Netflix to Split?

Since July, Netflix customers have been wondering whether the video rental company would be splitting into two different companies when it announced a new pricing scheme. Instead of $9.99 for DVD deliveries and Internet streaming, it would charge $7.99 for each of the services, leaving those customers who want it all paying 50% more than they did the month before.

CEO Reed Hastings and other Netflix executives probably assumed that the split into Qwikster (DVDs) and Netflix (streaming) would favor the majority, as surveys showed 75% of new Netflix customers preferred online streaming. The thing is, 25% of 24.6 million US users isn't a small number, in fact, it's 6.15 million. Luckily for Mr. Hastings and his crew, only around a tenth of these (600,000) Netflix users will have abandoned ship by the end of the third quarter since the pricing news broke. However, it is estimated that 1.95 million customers will leave in the fourth quarter, leaving Netflix with 90% of the customers they had at the start of summer. Moreover, the public image of Netflix will diminish greatly, as many people had a quiet respect for the company, with its mission to provide a wide range of low-cost entertainment to the masses.

While prospective customers wanting only Internet streaming may be drawn by the lower price, many existing customers are annoyed that they have to choose between methods of entertainment delivery, or fork over the extra $7.99/month. With many movies and television series being DVD only, and with Internet connectivity being limited in select areas, some will no doubt trade the instantaneous (and somewhat choppy) streaming for the larger variety of videos on reliable DVDs. No word yet on how this will affect USPS.

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