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Netflix abandons plans to split its DVD, streaming services

NEW YORK — Netflix generates more head-scratching plot twists than a cheap B-movie.

On Monday, the company said it would reverse a previously announced decision to put its DVD-by-mail and Internet streaming services on separate websites, a plan that was widely derided by Net­flix subscribers.

People will be able to use both services under one account and one password, CEO Reed Hastings said Monday in a blog post.

Netflix Inc., however, plans to stick to pricing plans introduced in June, which means subscribers are now paying separately for streaming service and mailed DVDs. That change amounted to a price increase for most subscribers.

Investors approved of the reversal, sending the stock up $7.68, or 6.6 percent, to $124.89 in midmorning trading after rising as high as $128.50.

But even with Monday's premarket bounce, Netflix's shares have been savaged by the price change and the Qwikster initiative. They've lost more than half their value since July.

Netflix had 24.6 million subscribers at the end of June, but it warned last month that it expected a net 600,000 to leave by the end of September because of the price increase. That would be by far the worst downturn in the company's history. Netflix reports final figures on Oct. 24 for the quarter that ended in September.

Here are some questions and answers for Netflix customers:

Will I have to go to two websites to manage my DVD queue and watch streaming videos?

No. Netflix backed off its plan Monday to create two separate sites — one at Netflix.com for streaming videos, and another at Qwikster.com, for DVDs.

Will I still have to pay for the services separately?

You'll have one account for both services. But the price changes Netflix instituted in July, under which it charges separately for streaming and for DVDs, are still in place. In other words, streaming is no longer a freebie thrown in with the DVD subscription.

Why did Netflix change its mind?

Customers had greeted the idea with jeers and threats to take their business elsewhere. In a blog post, CEO Reed Hastings said he's realized the change would make things too complicated for subscribers.

What plans does Netflix offer now — and how much do they charge for each?

The video streaming service costs $8 per month. The DVD service starts at $5 if you want one DVD out at a time and a maximum of two mailings per month, and goes up to $44 for those who want to have eight DVDs out at a time and unlimited mailings.

Why did Netflix think splitting the site in two was a good idea to begin with?

The company sees the streaming service as its future, and what it wants to focus on. The DVD-by-mail service got Netflix into homes, but it's expensive to mail DVDs and the potential for growth is limited. In homes, the streaming service is making the jump from PCs to the living-room TV, thanks to game consoles, DVD players and TVs that come with the ability to connect to the Internet. It's also going outside the home, since Netflix is now available on smart phones and tablets.

Netflix abandons plans to split its DVD, streaming services 10/10/11 [Last modified: Monday, October 10, 2011 10:07pm]
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