NEW YORK—Faced with increasing pressure from customers and investors, Netflix Inc. on Monday announced that it would abandon a plan announced last month to create a separate division for its DVD-by-mail business.
Last month, Netflix moved to separate its DVD rental division from its video streaming service, by calling it Qwikster and spinning off the business into a new website.
This week, it did an about face and said that it would not go through with its plans.
“Consumers value the simplicity Netflix has always offered and we respect that,” said Netflix CEO Reed Hastings in a statement. “There is a difference between moving quickly—which Netflix has done very well for years—and moving too fast, which is what we did in this case.”
The decision was initially a boon for its stock, as shares of Netflix (Nasdaq: NFLX) increased by as much as 10 percent immediately following the announcement. However, it ended lower later in the trading day Monday.
In a follow up blog post by Hastings, he reiterated that the company may have moved too quickly, but inferred that this separation will probably still occur some time later. The company was attempting to separate its two business lines—the fast growing Internet streaming business, and the comparatively slow-growing DVD-by-mail business.
The announcement to create Qwikster occurred after Netflix said that its two service lines will become separate and it would charge $8 per month for streaming, and $8 per month for DVD-by-mail. In the past, the DVDs were viewed as a $2 per month additional charge, bringing customers both services for $10 per month.
Some commentators and analysts felt that Netflix’s split was to garner interest from outside parties, such as Web retail giant Amazon.com Inc., for a sale of one of Netflix’s divisions.
Post announcement, the two plans will continue to be separate and the recent price realignment will still go forward as planned. However, U.S. customers will continue to access both services on the same website, Netflix.com.
