Is Netflix Trying to Pull Another Qwikster?

A recent article on venturebeat.com grabbed my attention. Remember all that brouhaha last summer, when Netflix (Nasdaq: NFLX  ) tried to separate its DVD-by-mail service from its video streaming? Well, the scuttlebutt is that it's at it again, albeit without the Qwikster name and all that pesky public-announcement stuff.

The article stated that some redditt.com users have noticed that a separate Web page has been set up for DVD customers, where users are redirected when they try to rate movies on the main site. Other changes have taken place as well: Searching for DVD-only titles returns only streaming choices, and ratings and recommendations by DVD and streaming customers are now separate.

I have an as-yet-untapped gift DVD subscription I received for Christmas, so I checked out the site myself. The Netflix site has indeed changed, with a new support page that sends searchers to the site "dvd.netflix.com" to sign up for a DVD-only account. Interesting.

Streaming content is king
It's hard to blame Netflix for its emphasis on streaming versus DVD rental. New market data shows that the disc-rental business is down 3.4% from 2010 to 2011, with the last quarter showing the greatest loss year over year. The one bright spot is Coinstar's (Nasdaq: CSTR  ) Redbox kiosks, which saw business increase by 28% last year. The report doesn't mention rentals by mail, only by stores. It doesn't seem a stretch to imagine that Netflix may be hurting in that department, though, and there's plenty of evidence to show that streaming is quickly becoming the norm. According to IHS Screen Digest Research, streaming content will top 3.4 billion views this year. That represents the first time streamed video will surpass physical DVD and Blu-ray sales.

Netflix also faces tough competition from Amazon.com (Nasdaq: AMZN  ) , which just recently inked a deal with Discovery Communications (Nasdaq: DISCA  ) , meaning that Amazon subscribers will now be able to stream popular offerings, both current and past, from Animal Planet, the Discovery Channel, and TLC. This pact swells Amazon's title list to approximately 17,000 -- about 3,000 more than Netflix is rumored to have on hand. Even with its growing DVD-rental business, Redbox is also getting in on the streaming-content act, signing on with Verizon in a bid to deliver content to viewers' mobile devices.

DVD spinoff?
In my mind, there's definitely something afoot, at least for customers of the DVD-by-mail plan, and time will tell whether a full-fledged splitting of the two services is really in Netflix's sights. My opinion is that it is, and having learned its lesson last year about making a big splash with news that isn't popular with customers, it's hoping to make the change quietly. In an interview shortly after the famous backpedal last fall, Netflix CEO Reed Hastings said the company had made a mistake by separating the two, as well as by setting up a separate website. Well, there is definitely a new website, so watch the news to see how this venture unfolds. Meanwhile, I'd better start using my gift subscription before Netflix goes out of business entirely.

Verizon and Coinstar aren't the only bit companies getting in on the mobile revolution. Check out our free report to see who else is raking in profits with this medium -- and how you can, too!

Fool contributor Amanda Alix owns no shares in the companies mentioned above. The Motley Fool owns shares of Amazon.com. Motley Fool newsletter services have recommended buying shares of Amazon.com and Netflix. The Motley Fool has a disclosure policy. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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