Netflix Turmoil and Business Remodeling

The once unstoppable movie service is experiencing major criticism from consumers and from business analysts alike. For those who haven't been following the company's recent changes, Netflix first announced  a change in its price plan. Two months ago, you could spend 10 bucks and get both streaming and mail order service. Now customers have to pay $8 for each service. Netflix announced that they've lost a million customers over the price hike and they may be about to lose more.


The CEO of Netflix said he was sorry for mishandling a recent price increase that caused customers to cancel the service in droves. But the apology was drowned out by a decision that angered subscribers all over again. The company will split into two services -- one with an odd new name that offers the familiar discs in red envelopes and another for online streaming of TV shows and movies. The DVD service will be called Qwikster, a name that is supposed to signify a commitment to fast service but quickly became an object of ridicule Monday on the Internet. The streaming service will keep the Netflix name.

As one analyst noted, "It's kind of the cardinal rule of marketing that you do not make it more complicated for the customer. You always make things easy. You know, think Amazon one-click ordering and, you know, this is equivalent I think of Amazon getting rid of one click."

However, Hastings, Netflix's CEO, did not make this decision without reason. He sees the future of movie rentals in streaming. Spinning off the DVD services will also allow Netflix to provide studios with a clearer idea of how many people are streaming their content. That could be critical as it negotiates future licensing deals.

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