• BREAKING NEWS ABC shows live and on-demand -- Download the WATCH ABC app!

Netflix separates DVD, streaming businesses

Netflix customer Carleen Ho returns three DVD movies. (Paul Sakuma)

September 19, 2011 12:00:00 AM PDT
There is a big change for Netflix. The company's officially separating its movie-streaming business and its DVD-by-mail service.

The mail service has been renamed "Qwikster" and will have its own website. Movies will still come in those signature red envelopes.

In a few weeks, Netflix subscribers who want to get DVDs by mail will go to a separate website to access Qwikster. The streaming business will continue to be called Netflix.

Acknowledging that he "messed up" in a blog post late Sunday, Netflix CEO Reed Hastings said he "slid into arrogance based upon past success" when he did not adequately explain the reasons behind the plan separation and effective price hike.

He said the reason is that instant streaming and DVD-by-mail are becoming "two quite different businesses, with very different cost structures, different benefits that need to be marketed differently, and we need to let each grow and operate independently."

Explaining the reasons behind the plan change "wouldn't have changed the price increase, but it would have been the right thing to do," Hastings wrote.

Two months ago, Netflix said it would change its pricing structure so that its by-mail and online offerings were essentially sold separately. The change raised the prices for users who wanted both services, by as much as 60 percent for some.

About 1 million customers canceled their memberships.

The Associated Press contributed to this story.

Load Comments