An Explanation and Some Reflections
I messed up. I owe everyone an explanation. — It is clear from the feedback over the past two months that many members felt we lacked respect and humility in the way we announced the separation of DVD and streaming, and the price changes.
Context & Ripple Effects
Netflix had already signaled that its strategy favored streaming over disc rentals: a July analysis framed the pricing change as an effort to move members away from DVDs. The company had also published an earlier member apology in 2010, making its admission of poor communication part of a visible pattern.
The September announcement formally separates DVD-by-mail from streaming and, as syndicated coverage makes clear, gives the DVD operation the Qwikster name. The move turns a pricing and messaging dispute into a distinct customer-facing structure.
First-order effects
- Netflix members who use both formats must navigate separated DVD and streaming services after the price change, while Netflix places its legacy disc operation under the Qwikster brand.
- Netflix’s apology acknowledges that the rollout damaged member trust, putting the company’s communication and retention efforts under immediate pressure.
Second-order effects
- By making DVDs a separate service, Netflix gives members a clearer choice to retain disc rentals or concentrate spending on streaming—the outcome its earlier pricing strategy was designed to encourage.
- Qwikster’s separate identity makes the DVD business’s customer base and economics more visible, rather than allowing them to be masked within a single Netflix subscription.
Third-order effects
- If Netflix continues to steer members toward streaming, subscription media will increasingly be organized around digital delivery while physical distribution is treated as a standalone legacy business.
- The episode shows that unbundling a subscription can expose a growth gap between an emerging service and the mature product that financed it, making pricing changes as consequential as the product split itself.
The trend: Netflix is shifting from a combined DVD-and-streaming offer toward a streaming-led subscription model, with the handling of the transition becoming central to member retention.