Netflix Splits in Two, Adds Video Games, Upsets Users Further

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Netflix’s CEO Reed Hastings thinks he has a great idea to stop more customers from defecting since its recent price hike: split his company into two operations, require users to maintain two separate accounts, and add video games. Hastings announced late Sunday that Netflix plans to rebrand its DVD by mail business as Qwikster, giving the new brand a separate website and independent viewing queue. Qwikster will also expand into video game rentals for Nintendo Wii, Sony PlayStation 3 and Xbox 360. Hastings named Andy Rendich, who currently heads up the Netflix DVD service, as Qwikster CEO.

Netflix Splits in Two, Adds Video Games, Upsets Users Further

Netflix, meanwhile, will move to a video streaming only service with aspirations of becoming a global business, according to Hastings. There will be no price hike with the changes, but it does mean that anyone paying for both DVD by mail and Netflix streaming, will now have to maintain two separate accounts, with independent order queues, movie reviews and billing services.

Hastings on the Netflix blog also offered an apology to customers who felt the company handled poorly its price hike announcement earlier this summer. In July, Netflix announced it get rid of its streaming plus unlimited DVDs option that cost $10 per month. The pricing overhaul requires users to pay $8 per month each ($16 total) for streaming and the basic unlimited DVDs plan. The new pricing came into effect for existing Netflix customers on September 1.

"Companies rarely die from moving too fast, and they frequently die from moving too slowly," Hastings said. "When Netflix is evolving rapidly, however, I need to be extra-communicative. This is the key thing I got wrong."

The move to split Netflix into two operations comes just days after the company revealed it expected to lose one million customers by the end of September. The drop in customers largely came from DVD-only account holders, although 200,000 streaming-only members have also dumped the service.

In a bid to win back some of those streaming customers, Hastings said Netflix has "substantial" streaming content coming to its service in the next few months.

If you're a Netflix customer using both services, here's what you need to know.

When Is Qwikster launching?

Netflix did not specify a launch date other than to say Qwikster would be launching in "a few weeks."

What will Qwikster offer?

Qwikster will provide the same DVD by mail service Netflix currently offers, and the company will also expand into video game by mail rentals for the three major gaming consoles--Wii, PS3 and Xbox 360.

How Much Will Video Games Cost?

Netflix didn't specify how much the new video game rentals will cost, other than to say it will be offered as an upgrade option similar to its Blu-ray disc offering.

I Pay For DVDs and Streaming, How Will My Membership Work?

If you pay for streaming and DVD by mail services, your account will be split into two. You will have one for your DVD by mail service and one for online streaming. That means you will see two separate charges on your credit card, and if you have to change your email address, credit card details or other information you will need to do it on two different Websites.

There will not be a unified billing system for both Qwikster and Netflix.

Will Movie Search At Least Be Unified? What About Movie Reviews?

No. There will not be a unified search option, according to a blog comment by Hastings. So if you look for a movie on Qwikster and you can't find it there, you will have to search for it again on Netflix.

User movie ratings and reviews also won't be integrated. So if you review or rate a movie on Qwikster, it won't show up on Netflix. To start, however, both services will carry over existing user ratings and reviews to both sites.

Why Is Netflix Doing This?

Hastings said the company is splitting because the two services are becoming different businesses that would be better able to innovate as separate brands. "We realized that streaming and DVD by mail are becoming two quite different businesses," Hastings said. "With very different cost structures, different benefits that need to be marketed differently, and we need to let each grow and operate independently."

How Are Netflix Customers Reacting?

Not particularly well, if the Netflix blog is any indication. The biggest issue appears to be the fact that customer accounts will now be split. "If queues aren't integrated it's huge detriment for customers who subscribe to both services," said Facebook user Ben Thompson (Netflix uses Facebook's commenting system for its blog). "We need to see which titles on qwiskter are available on netflix in order to use both effectively."

"You're not a DVD company and a streaming company: you're where I go to watch movies. That's it," said Jeremiah Cohick. "By separating and charging more for access, you're wildly less valuable to me. I'll likely cancel."

In the comments, Hastings pointed out that Netflix already has separate queues for streaming and DVD by mail. "We already have two queues," Hastings said. "The two "sites" are a click between each other, so we think not that much different than two tabs on one site." Hastings didn't further explain what he meant by the two sites being a click between each other.

Disgruntled customers disagreed with Hastings' interpretation, however, arguing that with the current service you can decide which queue to add a movie to (DVD or streaming) if a title is available on both services.

It appears that functionality is going away under the new Qwikster-Netflix scheme since the services will not be integrated.

Netflix and Qwikster Explained:

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In Video: Netflix Says Sorry, Then Annoys Customers Again with Qwikster

This story, "Netflix Splits in Two, Adds Video Games, Upsets Users Further" was originally published by PCWorld.

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