"Qwikster" is Netflix for "Oh, go away already." Netflix desperately wants to kill off its DVD-by-mail rental business. It's tried raising prices, and it's trying to spin off the operation, but the problem is that Netflix really isn't in control here. The movie studios are.
The very name "Netflix" describes a streaming service: as BGR writer Zach Epstein said on Twitter this morning, it delivers flix through the Net. The mail business was always a kludge for Netflix, a way to work around insufficient bandwidth. As soon as Netflix found a way to live up to its name, it jumped at the chance.
For people who have broadband, streaming offers a better customer experience than scratchable physical discs you have to haul to the mailbox and wait for days to arrive. People who don’t have broadband go for DVD-only plans. Yeah, sure, it's nice to take DVDs on trips where streaming doesn't work. But I think by far the biggest reason people subscribe to combination DVD/streaming plans is simply that the movies they want are only available on DVD.
No Celestial Jukebox
Netflix and consumers both want the celestial jukebox: they want to be able to see anything ever created, on demand, at one price. But what Netflix wants, and what consumers want, isn't what the movie and TV studios want. The movie studios have always seen Netflix streaming as a way to stoke interest in low-value content that would never have been rented or purchased otherwise. They want to charge more for the good stuff.
The studios don't love Netflix's rental-by-mail business either, but they have to tolerate it because they can't block it. Video rentals came about in those old pre-DMCA days when laws regarding renting, borrowing, and lending media were much more liberal.
So the studios have succeeded in keeping a lot of popular movies and TV shows off of Netflix's streaming service, but can't keep them out of the DVD library. This is why angry renters want to keep their DVD plans. It's not out of some love for optical media—it's because there's much, much more content available when the studios aren't choking it off.
Netflix may be calculating that there's enough streaming content out there to keep consumers interested. The DVD-by-mail business is expensive and inconvenient to run; streaming is cheaper and more profitable, even though you have to pay for bandwdith.
Netflix CEO Reed Hastings said that the lower costs with a streaming-only system will let the company spend more money buying rights to movies, so availability will improve. I’m skeptical, though. How can Netflix’s $7.99/month compete against the money studios get from HBO or video on demand? Consumers will pick the cheapest option with the content they want, and the studios want to stop that race to the bottom, so they won’t provide content to the cheap options if given the choice.
Netflix Becomes Cable
The only way I see studios making more desirable content available for Netflix streaming is via content-based price tiers, and then we have the cable TV industry. There's a certain beautiful symmetry there, as Netflix is becoming, for many people, the reason they can cut their cable TV service. But the studios simply won't go down without a fight.
The losers here, as always, are consumers. You're going to be paying more for the movies and TV shows you want than you think you should. Of course, you're also going to be paying less than you would if you bought them all on DVD, or if you subscribed to the super-duper-premium cable package, or rented them all through video-on demand. Netflix, for a while, was kind of a free ride through the entertainment world. It looks like that free ride is ending.