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Netflix looks to reclaim its mojo

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Hell hath no fury like a Netflix subscriber scorned. The company’s recent announcement that it will be spinning off its DVD-by-mail service as a separate business called Qwikster has incited another round of outrage. This comes on the heels of Netflix’s decision in July to split its streaming and DVD options — effectively a price hike for those who used both — which helped precipitate a nearly 50 percent tumble in Netflix’s stock price since then and a larger-than-expected number of subscribers leaving. While the move can be seen as forward-looking and possibly even inevitable, it’s clear from the backlash that the situation was mishandled.

Netflix CEO Reed Hastings released both a letter and a video apologizing for the company’s rip-off-the-Band-Aid approach. But the real question is where departing customers will go. Blockbuster might benefit in the short term, but its own financial troubles will make it difficult for it to pounce. (The Blockbuster Movie Pass, a newly announced streaming program available only to Dish Network users, hasn’t made much of a splash.) ”I think Amazon is the one that Netflix should be most concerned about,” says Mike Kaltschnee, founder of the news blog Hacking Netflix. Amazon has been steadily accruing content, including 2,000 new titles thanks to a deal with Fox, and its upcoming tablet will offer opportunities for packaged deals. ”But Netflix still has more buying power than anyone else,” adds Kaltschnee. Such buying power was demonstrated this week when Netflix announced it had signed a major deal with DreamWorks Animation. ”Netflix is writing bigger and bigger checks to the studios to get content, and people are going to want to access that content,” says Steve Swasey, VP of corporate communications for Netflix. ”That is, after we get through this period of disappointment.”

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