Why, though? When Netflix got ahead of itself

Netflix tried to spin off its DVD biz into a new company. People hated it.

Netflix said goodbye to its DVD-by-mail service — the concept that started the media empire — in September, finally becoming a fully streaming service.

The red Netflix ‘N’ surrounded by DVDs on a blue background.

But Netflix once made a very brief attempt to break its DVD biz off into a separate entity called Qwikster.

What happened?

When Netflix launched in 1997, there was no streaming, only a DVD rental business where customers could have titles shipped by mail.

By 2011, Netflix had a streaming platform, but it offered a limited selection that most people had to watch on a computer or tablet. Its early TV hits — “Orange is the New Black” and “House of Cards” — wouldn’t premiere until 2013.

That July, then-CEO Reed Hastings announced that streaming and DVDs had become “two quite different businesses,” with varying cost structures and marketing needs. So, instead of paying $10/month for both streaming and DVDs, it’d be $8/month each or ~$16/month for both — a 60% hike.

People were angry

While investors were initially into the idea, subscribers were very much not.

In September 2011, Hastings announced that there would actually be two different businesses: Netflix as a streaming service and Quikster for DVDS, each requiring its own logins and payment methods.

Unsurprisingly, customers hated this, too; NPR compared it to the famous flop New Coke.

By October, Netflix pulled the plug on the whole thing. That quarter, it lost ~800k subscribers, and its stock sank 30%+ on the news.

At the time…

… Daniel Indiviglio, then a journalist with The Atlantic, wondered if Netflix had hoped to sell Qwikster, but found no interested buyers and instead decided to continue service until “its streaming company is robust enough that few use DVD-by-mail anymore, and it can shutter the operation.”

Speculation aside, that’s… pretty much what happened. Netflix just tried to go too fast, too soon.

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