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Netflix Splits Into Two Companies

At midnight Monday night, Reed Hastings, CEO of Netflix, released a blog post announcing the split of Netflix into two separate companies. Netflix itself would encompass the streaming part of the company, while the new entity known as Qwikster would take over the DVDs and Blu-rays.

When Netflix announced it would be charging separately for discs and streaming, and discontinuing the combined plans, it was met with much derision from their users. Netflix kept quiet, but did inform their api developers that the Netflix API would no longer give them access to disc queues starting in October. While splitting the company may have been the plan all along, it may have been better to announce everything at once rather than the incremental way they are now, and being forced to attempt to backtrack to try to assuage angry customers.

With the split, Netflix is looking to compete with GameFly by offering a plan to rent games with Qwikster. The question is whether people will want to rent games for an additional fee from the same place they rent their movies. If people associate Qwikster with movies, will they think of it for games or will they only want to receive their movies in the red envelopes.

One major problem with the split between the two services is the announcement that they will not be sharing data across the two sites. Ratings and recommendations will be kept strictly to the individual sites, which inhibits the customer’s usage of the sites. Either the user needs to rate each movie twice or find a service that will do it, so they will get the best possible recommendations for themselves and to maximize the data collection by Netflix.

No matter how long Netflix has been planning the Qwikster move, it obviously hasn’t been fully thought out, as evidenced by the Qwikster Twitter account, which is currently occupied by an urban youth with a pot smoking Elmo as his avatar. Of course, the denizens of the internet are having a field day reading his ramblings and commenting on them.

Whatever becomes of the new Netflix and Qwikster, it is up to the customers who vote with their dollars. This may also open up the movie rental space to competitors who swoop in and try to steal away the dissatisfied customers who have openly been complaining about the raise in prices and the recent quality of service. Only time will tell what happens and what services attempt to capitalize (including the one I have been working on).

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