Netflix Severs DVD-by-Mail Arm, Calls it "Qwikster" and Adds Videogames

Paul Lilly

It's doubtful Reed Hastings is a football fan. Instead of kicking back on the couch yesterday and watching any number of NFL stories play out, the CEO of Netflix spent Sunday penning an apology letter to subscribers for his poor communication regarding the recent price hikes, and explaining this thing called Qwikster, which is what Netflix is calling its suddenly severed DVD-by-mail business.

Streaming and DVD rentals are now two separate companies, the former belonging to Netflix and the latter attached to Qwikster. These two operations have "very different cost structures, different benefits that need to be marketed differently, and we need to let each grow and operate independently," Hastings explained in a blog post .

This is a big move for Netflix, but for customers, Hastings says this amounts to little more than a name change for its DVD rental service. There's actually more to it than that. DVDs will still show up in little red envelopes (with the new logo, of course) and subscribers will still have access to their queue, but it will be on a separate website, managed separately from their streaming queue on Netflix, and will be charged separately for each service, too. DVDs and streaming are no longer intertwined in any way, and if you rate a movie on one service, it won't apply to the other.

When Qwikster launches, it will add a videogame option similar to the upgrade option for Blu-ray. You'll be able to rent games for all three major consoles -- Wii, Xbox 360, and PlayStation 3 -- though Hastings didn't say how much the service upgrade will cost.

So there you have it, Netflix finally and officially severed its DVD arm and is now a streaming only service, a move everyone knew was coming, though most assumed Netflix would simply dump its DVD business altogether. Maybe after Qwikster gets up and running for a few months, it will fade out of existence, but for the time being, you can subscribe to both, just not on the same website.

What do you think about this move? Is Netflix making the right decision, or has Hastings gone and shot his company in the foot?

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