Peter Kafka

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Qwikster Is Gonester: Netflix Kills Its DVD-Only Business Before Launch

Qwikster, we never knew ya: Netflix has killed its plans to turn its DVD service into a separate business.

Netflix CEO Reed Hastings delivered the news via a blog post this morning, reversing a decision he announced via a blog post three weeks ago. Though the Web site for Qwikster, the would-be DVD-only service, said Sunday night that it was “launching soon,” it will never launch at all. The URL now directs visitors to the main Netflix site.

While Netflix had to use some strained logic to explain its decision last month, this one is straightforward: It’s not going to force customers to use two different services to rent DVDs and streaming video, because customers hated that idea.

Wall Street didn’t like it, either. After Netflix unveiled its Qwikster plans, its stock, which had been tumbling since July, fell another 25 percent — from $155 on Sept. 16 to $117 last Friday.

So presumably today’s announcement will appease at least some disgruntled customers and/or investors.

But not all of them: Netflix still hasn’t changed the pricing plans it announced this summer, which amount to a 60 percent price hike for about half of its customer base. And that price hike is what kicked off the company’s tumble from a peak of $300 a share.

Stock moves aside, the about-face — three weeks after an announcement that itself seemed rushed* — is a little hard to square with the aura that used to surround Netflix, and Hastings in particular: Super smart, able to see around corners, not afraid to run against the herd.

Because if Netflix really thought that “over time, both DVD and streaming will be much better, because they’re separate,” as Hastings put it in a much-unloved video message last month, why reverse the decision after some squawking?

Just a week ago, Ted Sarandos, Netflix’s man in Hollywood, told an industry conference that he was “very convinced” the split was “good for the long-term health of the business. And the long-term clarity of the brand.”

“But,” he added, “we also hear our customers, and we want to make sure we react to that,” promising that Netflix would have some news on the Qwikster front soon. (Thanks to Rich Greenfield for spotting; registration required at BTIG Research site.)

If you want to let your mind drift to dark thoughts, you could theorize that the reaction to the Qwikster announcement was so forceful that Netflix could see the results in its subscriber numbers.

If that’s the case, we might be able to see the effect in the Q3 subscriber numbers Netflix releases Oct. 24. Those numbers will include two weeks of operations post-Qwikster announcement, so the reaction would have to be quite severe to show up. But we’ll see.

Bear in mind that a few days before the Qwikster announcement, Netflix had already cut its Q3 guidance, citing reaction to the price hike.

The positive spin is that Hastings gets credit for recognizing a bad decision and fixing it before he caused more damage. You won’t be able to lump Qwikster in with New Coke and other bad-idea brands that never should have made it to market.

Again, here’s a reminder of how difficult it was for Hastings to pitch Qwikster last month:

*For the record, Jason Castillo, who owns the @Qwikster Twitter handle, wants the world to know that just because his avatar used to feature a pot-smoking Elmo, he’s not stoned himself. Left unanswered: Why couldn’t the Netflix guys find a brand name that someone hadn’t already claimed?

[Image credit: Konmesa/Shutterstock]


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— Gitesh Pandya of BoxOfficeGuru.com comments on the dreadful opening weekend box office numbers for “The Fifth Estate.”