Netflix backtracks on Qwikster spin-off

08.10 Europe/London, October 11, 2011 By Robert Briel

Netflix has scrapped plans to spin-off the DVD rental business from its online video service. No more Qwikster, writes Reed Hastings on the Netflix blog, following a barrage of complaints from Netflix customers.

“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,” according to Hastings. “This means no change: one website, one account, one password… in other words, no Qwikster.”
It looks like Netflix has managed to alienate many of its customers by first its hiking the prices and then splitting the business into two separate units. “While the July price change was necessary, we are now done with price changes,” writes Reed.
The two moves apparently drove many customers away to competing services such as Amazon. But the company remains confident that customers will stay. “We’re constantly improving our streaming selection. We’ve recently added hundreds of movies from Paramount, Sony, Universal, Fox, Warner Bros, Lionsgate, MGM and Miramax. Plus, in the last couple of weeks alone, we’ve added over 3,500 TV episodes from ABC, NBC, FOX, CBS, USA, E!, Nickelodeon, Disney Channel, ABC Family, Discovery Channel, TLC, SyFy, A&E, History, and PBS.”
Broadband TV Views. It is our take that it seems Netflix is now panicking. While it is always good to listen to your customers – and with online services, customers’ response is immediate – the question remains how long Netflix can sustain its DVD-by-mail rental business.
The move to hive off the physical rental business makes sense, as sooner or later the on-demand business will completely move online, be it on a computer or connected TV set. DVDs, and for that matter Blu-ray discs, are a dying breed. The future is online and Netflix is – at least until now – in the best position to profit from that move.
It was a brave decision to bite the bullet – but it now seems it chickened out in face of customer reaction. The fault was not so much the decision itself, but rather the way Netflix communicated it.