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Qwikster Is Out As Netflix Reverses Plan To Split In Two

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Netflix raised subscription rates by 60%, a decision it has not reversed. (Photo: Shannah Pace)
Netflix raised subscription rates by 60%, a decision it has not reversed. (Photo: Shannah Pace)

BUSINESS

  • Netflix CEO announces decision not to split company between Netflix and Qwikster
  • Decision satisfies angry customers
  • Company believes its future lies in online streaming, but competition is stiff

In a rare act for a corporation, Netflix listened to its angry customers and reversed its previous decision to split the company into two, which would have seen Netflix dealing with online video streaming and Qwikster taking over the DVD-by-mail business.

Netflix CEO Reed Hastings made the announcement via the company’s blog.

The Qwikster idea had been unpopular from its inception because it would not have been integrated with the current Netflix website, requiring customers to establish two accounts and be charged twice on their credit cards. In addition, movie reviews on one site would not have been viewable on the other.

The Qwikster idea was announced two months after another equally unpopular decision with customers, which involved Netflix raising its subscription rates by 60%, a decision it has not reversed. The rate hike is estimated to have cost Netflix 1 million customers in its third quarter, which ended September 30.

Hastings says in his blog post: “While the July price change was necessary, we are now done with price changes.”

Focus On Online Streaming Video

Netflix is now looking to the future and that future is online streaming video. It has signed agreements to partner with AMC Networks, DreamWorks Animation and Discovery Communications in an effort to maintain its current customers and possibly acquire new ones. These partnerships will add content through licensing agreements.

Hastings said on the Netflix blog: “We value our members, and we are committed to making Netflix the best place to get movies and TV shows.”

However, Netflix faces major competition from companies such as Amazon, Apple and Google, which will likely increase licensing fees and effect the number of new subscribers.

Blockbuster, now owned by Dish Network, is also a competitor. Blockbuster and Dish Network announced in September they will be offering a streaming video and DVD rental service for $10 a month. The new service will only be available to those who subscribe to Dish Network’s TV service.

In addition, Xbox, partnered with Comcast, will offer television-on-demand to all Comcast customers.

Despite dropping Qwikster, shares in Netflix fell $5.59 to $111.62 by closing of the day of the announcement.

Key Statistics – Global Internet Movie/TV Streaming Video (source: network monitoring firm Sandvine)

  • In the United States, more than 49% of peak internet traffic is from streaming audio and video, 44% higher than a year ago.
  • If the current rate remains unchanged, by the end of the year, streaming audio and video will account for 60% of all US internet traffic.
  • In March 2011, Netflix accounted for nearly 30% of peak downstream traffic in the US, making it the largest amount of internet traffic.
  • Over a 24-hour period, off-peak traffic for Netflix averages at around 22%.
  • In Europe, more than 33% of internet traffic is from streaming audio and video.

By Melina Druga for
Melina Druga is an American writer and editor. She is the author of Enterprising Women: Practical Advice for First Time Entrepreneurs.

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