Netflix Retreats from Plan to Separate its Businesses

October 11 00:00 2011

New York, October 11 ( – Netflix (NASDAQ: NFLX) has decided to preserve its single service three weeks after it announced that it would be separating its DVDs-by-mail business from online streaming service. The company had announced the plan for splitting the businesses after it came in for heavy criticism for its highly unpopular 60% price hike in July for its consumers who watched both DVDs and online video.

As a result of this unpopular move, the company had predicted that it would lose 600,000 US subscribers for the third quarter, instead of gaining 400,000 as it had previously predicted. Netflix Chief Executive Reed Hastings said Monday that managing two distinct subscription businesses with separate billing and recommendations would be counter-productive besides being too difficult for customers who crave simplicity.

In a blog post and email to customers, Hastings wrote, “This means no change: one website, one account … in other words, no Qwikster.” Anthony J. DiClemente, a media analyst with Barclays Capital, wrote in a report Monday, “Given the amount of negative news flow around recent company-initiated actions — including the price change, which remains in effect — we believe it could take some time for consumers to come back to Netflix.”

Industry observers however feel that even though customers might be appeased, the anger over the price hike would still be there. Hastings said that the price hike was necessary as it was instituted to pay for the rights to more movies and television shows and that it would remain in place.