More on Netflix Split into 2 Services

Netflix has announced that it’s splitting its video service into 2 parts. Netflix will be the name of the streaming service, while Qwikster is the new name for the DVD rental service. The company is at a crisis point after smoothly transitioning from a hugely successful DVD rental company into a rental and streaming service. Now the company faces numerous obstacles from bad publicity over their price increase to increased rights fees and the launch of competing services.

The next few months will be critical to how Netflix will be viewed in history. Until now, their masterful pivot from a physical goods rental company to a virtual streaming service has been a textbook example of how a company can see the future and evolve on the fly. Will the price increase and the attendant bad publicity do them in? Or will this be just a speed bump on the road to lasting dominance?

Many observers feel that while the self-inflicted wound from the price increase hasn’t helped any, the bigger problems for Netflix come from increased competition. Hulu is for sale and, depending on who ends up buying the service, it could be a bigger threat. Also, players such as Wal-Mart and Apple are or will be getting into the business. And the biggest question of all is what Hollywood plans to do. Netflix DVD service helped prop up the DVD format, which Hollywood loved. But the migration to streaming, while seeming inevitable technologically, is not a sure bet business-wise, due to Hollywood’s unhappiness over the further erosion of what had been a lucrative revenue stream. Netflix has already experienced problems with a number of movie companies, as detailed recently in Fortune.