In a bombshell this morning, Netflix co-founder and CEO Reed Hastings announced that Netflix will be spinning off its DVD by mail service into a new company, called Qwikster.

Apparently the streaming service will still be offered under the flagship name Netflix.  Under Qwikster you will still be able to rent all the movies you want via the mail, but now you will be able to also rent your favorite video games for the Wii, Xbox, and PS3.  This add-on will be an extra fee.

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.

Qwikster will be the same website and DVD service that everyone is used to. It is just a new name, and DVD members will go to to access their DVD queues and choose movies. One improvement we will make at launch is to add a video games upgrade option, similar to our upgrade option for Blu-ray, for those who want to rent Wii, PS3 and Xbox 360 games. Members have been asking for video games for many years, and now that DVD by mail has its own team, we are finally getting it done. Other improvements will follow. Another advantage of separate websites is simplicity for our members. Each website will be focused on just one thing (DVDs or streaming) and will be even easier to use. A negative of the renaming and separation is that the and websites will not be integrated. So if you subscribe to both services, and if you need to change your credit card or email address, you would need to do it in two places. Similarly, if you rate or review a movie on Qwikster, it doesn’t show up on Netflix, and vice-versa.

There are no pricing changes (we’re done with that!). Members who subscribe to both services will have two entries on their credit card statements, one for Qwikster and one for Netflix. The total will be the same as the current charges.-Reed Hastings

Truly exciting information for a Monday morning.  Could this mean the end of the DVD by mail.  It sounds like a nail in the coffin to us.   Netflix has over the past years pushed more and more to be a streaming company, and by spinning the DVD business to a whole other company name simply sounds like Netflix as a brand is putting the DVD by mail service at a very distant arm’s length.