Netflix splits into two companies, says they ‘messed up’

September 20th, 2011 by Search Influence Alumni


It’s safe to say that Netflix pissed off a lot of people when they announced major changes to their pricing structure this past July. The new setup went something like this: $7.99 a month for unlimited streaming and $7.99 a month for one DVD out at a time. However, if subscribers didn’t actively go in and select a new plan, they would be automatically subscribed to both. The price increase, which was 60% higher than the previous prices, did not go over well. Netflix stocks plummeted, and the company found themselves with several million less subscribers than they bargained for, not to mention the massive internet backlash that followed.

What to do? Well, desperate times call for desperate measures, and any good business owner knows it. In a major move, Netflix CEO Reed Hastings sent an email to every Netflix subscriber (which is also now posted on their blog) announcing that Netflix would separate into two businesses: One called Qwikster, which would handle physical DVDs and will also add video games, and Netflix would remain as an all-streaming service. But here’s the catch — If you want to use both, you need a separate account at both websites. Inconvenient? Just a bit.

However, there are some advantages to the situation, as each business will have its own dedicated team, and Hastings promises that improvements for each service are on the drawing board. I’m sure that many users appreciate a forthcoming apology from a business of this size, and perhaps people will find this system works better for them. What is notable is that so much of the results of Netflix’s downfall in the eyes of the public was geared by social media: Within minutes of the price change announcements, people were in an uproar all over Facebook and Twitter, swearing they would drop their Netflix accounts and move to Hulu. Those people told their friends, and so on and so forth, and the chain continued. Whether businesses like it or not, they know that social media is powerful enough to literally cause a mass exodus, so they must consider carefully when it comes to making major decisions such as this.

Speaking of Twitter, you may want to hold off on going to follow the @qwikster Twitter account for now, should you be interested to do so. Why? Well, apparently it’s being squatted on by a guy who is not exactly the epitome of class. He does have over 11,000 followers, however, who are probably getting just the show they bargained for. And he’s enjoying the attention, because he won’t give up the account. Hopefully Quikster has a gameplan to fix that messy little issue….