Netflix took plenty of heat recently when the company raised rates on its DVD rental and streaming content options, and now Reed Hastings, Netflix's CEO, has offered a sort of half-hearted apology mixed with another announcement that is sure to rile people up.  Netflix is spinning its DVD rental business off into an entirely separate division called Qwikster.  Anyone currently subscribing to the newly-expensive DVD and streaming content plan will have to deal with a separate Qwikster account, separate billing from Qwikster, separate Qwikster queue, etc.  Is Netflix involved in some kind of race to the bottom in terms of popularity?  The company lost one million subscribers over the price hike.  Here's Hastings:

So we realized that streaming and DVD by mail are becoming two quite different businesses, with very different cost structures, different benefits that need to be marketed differently, and we need to let each grow and operate independently. It’s hard for me to write this after over 10 years of mailing DVDs with pride, but we think it is necessary and best: In a few weeks, we will rename our DVD by mail service to “Qwikster”.  We chose the name Qwikster because it refers to quick delivery. We will keep the name “Netflix” for streaming.

Qwikster will be the same website and DVD service that everyone is used to. It is just a new name, and DVD members will go to qwikster.com to access their DVD queues and choose movies. One improvement we will make at launch is to add a video games upgrade option, similar to our upgrade option for Blu-ray, for those who want to rent Wii, PS3 and Xbox 360 games. Members have been asking for video games for many years, and now that DVD by mail has its own team, we are finally getting it done. Other improvements will follow. Another advantage of separate websites is simplicity for our members. Each website will be focused on just one thing (DVDs or streaming) and will be even easier to use. A negative of the renaming and separation is that the Qwikster.com and Netflix.com websites will not be integrated. So if you subscribe to both services, and if you need to change your credit card or email address, you would need to do it in two places. Similarly, if you rate or review a movie on Qwikster, it doesn’t show up on Netflix, and vice-versa.

My guess is that Netflix is priming the DVD side of things to be sold to someone else.  DVD rentals are a sinking ship in the extreme long term and I'm sure that the company doesn't want to be caught unprepared when the streaming revolution nails discs to the wall, but until the Instant Watch library is more comprehensive and high definition streaming is available to more subscribers at a fair price, I don't see the disc side of the business going away.  Unless, of course, Netflix forces it away.  Sending little discs around the country is inefficient compared to the promises of streaming content, but unless Instant Watch picks up more worthwhile content from more sources, there's still value in sending discs through the mail. 

The other bit of interest in today's news is that Netflix... er, pardon, Qwikster... will start to offer video games by mail in a bid to compete with companies such as GameFly.  There's no word on how much adding games to one's subscription plan costs, but if Qwikster can undercut GameFly's prices & quality of service and offer movies to the mix, we could be in for a nice competitive war.  GameFly has its problems, but it's always been good to me, so I'm in no rush to switch, but if I can get a better deal from Qwikster for less money, it might be worth investigating.

Really though, "Qwikster"?  That's a terrible name.  It sounds like a fly-by-night company.