I'm fascinated by what's going on with Netflix. I come at this as a former long-time customer. I first had an account near the beginning when we still had to mail DVD's back to California. I wasn't dissatisfied with Netflix as a service, we cancelled simply because of lifestyle - having a young baby is not conducive to watching many movies and we were much more attached to our Tivo than our DVD player for entertainment anyway.
I've watched from afar as Netflix has grown its streaming business while keeping the DVD business by its side. It's a nice compliment. I never found the streaming options to be that great when I last subscribed almost two years ago. Some told me they had improved, but then I keep reading stories in the news about deals gone bad.
I'm sure a number of my friends who are more into movies will have some decisions to make, or maybe they've already made them. But as a casual movie watcher who is more into current TV programming, they've probably lost me for good.
It takes a bit of guts to do what they are doing though, and take a perfectly good business, splitting it up into parts - aligning strategically with the future of content delivery. Don't get me wrong, I don't think anybody knows exactly where this whole thing is going to land between the distributors (the networks, cable companies, and streamers, etc), creators (studios) and the consumers, but it does seem likely that physical media will fade out at some point in the next 10 years. If not completely go away, it will have a lesser role, and could eventually be limited to those that streaming is not an option (those without access to high speed internet). Unwinding/morphing that business into something completely different is totally different from what the company has been for the first 10 years of its life, and certainly a much different thing than streaming video content, the future of the business.
Netflix is doing what it can to separate these businesses before they are publicly forced into doing it by investors. They may even have a suitor already. This is one step in a much larger plan.
This move is not unlike what Kraft Foods is doing with their business, or Tyco International, or countless others have done over time. Concentrate on what they do best or what to do best and where the growth opportunities are and unload the rest. The trick is to do it without alienating your existing customer base which is no small feat, and one that Netflix is clearly struggling with.
This will make a really interesting b-school case study someday, but perhaps for not the reasons people think.