Netflix revealed today that it will abandon a proposal to separate its streaming and DVD businesses, sending its shares soaring in pre-market trading. Last month the company said its DVD-by-mail service would be split from the company and operated via separate website, Qwikster.com, sending its shares slumping in the following weeks.
Netflix CEO Reed Hastings sets out to assure no new price hikes will take place in the near future, but doesn’t address whether additional features planned for Qwikster, like video game rentals, have been abandoned or if they’ll be integrated into Netflix library.
“It is clear that for many of our members two websites would make things more difficult, so we are going to keep Netflix as one place to go for streaming and DVDs,” Hastings said in a blog post.
“This means no change: one website, one account, one password… in other words, no Qwikster.”
While the plan for DVD operations to be separated internally appears to still be under way, for customers, things will stay the same with one login and one website. While the retreat will probably prompt even more speculation about the company’s true plans and ability to survive the streaming transition, CEO Reed Hastings has issued yet another apology to customers, admitting Netflix may have moved too fast this time.
The move is a concession to those who questioned the wisdom of Netflix’s recent plans, but also an acknowledgment that the company harmed its brand and relationship with users through poor communication and an apparent disregard for what customers actually liked about the bundled service: simplicity. By splitting the services and brands, Netflix added an unnecessary layer of complexity to using both DVD-by-mail and streaming.
“Consumers value the simplicity Netflix has always offered and we respect that. There is a difference between moving quickly — which Netflix has done very well for years — and moving too fast, which is what we did in this case,” Hastings admits.
Since the Sept. 18 announcement to split the companies and increase prices, shares fell from more than $200 to less than $120. Share prices are now up almost 10 percent before the bell.
Meanwhile, Netflix still has to concentrate on its online streaming service, which is now widely considered to be its core business.
[...] split DVD rentals into a separate service and pricing scheme, came up with the much-taunted name of “Qwikster” for its DVD division then lost a content deal with Starz, and has seen aggressive competition from the likes of Amazon, [...]