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Must-Read List: Understanding the Netflix Split

It might not end quite as badly as the “New Coke” marketing campaign once did. But Netflix’s announcement that it will split its video service into two separate operations — with a renamed DVD-by-mail service that will now be called Qwikster and an online-streaming service that will remain known as Netflix — seems to be crash-landing with a big thud among many customers.

Netflix CEO Reed Hastings broke the news in a Sunday night email to customers, but this could not have been quite the reaction the company wanted. A partial apology for the company’s ham-fisted and “arrogant” announcement of pricing changes earlier this month and partially an announcement about why the company was cleft in twain, the online post has hardly stopped the bleeding.

If anything, people are more fired up. As of Tuesday afternoon, there are 24,000 responses to Hastings’ blog post. We can’t say we’ve gone through them all by any means, but as you can see for yourself, it’s safe to say the tone generally ranges from disappointed to bitter. Customers are quick to note that the online-streaming service only has about one-fifth of the 100,000 titles available by mail. Moreover, billing for each service — and preferences for one’s queue (a handy feature of the original Netflix) — will be separate. And then there’s the money, too.

Damage is already apparent: The company has lost more than 800,000 DVD-only subscribers in the past month.

But Netflix remains a huge player with a subscriber base of about 23 million, 12 million of whom have subscribed to the combination of DVDs by mail and streaming content.

Is Netflix making the right business choice — given the move toward online streaming? Does it really want to sell Qwikster given that DVD-by-mail costs too much? What role do Hollywood studios and content play in all this?

Our staff has been culling through some of the more interesting reactions and analysis online. Here are some top reads:

Q and A: Netflix’s Changes | The Associated Press

First to the basics: A Q&A on why Netflix made its move and the impact on consumers on a practical level.

Netflix launches Qwikster for DVDs | Steve Henn, Marketplace

Marketplace lays out the challenges Netflix is facing, with stocks down and hundreds of thousands cancelling subscriptions.

With All Respect To Reed Hastings, The Netflix-Qwikster Split Bad For Customers | Henry Blodget, Yahoo! Finance

Yahoo! Finance looks at the split’s negative impact on customers:

And we can also certainly understand why, from the company’s perspective, it makes sense to split the DVD and streaming businesses into two separate companies: They’re different businesses, with different cost structures and different delivery, marketing, licensing, and management challenges, and they will be easier to run better if they’re managed separately.

But what’s better for the company, in this case, is worse for most of the company’s customers.

Blodget looks at the “tough decisions that cause near-term pain in order to improve the company long-term,” and praises Netflix CEO Reed Hastings’ long view business plan.

The Qwikster and the Dead | Megan McArdle, The Atlantic

The author says the move left her “desperately searching for the logic” and asks, “What problem does this solve?”

Wired and Tired: The Long View on the New Netflix | Tim Carmody, Wired

Despite a barrage of criticism, Carmody asked a series of experts and then “gathered these opinions to make the best possible case for (and explanation of) Netflix’s decision to divide itself.”

Latest Move Gets Netflix More Wrath | Jenna Wortham and Brian Stelter, The New York Times

The Times explores customer backlash to the Netflix moves, as well as analysts’ assessment of the company’s ways of making them.

Netflix CEO Unbowed | Ethan Smith, The Wall Street Journal

The Journal offers a more business-minded view of the company and the unfolding changes.

“The transition from physical to digital hasn’t been easy for any media business. The pain often has been exacerbated by attempts to hang onto their old businesses without focusing on new ones,” the authors write.

Will Netflix Hand Over Six Figures for @Qwikster Twitter Feed? | Chloe Albanesius, PC Mag

Compounding Netflix’s woes is the fact that the Twitter handle @Qwikster is already taken — and it may come down to a bid from its owner.

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