Netflix CEO Reed Hastings has made a surprising announcement. Following a sharp drop in Netflix’s stock price, Hastings is making a bold move by separating the DVD-by-mail and video streaming services. The DVD service will now be operated under the name Qwikster, while the streaming service will retain the Netflix brand.
Although customers can still subscribe to both services, the two sites will no longer be integrated. Qwikster will also begin offering video game rentals through the mail, a feature that has been in demand for a long time. With this decision, Hastings is reinforcing his belief that streaming is the future of Netflix and the entertainment industry. Separating the businesses will also compel customers to make a choice, and it is clear which choice Hastings prefers (hint: it starts with an “N”). This move demonstrates Hastings’ commitment to pursuing the greatest opportunity, despite the recent adversity faced by the company.
In a blog post, Hastings expressed his concerns about the company’s transition from success in DVDs to success in streaming over the past five years. He stressed the importance of not being complacent and of focusing on the new demands of consumers. It remains to be seen how investors will react to this news, but Hastings believes it is the right move.
Notably, Hastings begins his announcement with an admission of fault to his customers: “I messed up.” While he does not label the price hike as a mistake, he acknowledges that he should have communicated it better. By separating the two businesses now, Hastings aims to address potential issues sooner rather than later. Below is a video featuring Hastings and Qwikster’s new CEO Andy Rendich explaining the change:
