), the company which put the final nail in the coffin of
bricks-and-mortar video stores around the country, is now shoving
its own physical DVD department out the door. It will split into
two businesses - Netflix, which will focus on streaming movies and
TV shows, and Qwikster, which will deliver physical media. In
addition, Qwikster will bring videogame rentals to the Netflix
family, emulating services like Gamefly which allow players to rent
console games and play them on the Microsft (
) Xbox 360, Sony (
) Playstation 3 or Nintendo Wii.
Netflix shares rose during the first half of the day but then
dropped off durning a general across-the-board slump in U.S. stock
The move follows the separation of Netflix's streaming and DVD
delivery offerings into two separate subscriptions, effectively
raising the price of the service, causing a massive uproar in its
consumer base and hammering its share values as Wall Street
predicted it would lose subscribers.
The company's chief executive officer and co-founder, Reed
an apologetic blog post on Sunday, beginning "I messed up. I
owe everyone an explanation. It is clear from the feedback
over the past two months that many members felt we lacked respect
and humility in the way we announced the separation of DVD and
streaming, and the price changes."
After apologizing for "arrogance," Hastings described the new
structure, which will create two companies with two billing
accounts for the average customer who wants both physical discs and
streaming service, but will retain the same total price and an
expanded range of service.
It's quite possible to view this as a small tremor from a tectonic
shift in the way the developed world consumes media - though it's
also a return to an older model. For much of the 20th century, mass
entertainment was consumed as a service, with radio shows and music
beamed over the air and, later, the rise of the television as the
central entertainment appliance. Towards the latter half of the
century, entertainment became more commodified, in the sense that
it was possible to purchase individual physical items - records,
8-track cassettes, VHS tapes, CDs and DVDS - which stored albums,
movies and TV shows.
That commodity-based model persisted until the widespread
introduction of broadband internet, which began pushing the service
model back to the fore, as streaming services like Netflix and Hulu
battled with free - and illegal - downloads of the formerly
commodity-bound content across Napster, Limewire and BitTorrent.
It would not be at all surprising to see Qwikster start strong but
then slowly fade away, as internet bandwidth continues to grow and
a generation raised on records and tapes gives way to those
accustomed to YouTube and Hulu.