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Is Another Netflix Service Split Coming?

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Are you a film buff or a fan of television?

Netflix (Nasdaq: NFLX  ) recognizes the difference, and it's testing a redesign that splits the difference.

According to The Los Angeles Times, Netflix is serving up a new prototype of its streaming landing page to a small group of customers. There are separate tabs for movies and TV. If the video service provider finds that users seeing the dual tabs are consuming more video or are more likely to stick around, you can be sure that the redesign will roll out to all of its 23.4 million stateside streaming accounts.

Netflix's original DVD-based service was primarily seen as a movie rental service, and rightfully so. The company's biggest competitors -- DISH Network's (Nasdaq: DISH  ) Blockbuster and Coinstar's (Nasdaq: CSTR  ) Redbox -- rely on new film releases on DVD and Blu-ray. Television shows on disc just take too long to go through as rentals, though Netflix relished those rentals since it meant longer gaps between bankrolling roundtrip shipping costs.

However, Netflix's streaming service has become a popular source for subscribers to catch up on prior seasons of TV shows.

Netflix content chief Ted Sarandos conceded that 50% to 60% of the service's streams are for television shows late last year. It's easy to see why.

  • Netflix's catalog is sorely lacking in movies, particularly the new releases that drive the traffic at Redbox and Blockbuster.
  • The lack of having to wait at least two days between rentals means that streaming customers can go through more video. This is a selling point for Netflix, but something that exposes its shortcoming on the new movie front.
  • TV studios have warmed up to striking licensing deals with Netflix for past seasons. It not only creates incremental revenue, but also builds a larger audience. When the fifth season of AMC's (Nasdaq: AMCX  ) Mad Men kicked off with a 20% spike in ratings earlier this year, Netflix was quick to point out how the first four seasons being added to its streaming library helped get a new audience up to speed.  

Netflix wears the "rerun TV" badge with pride, leaving Hulu and the networks themselves to stream ad-supported episodes of current seasons.

Splitting the streaming site into the two tabs will make it easier to navigate. The move will also make it easier if Netflix should decide to offer either TV or movies as standalone plans at cheaper price points. Now it's just a matter of waiting to see how Netflix's test audiences react to the change.

Stream on
Motley Fool Co-Founder David Gardner has been a fan of Netflix as a disruptor for nearly a decade, but there's a new rule-breaking mutlibagger that's getting him excited these days. Learn more in a free report that you can check out right now.

The Motley Fool owns shares of Netflix. Motley Fool newsletter services have recommended buying shares of Netflix and Coinstar. The Motley Fool has a disclosure policy. We Fools may not 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.

Longtime Fool contributor Rick Munarriz has been a Netflix subscriber and shareholder since 2002. He does not own shares in any of the other stocks in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.

Read/Post Comments (4) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 18, 2012, at 1:46 PM, dlchase24 wrote:

    If you're browsing for something specific, I could see how different tabs could prove helpful. However, a lot of times I run across TV shows while just looking for something to watch and having to switch from Movies to TV could be annoying.

    I currently run a media center program that separates my local TV and Movie files and I've recently started to wish they were not separated.

    I'd rather see the two separated by a filter, so I can search both or just one or the other.

  • Report this Comment On June 18, 2012, at 3:00 PM, rhealth wrote:

    Sheesh! Your title scared me, I thought another split?! Why dont they just go into the parking lot and start burning c-notes?

  • Report this Comment On June 18, 2012, at 7:23 PM, JudasTouch wrote:

    "Netflix content chief Ted Sarandos conceded that 50% to 60% of the service's streams are for television shows late last year. It's easy to see why."


    I think there might be more important factors than the three you listed.

    As someone who finds himself watching more TV shows than movies on Netflix, I think a large part of why TV shows are popular is because finding 20-30 minutes to sit in front of the TV is a lot easier than finding 90 minutes.

    Plus, once I'm invested in a TV show, I know what to expect. Whatever my mood is, it's easy to queue up just the right show. With movies, even knowing the genre and trusting Netflix's recommendations, it takes a certain amount of time to get invested in it. With a TV show, I know the key characters and, frankly, that allows me to go through e-mail or pay bills while I watch.

    As usual, I enjoy reading your stuff.


  • Report this Comment On June 20, 2012, at 2:39 PM, 48ozhalfgallons wrote:

    Streaming old TV is not worth 8 bucks a month now that I've exhausted all the Star Trek episodes. The unseen Public TV stuff is worth about 3 bucks. I still have a lot of movies to catch up on and my home theater sound beats all theaters. Can't get that streaming!

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