Netflix to Split Streaming and DVD Services

Hastings Announces Qwikster in Blog Post, Email

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Netflix plans to separate its DVD-by -mail service from movie streaming, a move the company said will give both businesses a better chance to grow.

The DVD-only service will be called Qwikster and add video games to the current movies and TV shows, Reed Hastings, CEO of Los Gatos, California-based Netflix said yesterday in a blog post. The streaming service will keep the Netflix name.

The move grew out of the realization that the businesses had different cost structures and marketing needs, Mr. Hastings said in the post. Separating them will allow each to grow and operate independently, he said.

"It's hard for me to write this after over 10 years of mailing DVDs with pride, but we think it is necessary and best: We will rename our DVD by mail service 'Qwikster,'" Hastings said.

Andy Rendich, who has led the DVD operation for four years, will be Qwikster's CEO. The by -mail and streaming products will have separate websites and customers will receive unique credit-card charges from each.

Qwikster will start "in a few weeks," and will offer video games for Nintendo Co.'s Wii, Sony Corp.'s PlayStation 3 and Microsoft Corp.'s Xbox 360 consoles, Mr. Hastings said.

There will be no new pricing changes, Mr. Hastings said. He said the company had "messed up" over the past two months in how it discussed with customers pricing changes, which raised fees on customers who pay for both DVD and streaming by as much as 60%.

"It is clear from the feedback over the past two months that many members felt we lacked respect and humility in the way we announced the separation of DVD and streaming, and the price changes," Hastings said.

Netflix fell 26% in two days last week after the company said it lost more customers than anticipated following the price changes. The shares closed at $155.19 on Sept. 16 in Nasdaq Stock Market trading, down $14.06, and have declined 12% so far this year.

-- Bloomberg News --

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