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Netflix Change Their Minds Again, Scrap Qwikster, No Longer Splitting Into Two Companies

Photo of Oliver Lyttelton By Oliver Lyttelton | www.oliverlyttelton.com October 10, 2011 at 3:30AM

Things have been pretty rosy for Netflix these last few years. Starting as a humble VHS-rental company in 1998, they swiftly became the market leader in DVD rentals, helping to pretty much bury Blockbuster, delivering one billion discs by 2007, and reaching 23.6 million subscribers as of April this year. They've also been ahead of the game in delivering a streaming system, which is, after all, where the home video market is heading, and have become the first stop for film fans looking for online content. And 2011 was going pretty well for them; they announced plans to roll out in Europe in 2012, and are going to be producing their own high content with big names involved, starting with the David Fincher/Kevin Spacey collaboration "House of Cards" next year.
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Things have been pretty rosy for Netflix these last few years. Starting as a humble VHS-rental company in 1998, they swiftly became the market leader in DVD rentals, helping to pretty much bury Blockbuster, delivering one billion discs by 2007, and reaching 23.6 million subscribers as of April this year. They've also been ahead of the game in delivering a streaming system, which is, after all, where the home video market is heading, and have become the first stop for film fans looking for online content. And 2011 was going pretty well for them; they announced plans to roll out in Europe in 2012, and are going to be producing their own high content with big names involved, starting with the David Fincher/Kevin Spacey collaboration "House of Cards" next year.

But in recent months, the company have dropped the ball in a big way. They jacked up their pricing plan, something which suggested they were likely to lose as many as a million subscribers, and then, last month, in a complex email to subscribers, announced they would be splitting the company into two separate entities: Netflix, which would focus on streaming services, and Qwikster, who would handle DVD and Blu-Ray rental by mail, as well as incorporating video games into the mix. Two separate companies, two different services, and twenty four million subscribers who didn't really understand what was going on. But it's ok. Because Netflix have totally changed their minds.

The New York Times' Media Decoder blog have discovered that Netflix are now abandoning any plans to split the company up, and that postal and streaming services will continue to be one entity, under the Netflix banner. Spokesman Steve Shales told the Grey Lady that “We underestimated the appeal of the single Web site and a single service. We greatly underestimated it.” Which is a little bit like Ford underestimating their customers' desire to have a car with a steering wheel.

The company's chief executive, Reed Hastings, said in a statement that "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.” It seems that the price hike -- from $10 a month to $16 will remain in place, and the video game plan may be withdrawn, so they're pretty much back at square one here.

There's no doubt that this is all something of a PR disaster, and it'll take them a lot of work to regain the confidence of their customers; we're sure that sound you can hear is the sound of champagne corks popping over at Hulu. But has the flip-flop put the company back in your good books? Or are you looking elsewhere for your streaming options?

This article is related to: TV Networks, NetFlix


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