When you last heard from embattled Netflix CEO Reed Hastings, he was licking the deep wounds cut by Qwikster, the ill-fated DVD and video game service Netflix wanted to launched last September. However, as it turns out, maybe splitting the business wasn't the worst idea after all.

The company lost 2.76 million DVD-by-mail subscribers during the last three months of 2011, and Hastings told analysts on Wednesday that Netflix will no longer spend money marketing the fading service. Nor will video games be added in the near future, despite promises to the contrary last year.

"We expect DVD subscribers to decline each quarter forever," he said, ominously.

Not that the bleak forecast should be a surprise to Hastings. As he wrote when announcing Qwikster:

"For the past five years, my greatest fear at Netflix has been that we wouldn't make the leap from success in DVDs to success in streaming. Most companies that are great at something -- like AOL dialup or Borders bookstores -- do not become great at new things people want (streaming for us) because they are afraid to hurt their initial business. Eventually these companies realize their error of not focusing enough on the new thing, and then the company fights desperately and hopelessly to recover. Companies rarely die from moving too fast, and they frequently die from moving too slowly. "


On the plus side, while the DVD business is sputtering, Netflix itself is doing pretty well. The company added 610,000 subscribers in the final quarter of 2011, which nearly offset the 800,000 it lost in quarter three.

[via LAT/Company Town]
categories Movies