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Slideshow: Giant vegetable contest Follow Reuters Facebook Twitter RSS YouTube Read Obama offers $3 trillion debt plan, tax hikes on rich 11:51am EDT Greece must shrink state to avoid default: lenders 7:19am EDT Greece must shrink state to avoid default: lenders 11:31am EDT Wall St sharply down on escalating euro zone woes 10:28am EDT Abbas defiant on U.N. bid as officials scramble on crisis | 11:45am EDT Discussed 140 Number of poor hit record 46 million in 2010 71 Geithner’s ”succinct” message irks Europeans 51 Obama to propose $3 trillion in deficit cuts Watched Scarlett's naked pics, Tyler Perry is highest paid Wed, Sep 14 2011 Photos capture air show crash Sat, Sep 17 2011 The fight for Sirte Sun, Sep 18 2011 Netflix to split DVD and streaming services Tweet Share this Email Print Related News Euro zone progress extends Wall St gain Thu, Sep 15 2011 Netflix lowers U.S. subscriber forecast; shares fall Thu, Sep 15 2011 HOW TO PLAY IT - Did Netflix's very bad day create value? Thu, Sep 15 2011 McGraw-Hill to split into two listed companies Mon, Sep 12 2011 Google buys Zagat to vie with OpenTable, Yelp Thu, Sep 8 2011 Analysis & Opinion Brace yourselves: (former?) video titan takes aim at Netflix Can Netflix still win when cable TV loses? Related Topics Technology » Deals » Global Deals Review: 2011 Q2 » Global Deals Review » Inflows Outflows » Media » A screen grab shows the access to Netflix online, as displayed on a television screen, in Encinitas, California July 25, 2011. Credit: Reuters/Mike Blake By Yinka Adegoke Mon Sep 19, 2011 11:48am EDT (Reuters) - Netflix Inc is separating its movie streaming business from its DVD-by-mail service, which it is renaming Qwikster, as it tries to recover from a customer backlash over its subscription fee increase. Chief Executive Officer Reed Hastings made the announcement in a blog post a week after the company confirmed that it was adding fewer subscribers than forecast due to the 60 percent increase for its joint streaming and DVD rental service. The uproar has pushed shares of the company down nearly 50 percent since it announced the price increase on July 12. Shares of Netflix were up 2.3 percent at $158.78 in morning trading. "I messed up," Hastings wrote in the blog post. "I owe everyone an explanation." The streaming business will retain the Netflix brand. Hastings said streaming and DVD by mail were beginning to operate independently, with very different cost structures. They also offer different benefits that needed to be marketed differently, he added. There will be no pricing changes, Hastings said, and subscribers to both services will have two entries on their credit card statements, one for Qwikster and one for Netflix. The two services will have separate websites and no longer integrate customer use or preferences data for streaming and DVDs. "The share rise is mainly a bounceback from the recent declines, and today's news doesn't change much because Reed had talked about separating the businesses in the past," said Gabelli & Co analyst Brett Harriss. Netflix has been under pressure from Hollywood studios and cable programmers to pay much more for content. Analysts have said it would start to lose more shows for its streaming service after failing to reach a new agreement with Liberty Media's Starz. But Hastings said new content would be coming soon. "The additional streaming content we have coming in the next few months is substantial, and we are always working to improve our service further," he said. Even as it seeks out more content for its streaming service, Netflix faces increasing Web video competition from the likes of Amazon.com, Google Inc and Apple Inc. JPMorgan analyst Doug Anmuth said Netflix's hybrid DVD/streaming model had been a "competitive advantage," but three-quarters of Netflix's new subscribers were streaming-only. "It's possible now each business may be holding the other back," Anmuth wrote in a note to clients. Andy Rendich, who has worked at Netflix's DVD service for 12 years and has led it for the last four years, will become the CEO of Qwikster, Hastings said. Unlike Netflix's current DVD plan, Qwikster will feature a videogame upgrade for customers who want to rent Wii, Playstation 3 and XBox 360 software. "Members have been asking for video games for many years," Hastings said, "and now that DVD by mail has its own team, we are finally getting it done." (Reporting by Yinka Adegoke in New York and Sakthi Prasad in Bangalore. Editing by Jane Merriman and Lisa Von Ahn) Technology Deals Global Deals Review: 2011 Q2 Global Deals Review Inflows Outflows Media Related Quotes and News Company Price Related News Tweet this Link this Share this Digg this Email Reprints We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/ Comments (4) hypodoche wrote: So they are going to make it so you have to look at recommendations twice, have 2 queues, 2 passwords, 2 sign-ins, double the email notices, double the billing issues, twice the headache of searching… I’ve stayed with them so far, $20 isn’t an issue. This ridiculous Google/Aol-style of changing your user interface, structure and name every time your stock goes up or down is going to fail (again). This seems insane. Sep 19, 2011 9:53am EDT -- Report as abuse Yirmin wrote: Well first they shot their own foot when they raised prices so high so fast… now they decided to shoot the other foot with this boneheaded move. I was willing to pay more for the combined service but if they are going to do this… I will be cancelling them… I don’t need multiple queues and multiple bills and doubling everything else… the original system worked… now it looks like they have some moron trying to break the whole system… where did this idiot come from Blockbuster? Sep 19, 2011 10:25am EDT -- Report as abuse Whatsgoingon wrote: Hastings did not mention the benefit of this move, how is he going to convince customer and his own employees? If “I messed up” was the reason how people know he does not mess up again? Sep 19, 2011 10:54am EDT -- Report as abuse See All Comments » Add Your Comment Social Stream (What's this?) 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