Netflix Will Sell Their DVD-By-Mail Business to Blockbuster

By now everyone has heard that Netflix, under mounting criticism from customers and investors alike, is going to split its company in two. One side will retain the Netflix name, but only provide streaming services. The second half will comprise their physical DVD distribution business, which has been renamed Qwikster (apparently asfadj;k was taken). This was done with such haste and without even checking to see if they could get the social network handles for Qwikster (Twitter is currently being used by a Stoned Elmo Avatar). Why on Earth would Netflix want to make it more complicated and time consuming for consumers to use their service? Who wants two separate unconnected queues?

Recently Wedbush analyst Michael Pacther mentioned the idea that Netflix did this in order to sell off the streaming service to Amazon. He was one of the first analysts to float the idea, as nothing has come forth from the company(s) yet. Mr. Pacther postulated that Netflix would sell off the streaming side to Amazon in order to increase their market capitalization and license new content deals.

There’s just one problem (actually several), with this assumption. One of their most valuable assets is the name Netflix and those red envelopes. They’re ubiquitous. Under Mr. Pacther’s assumption it would make more sense to keep the Netflix name on the DVD’s and call the streaming service Qwikster. If the brand was sold to Amazon (who could use the licensing agreements to boost their catalog and compete with Hulu/Apple/YouTube, etc.), Amazon would inevitably retire the name and fold the catalog under their own brand name (Similar to Google and Blogger).

If you logically follow this train of thought than it leads to another, more probable scenario; Netflix will sell off their DVD by mail business- in case you forgot that was the one with the forgettable name that will probably be dropped the moment it’s acquired. But who would want to acquire a business based on a failing format with a maximum of 10 years left in its life cycle? Blockbuster, who else? From their perspective they’d eliminate their biggest competitor, increase their market capitalization and become more competitive against individual rental sites like RedBox.

The cash infusion would also allow Netflix (the brand we’re all familiar with) to survive the next round of negotiations with movie studios. It could also help them to gain access to a wider selection of new releases available for streaming (which is what everybody wants, and the massive hardware sales prove we’re moving towards). This would also help Netflix to rehabilitate their image with consumers. It’s impossible to say which brand is headed out the door; but Netflix CEO Reed Hastings is either going to preside over the slow death of his company… or position it to dominate the future of online streaming.

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