Netflix drops unpopular Qwikster DVD plan

(Reuters) - Netflix Inc Chief Executive Reed Hastings reversed an unpopular decision to separate his company's DVD rental business and online video streaming service, sending the stock up 7 percent in early trading.

U.S. customers will continue to go to Netflix.com for streaming and DVD-by-mail rentals, as the company has dropped plans to move its DVD rentals to a separate business called Qwikster, Hastingsannounced in a short statement on the company blog on Monday.

Hastings' earlier plan to put movie and television DVD rentals on a different website, which never went into effect, was one of several missteps in recent months that have helped drive shares of the one-time Wall Street darling down about 60 percent since July.

Writing on the company blog last month, Hastings said Netflix was putting the DVD service on a different website and naming it Qwikster as the company separated the business from its growing online streaming offerings. The move would have forced customers of both streaming and DVD options to visit different websites and maintain different accounts for each subscription. Customers also would have received separate credit-card charges.

The announcement prompted confusion and outrage from customers who fumed on the Netflix blog and Facebook page, plus bewilderment over the move to the Qwikster name for DVDs sent through the mail in the company's signature red envelopes.

"The subscribers voted and Netflix realized the whole thing was stupid," said Charlie Wolf an analyst at Needham & Co. "It was an act where you didn't raise prices but you lost subscribers."

In a statement issued on Monday, Hastings said "there is a difference between moving quickly -- which Netflix has done very well for years -- and moving too fast, which is what we did in this case."

"Consumers value the simplicity Netflix has always offered and we respect that," Hastings said.

Netflix said it will not rename the DVD service. U.S. members "will continue to use one website, one account and one password for their movie and TV watching enjoyment under the Netflix brand," the company's statement said.

The move comes as Netflix deals with a customer backlash that began in July when the company announced it was raising prices by as much as 60 percent, or $6 a month, for some customers who wanted to keep DVD and streaming subscriptions.

With cancellations rolling in, Netflix in September cut its third-quarter forecast by 1 million subscribers. The company said it expected to have 24 million subscribers at the quarter's end.

Hastings later apologized for the handling of the price increase but is sticking with that decision as the company works to build its online movie and television streaming service.

But Hastings stopped short of an apology to customers for the confusion it caused before reversing course on Monday.

In a terse 140-word blog statement Hastings said: "It is clear that for many of our members two websites would make things more difficult." He added, "While the July price change was necessary, we are now done with price changes."

Netflix faces pressure from Hollywood studios and cable programmers to pay more for streaming content. Negotiations with Liberty Media's Starz were recently called off because the two sides could not reach an agreement on pricing terms. The company also faces competition from Amazon.com, Hulu and others.