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Netflix calls it quits for Qwikster

Jennifer Collins Oct 10, 2011

Netflix calls it quits for Qwikster

Jennifer Collins Oct 10, 2011

Kai Ryssdal: This is the point in the broadcast where we’re going to pause and ask you a question. You ever done something you regret? Something that — even at the time — you figured might not be the greatest idea?

We all have. But it’s not often our miscalculations cost our companies billions of dollars. A couple of weeks ago, Netflix founder Reed Hastings said he was going to split the company’s DVD and streaming video business in two and create a separate DVD-only company called Qwikster. Customers went nuts, bolted by the hundreds of thousands. Wall Street went nuts and shredded the stock.

Today, the company announced a do-over — or rather an undo-over. Marketplace’s Jennifer Collins explains.

Jennifer Collins: Qwikster is dead. Netflix CEO Reed Hastings says the company’s DVD and video streaming business will remain under one roof — no separate websites, no separate bills.

Lazard Capital Markets analyst Barton Crockett says there’s one good reason for this.

Barton Crockett: Consumers rejected it. They ridiculed it. Reed Hastings heard, he’s retreated. He’s made the right choice, which is to give up a bad idea.

Here’s how “Saturday Night Live” portrayed the idea online.

“Saturday Night Live”: Here’s what’s new with Qwikster: We’ve merged with Aflac to produce Qwackster, where you can get your insurance coverage and Commodore 64 games.

Tony Wible is an analyst with Janney Capital markets. He says, split or no split, Netflix is in trouble.

Tony Wible: Frankly, it seems like they’re acting out of desperation in part because the world around them is changing very quickly.

And he says the company paying out a lot for TV shows and movie streaming deals with the entertainment industry. That’s a threat to profits from its streaming business, and the DVD business is sure to slump as more content becomes available online. What Netflix has going for it is over 20 million subscribers and a strong brand.

Wible: And both of those things are in jeopardy right now.

Netflix also announced it was boosting prices a few months back. Some analysts estimate it may have lost around 10 percent of its subscribers since then. And while Qwikster may be gone, the price hike remains.

I’m Jennifer Collins for Marketplace.

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