Netflix Splits DVD And Streaming Businesses

Side note: TechCrunch got back to doing real news. Good for them!

I think this is a good move simply because the two divisions have contradictory goals at this point.

For example, the Qwikster division should be looking at finding ways to deliver DVDs quicker (Kiosks for example). But that's not something that would ever occur to Netflix because they're focused on streaming as the future.

Which is where the contradiction comes in. It is hard to run a business unit when the goal of the company overall is to kill off your unit.

That said I think announcing it today is foolish. Even if it was their original plan to do so announcing it right after a stock drop makes the decision look rash. IMHO they should have put this announcement off for a couple weeks.

Biggest downfall here will potentially be the separation of ratings. Dvd and streaming customers will have to rate dvd first and then see it as unwatched in streaming later?

I think of Netflix as my repository for "what I have watched" and teller of "what you will want to watch". I don't tie the brand to a specific delivery mechanism (dvd or streaming).

Interesting prediction. It would make a lot of sense to produce/fund more original content. It's definitely the direction the streaming business has to follow. If cool and original stuff is on Netflix only, it will be good for them and other original content producers may be more inclined to be there.

"...the Qwikster.com and Netflix.com websites will not be integrated. So if you subscribe to both services, and if you need to change your credit card or email address, you would need to do it in two places. Similarly, if you rate or review a movie on Qwikster, it doesn’t show up on Netflix, and vice-versa."

Wow. I had previously thought that their pricing change was forcing consumers to effectively choose between streaming and disc-based services, but didn't expect that they'd actually go this far and completely cut the cord between the two.

Considering the how much less efficient it is to mail movies than it is to download them in an age of high gas prices and fast internet, Netflix killing or spinning-off it's dvd service was an inevitability. I'm just not sure that right now the streaming service by itself has the selection to keep subscription numbers high enough to maintain sufficient leverage with content providers.

Momentum is very important with the type of model they have: the more content Netflix loses to studios who start their own streaming services, the less appealing the Netflix service becomes to subscribers, which both weakens the argument for studios to stick with them due to the size of their subscriber base and also sets a positive example of succeeding without Netflix that other studios can follow.