Posts Tagged ‘Qwikster’

Netflix Launches Spin-Off ‘Qwikster’ To Handle DVD Service

Tuesday, September 27th, 2011

Qwikster To Replace Netflix DVD-By-Mail Service

Netflix CEO Apologizes For ‘Arrogance,’ Announces More Changes

The Netflix news keeps pouring in, and it never seems good. It’s been just two months since the top video rental company announced price hikes of up to 60 percent for its customers who take advantage of both the original Netflix DVD-by-mail service and the company’s more forward-looking online streaming service. During that time, Netflix has been subjected to endless scrutiny from angry customers, as well as from doubtful investors and financial analysts, all of whom disapproved of the changes. Most recently, Netflix lost the rights to stream digital video transfers of content owned by the Starz network, including movies from Disney and Sony Pictures.

Last week, in a move ostensibly designed to quell the growing concerns among Netflix’s customer and investor base, Chief Executive Reed Hastings sent out a letter offering a frank apology for his company’s customer communications shortcomings. But a few sentences after Hastings admitted to “arrogance’” over failing to adequately explain the reasons behind the price changes, he announced another set of guaranteed-to-be-unpopular changes that sparked a new round of fierce complaints – this time about an impending spin-off company called “Qwikster,” which will be taking over Netflix’s DVD service. Moving forward, the Netflix brand will represent only the company’s digital video transfer streaming service, and customers wanting to receive DVDs by mail will need a separate Qwikster account (with a separate bill, and a separate website used to manage a separate queue).

Since the announcement of the pricing hikes in July, Netflix shares have dropped over 50 percent. Shares dropped a further 7.4 percent after Hastongs’s announcement last week, ending at $143.75 on Nasdaq. Many industry analysts believe that the Netflix “divorce” will fuel the fire of subscription cancellations that has been rolling on since July. Before the announcement of the pricing increases in July, Netflix had been a darling of Wall Street, with stocks gaining over 450 percent over a period of 18 months. Some analysts suggest that Netflix plans to sell off Qwikster to focus on its streaming service in the future, while others believe that the restructuring is a move on Netflix’s part to prepare for a complete buyout by Amazon. Check back for continuing coverage as the story unfolds.