SEPT. 19, 2011 • Shortly after separating its pricing stricture for DVD rentals and streamed movie delivery, Netflix announced is was going further by splitting the company. Netflix would remain as the destination for streaming film content, and a new entity called Qwikster would handle DVD rentals. As part of the split, customers subscribing to both would soon be forced to long onto different web sites to reserve content. In addition, Qwikster will add video game rentals to its offerings.
Impact: There is plenty of speculation on the why behind Netflix’s reorganization. Most theories have management intent on selling either the streaming or the DVD business. From our perspective, the decision to split the company is risky from a brand perspective. Yes, online streaming is the future of content delivery. However, the size of Netflix’s streaming library is small, and consumers really liked being able to stream and order disc rentals in one convenient spot. No other brand could deliver rental content so well. Now Netflix’s two services will have to compete separately against a slew of other competing streaming and DVD providers. The addition of game rentals to Qwikster’s catalog is generally complementary, yet it remains to be seen how interested Qwikster’s subscriber base will be in renting games.
