Monday, October 10, 2011 at 9:58 am.

Qwikster or not, Netflix still needs a plan to kill the DVD

DVDsNetflix has ended its plans to separate its DVD business under the “Qwikster” name. CEO Reed Hastings writes on Netflix’s blog:

It is clear that for many of our members two websites would make things more difficult, so we are going to keep Netflix as one place to go for streaming and DVDs.

This means no change: one website, one account, one password… in other words, no Qwikster.

This fixes the “customers hated the idea” aspect of the Qwikster plan and may save Netflix some “New Coke” embarrassment, as Peter Kafka notes. I admire Hastings’ flexibility, even though I supported the separation.

But it doesn’t necessarily solve the problem that Hastings started out with: How to get customers and Hollywood to stop using the DVD and start streaming everything? That is, if you recall, the only potential future for Netflix’s business.

For context, I’ll re-quote Reed Hastings’ original explanation for why he decided on the Qwikster spinoff and name change to begin with:

For the past five years, my greatest fear at Netflix has been that we wouldn’t make the leap from success in DVDs to success in streaming. Most companies that are great at something – like AOL dialup or Borders bookstores – do not become great at new things people want (streaming for us) because they are afraid to hurt their initial business. Eventually these companies realize their error of not focusing enough on the new thing, and then the company fights desperately and hopelessly to recover. Companies rarely die from moving too fast, and they frequently die from moving too slowly.

So, what’s the plan now?

Perhaps the answer is that even before the Qwikster name-change, people are already ditching DVDs in surprising volume? If you recall, that’s what surprised Netflix about its price changes in mid-September. So maybe, it turns out, the separation of Netflix streaming and DVD will be even more elegant with the same name than with different names.

Or perhaps the Qwikster plan was hurting subscriber numbers so much that it was no longer an option?

Or perhaps it’s the opposite — that Netflix has realized, no matter what it desires, that it won’t be able to replace most of its DVDs with streaming any time soon, so it shouldn’t try to force consumers to switch right away?

Or perhaps Netflix employees have learned the lesson they need to internally — that the DVD is not the future, and streaming is — but they don’t need something as drastic as a corporate name change to see it through.

We’ll hear more, no doubt, during Netflix’s earnings on Monday, Oct. 24.

Now, some questions:

  • Will Netflix still be renting videogames, or was that only going to be a Qwikster thing? (Update: A Netflix rep tells me the company is “still considering” game rentals.)
  • Will Netflix still be able to recruit and retain talent for its DVD business, the way it thought Qwikster the separation would be able to help? (Or was Qwikster such an embarrassment that it would have been even harder?)
  • Will Netflix be adding streaming video-on-demand any time soon? It sounds like no.
  • Will Netflix spin off or sell its DVD business eventually? That would have been much easier under a different name. Now it will be trickier. Maybe it wasn’t the plan to begin with, or maybe it’s going to wind up being a smaller, less interesting business than originally projected.

Related: Here’s where Netflix screwed up this whole Qwikster thing