Netflix has announced that the company is splitting its DVD and streaming business into two separate companies. The streaming service will continue with the Netflix name, whilst the DVD-based subscription service will now be called Qwikster.
The news came from Netflix CEO Reed Hastings in a blog post on the Netflix Blog, and the two services will now be completely independent of each other and will have separate websites.
For the past five years, my greatest fear at Netflix has been that we wouldn’t make the leap from success in DVDs to success in streaming. Most companies that are great at something – like AOL dialup or Borders bookstores – do not become great at new things people want (streaming for us) because they are afraid to hurt their initial business. Eventually these companies realize their error of not focusing enough on the new thing, and then the company fights desperately and hopelessly to recover. Companies rarely die from moving too fast, and they frequently die from moving too slowly.
The Strategic Move Behind the Split
Reed Hastings’ announcement highlights a strategic move to ensure that both services can grow and innovate independently. By separating the DVD and streaming businesses, Netflix aims to focus more on the rapidly growing streaming market without being held back by the traditional DVD rental service. This decision reflects a broader trend in the tech and entertainment industries, where companies are increasingly focusing on digital and on-demand services.
The DVD rental service, now branded as Qwikster, will continue to cater to customers who prefer physical media. This segment, although shrinking, still represents a significant portion of Netflix’s customer base. By creating a distinct brand for Qwikster, Netflix can tailor its marketing and service offerings to meet the specific needs of DVD rental customers.
Implications for Customers
For existing customers, the split means that they will need to manage two separate accounts if they wish to continue using both services. This could be seen as an inconvenience, but Netflix has assured that there will be no price increases for either service. Therefore, if you currently subscribe to both, it won’t cost you any more than it does now.
The separation also allows each service to innovate and improve independently. For instance, Netflix can now focus on enhancing its streaming technology, expanding its content library, and improving user experience without the constraints of the DVD business. On the other hand, Qwikster can focus on maintaining a robust DVD inventory and improving delivery logistics.
This move also opens up opportunities for partnerships and collaborations that may have been challenging under a single brand. For example, Qwikster could potentially partner with other physical media companies to offer a broader range of products, while Netflix could collaborate with more streaming content providers to enhance its digital library.
Reed Hastings’ blog post also touches on a broader business philosophy: the importance of innovation and the risks of complacency. By making this bold move, Netflix is positioning itself to stay ahead in the competitive streaming market. The company recognizes that the future of entertainment is digital and on-demand, and it is willing to make significant changes to align with this vision.
In conclusion, Netflix’s decision to split its DVD and streaming businesses into two separate entities is a strategic move aimed at fostering growth and innovation in both areas. While it may require some adjustments for existing customers, the long-term benefits of this separation are likely to outweigh the initial inconveniences. As the entertainment landscape continues to evolve, Netflix’s proactive approach ensures that it remains a leader in the industry.
Source Gadgetsteria
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