Netflix has been in the news quite a bit recently, with its price hike and the subsequent loss of subscribers, as well as its plummeting stock value and the controversy surrounding the construction of its new corporate headquarters. “I messed up,” said CEO Reed Hastings in a blog post he released on Sunday night. And that was just the beginning of the bombshell.
Hastings went on to say that the company has decided to spin off its DVD division as a separate company called Qwikster. “Launching soon,” says the company’s website, “so start popping the popcorn.”
Hastings explained that the reason for the decision to separate the DVD and streaming divisions into two separate companies is that they are completely different business models. He wrote that the company is in a transitional phase, and that streaming is rapidly replacing DVDs as the preferred means of obtaining videos. “DVD by mail may not last forever, but we want it to last as long as possible,” Hastings wrote.
Hastings also compared the need for the transition to the fates of AOL and Borders bookstores, both of which failed to keep up with changing technologies. “Most companies that are great at something … do not become great at new things people want (streaming for us) because they are afraid to hurt their initial business. … Companies rarely die from moving too fast, and they frequently die from moving too slowly.” On the other hand, just a few paragraphs down he wrote, “It is possible we are moving too fast – it is hard to say.”
TechCrunch believes Qwikster is the right move, though it admits that the ultimate decider will be how Netflix’s shares fare today with the new announcement. Subscribers were more circumspect, and wondered how the queues and ratings systems would work now that they have to negotiate between two ostensibly separate companies. As one person commented, “The lack of communication between the two services regarding rating and reviews seems like a huge downfall and I would imagine will be a major complaint.”
Another person asked, “If a film I search for on Netflix is not available for streaming, will the website still tell me if the DVD is available?” Hastings responded, with an “Ouch,” indicating that they had clearly not thought the whole thing through.
Only time will tell if this bold move by Netflix is also a wise move. If not, Hastings may have to start another blog post with the epic admission, “I messed up.”
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