Netflix will split DVD delivery service from online streaming

Red Netflix envelopes sit in a bin of mail at the U.S. Post Office sort center March 30, 2010 in San Francisco, Calif.

Jeremy Hobson: Here's a new name to get used to -- Qwikster. That's what Netflix has just announced it's going to call its DVD-by-mail business, which it is spinning off from its online video streaming business.

John Moe is host of the Marketplace Tech Report, he's with us live to discuss. John - is this the beginning of the end of DVDs-by-mail?

John Moe: Most likely yeah, but it's probably going to take several years. I mean, Netflix never got into the VHS cassette business originally because people were using them less and less, and they were too expensive to ship. And the same thing is probably going to happen with DVDs. Netflix spends a fortune on postage plus warehouses and all that equipment. As for how fast that will happen, it depends on how quickly the streaming option improves and how Netflix defines itself -- maybe they get into streaming rentals like Apple does eventually.

Hobson: Well John, there's already some anger over this from Netflix customers who are getting sick, it seems, of Netflix changing the rules in the middle of the game over and over again. Why does the company keep doing this?

Moe: They want you to stop getting DVDs by mail. If you work for this company, you don't want to be working on the Qwikster side, you want to be working on the Netflix side -- that's why the name is staying with the streaming. They want to take that money they spend on postage and write big checks to studios for better movies and TV.

Netflix CEO Reed Hastings apologized to customers when he was announcing this, but they say, "Look, we know we're going to lose customers over this initially. We're making a bet that we're going to grow it eventually big enough that everybody gets on board and everybody does streaming.

Hobson: Marketplace Tech Report host John Moe, thanks John.

Comments

I agree to American Public Media's Terms and Conditions.
With Generous Support From...