Netflix Splits in Two, Qwikster Takes Over DVD-by-Mail

By Mary Collins

September 19, 2011 Updated Sep 19, 2011 at 10:51 AM EDT

NEW YORK (Indiana's NewsCenter)--- Netflix Inc. plans to separate its DVD-by-mail service from movie streaming, a move the company said will give both businesses a better chance to grow.

The DVD-only service will be called Qwikster and add video games to the current movies and television shows, Reed Hastings, chief executive officer of Los Gatos, California-based Netflix said yesterday. The streaming service will keep the Netflix name.

The move grew out of the realization that the businesses had different cost structures and marketing needs, Hastings said. Separating them will allow each to grow and operate independently, he said.

Qwikster will start “in a few weeks,” and will offer video games for Nintendo Co.’s Wii, Sony Corp.’s PlayStation 3 and Microsoft Corp.’s Xbox 360 consoles, Hastings said.

There will be no new pricing changes, Hastings said. He said the company had “messed up” over the past two months in how it discussed with customers pricing changes, which raised fees on customers who pay for both DVD and streaming by as much as 60 percent.

“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,” Hastings said.

Netflix fell 26 percent in two days last week after the company said it lost more customers than anticipated following the price changes. The shares closed at $155.19 on Sept. 16 in Nasdaq Stock Market trading, down $14.06, and have declined 12 percent so far this year.

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