Netflix unexpectedly announced a split between their two offerings, DVD-by-Mail and their streaming service into two separate services. This is surprising as Netflix has continued to grow in popularity and profits every quarter. Why fix what isn't broke? After all, the streaming portion of Netflix claims about 20% of North America's bandwidth during peak hours, which  certainly says something about their popularity.

When chief executive Reed Hastings announced the split, after already announcing a large increase in price a couple months back, the Netflix stock price quickly dropped. Many Netflix subscribers were angered by the announcement and by some estimates, more than a million unsubscribed within a period of a few days.  Weeks later, Netflix backtracked and announced they would not separate the services, but the price increase would remain in place.

The Netflix the streaming service is a widely used portion of the business, and instant movies on demand is very attractive for customers and getting easier and more popular. Infrastructure-wise, it is less costly to manage and maintain the massive streaming data centers as opposed to facilitating mail centers, and it is better for the environment to boot. Most modern DVD and Blue-Ray devices offer streaming capabilities and many televisions are jumping on board. Video game consoles and mobile devices are capable of streaming movies as well. It's so simple and sensible that it makes the snail-mail service seem obsolete.

Is Netflix consciously pushing consumers away from one of their services to eventually only target streaming media? This likely seems to be the case. The streaming service is more economical to run for the company and most users alike. It's likely this is a situation where you are either on the boat or off the boat. Most importantly, Netflix is sweetening the deal by promising to improve their streaming library.  That has lately been another source of complaints about Netflix as they have not really improved the selection quality on the streaming side in terms of new releases.  Netflix also makes it difficult to find new releases.  I signed up for a Redbox account which specializes in new releases and has a very simple web-page for reserving movies for pickup at a nearby location.  Occasionally I found myself searching Redbox for a new Blue-Ray release and ordering it on Netflix!  That doesn't say much for the Netflix user experience.

What about your business? Has technology been able to completely change your service offering? What challenges die you face working to move customers to new services?