, blockbuster streams, and have video games ,dvd, bluerays for cheaper, Wat a dumm move,and there are even sites to watch movies that are in the movie theater, for free,

5. The_Miz

Posts: 1496; Member since: Apr 06, 2011

Yaay Netflix, kill off the thing that made you successful in the first place along with killing jobs.

10. Sniggly

Posts: 7305; Member since: Dec 05, 2009

Um, Miz, you DID read the article, right? They're not killing their DVD business, just spinning it off. Granted, I don't know if the revenue will still continue to flow back to them somehow, but I can't imagine that they'd completely destroy their footing in the industry.

21. c.hack

Posts: 614; Member since: Dec 09, 2009

Yeah, they're just burying it under a pile of rocks under the sea bed, not really killing it. Get real! Netflix is DEAD.

23. remixfa

Posts: 14605; Member since: Dec 19, 2008

based on?

26. lolnotreally unregistered

lol this shows you how dumb miz is pretty funny! what a dumb troll. yablow kid

6. JeffdaBeat unregistered

I just got the email... First off, they are the same company, they are just changing their branding. Netflix will be streaming, Qwikster will be the DVD by mail. That's the only thing. Plus they are adding in video games (definitely down for that). My question is, are they rolling off a new company or just adding a subsidiary...

8. Droid_X_Doug

Posts: 5993; Member since: Dec 22, 2010

It sounds like the plan is to spin off Qwikster once they get enough traction in the streaming business. My question is whether they will get the traction they are looking for in streaming. If they are expecting mobile streaming to be their growth engine, that kind of runs up against the monthly caps in the carriers data plans. Even unlimited customers are getting throttled, and over time, I suspect the universe of unlimited plan customers will diminish. Net-net, I tend to doubt that the streaming business is going to give them the traction they are looking for.

18. remixfa

Posts: 14605; Member since: Dec 19, 2008

netflix makes less money the more you actually watch. they have to pay to keep up all that bandwith on your end. The goal is to offer crap tons of content that is appealing to get users up... who then hopefully only watch it a few times a month... essentially free money. They hate users like me. I got rid of all cable services and went netflix/hulu/ antenna only.. with netflix consuming probably 80-90% of what we watch.

27. shimmyx20

Posts: 280; Member since: Mar 03, 2009

I'm the same way. Between Netflix and Hulu Plus, I've been able to cancel my cable TV subscription. There's actually some really good content on Netflix. Yeah, they may not have the most popular movies, but hey why not go outside your comfort zone and discover some new movies. Plus there's some excellent documentaries, and a good selection of TV shows

33. remixfa

Posts: 14605; Member since: Dec 19, 2008

that netflix reccommends thing has turned me on to so many programs its not funny. i always find new content in there.

7. Forsaken77

Posts: 553; Member since: Jun 09, 2011

cancelled my netflix account yesterday. Not worth it, streaming anyways, until they get some decent content.

24. remixfa

Posts: 14605; Member since: Dec 19, 2008

they just added pixar movies. :) how can u say no to that :)

9. Sniggly

Posts: 7305; Member since: Dec 05, 2009

Okay, I understand the rate hike better now. To me streaming content is worthless as all the companies, both landline and wireless, are moving to capped data plans. Granted, wired companies' caps are much higher and less expensive, but there's still a cap and it could be lowered. It's a negative direction for the industry, especially for companies which have already built the infrastructure and have pretty much paid for it.

25. bolaG

Posts: 468; Member since: Aug 15, 2011

What? Land line companies are going to cap their data plans??! Where did you get this info?

34. remixfa

Posts: 14605; Member since: Dec 19, 2008

comcast, att, and others were talking about capping data plans for landlines. The cap would be much higher than 5gigs, but a cap is a cap.

12. VZW4LIFE

Posts: 34; Member since: Jun 11, 2011

As long as Netflix allows their entire selection to be streamed..... I feel this is a good decision.

13. vvelez5

Posts: 623; Member since: Jan 29, 2011

Not liking this move. If Netflix can't get new releases on their instant streaming and quikster ends up being pricier than netflix DVD rentals, I will probably move on. Shame too Netflix had a great product and idea.

14. Mooooo

Posts: 212; Member since: Aug 27, 2011

I was one of many that cancelled Netflix when they decided to do this rate hike. I do not miss them at all. I can find most of what i want to watch free online.

16. Mjh unregistered

I hear you! Cable tv and Netflix are for suckers!

15. thatjackal unregistered

I love the move! I'm a streaming-focused customer and the more they focus on streaming the happier I am! I don't get why everyone complains about pricing though, 8 bucks is what I spend on lunch a day, instead getting streaming for a month..

17. Knicknevin

Posts: 153; Member since: Mar 18, 2011

While I appreciate the news, this doesn't exactly fall into the area of phones...

19. remixfa

Posts: 14605; Member since: Dec 19, 2008

netflix streams to ioS,android, and WP7.. so it does.

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