Netflix Separates DVD Business as Qwikster, Adds Video Games

Bloomberg Netflix Separates DVD Business as Qwikster, Adds Video Games September 19, 2011, 11:46 AM EDT More From Businessweek     RIM Fourth Quarter $1.82-a-Share Doubts Over Tablet Mount: Tech     'Modern Family' Leads ABC to 5 Emmys, Ending HBO's 8-Year Streak     California Sells 18% of $2.5 Billion of Bonds to Individuals     Silver Lake Said to Weigh Buying Yahoo, Selling Asian Assets     RIM Slumps on Concern Waning Sales Make It 'Niche Player' Story Tools     inShare     add to Business Exchange     E-mail     Print By Anthony Palazzo (Updates share price in last paragraph.) Sept. 19 (Bloomberg) -- Netflix Inc. 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 television shows, Reed Hastings, chief executive officer 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, 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, Hastings said. There will be no price changes associated with the move, Hastings said. He said the company "messed up" over the past two months in explaining a new plan that raised fees by as much as 60 percent for customers who use DVDs and streaming. "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 rose $4.05, or 2.6 percent, to $159.24 at 11:15 a.m. New York time in Nasdaq Stock Market trading. The shares fell 26 percent in two days last week after the company said it lost more customers than anticipated following the price changes. --Editors: Rob Golum, Anthony Palazzo To contact the reporter on this story: Anthony Palazzo in Los Angeles at apalazzo@bloomberg.net To contact the editor responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net