Analysts: Netflix setting up sale of DVD rental business to focus on streaming

Netflix (Nasdaq: NFLX), which this week announced plans to rename its DVD-by-mail business "Qwikster" and operate it separately from its streaming video business, may be setting the stage to exit that part of the business entirely, analysts said.

The Los Gatos, Calif.-based company, which made its marks with its DVD rental business, could now be looking to spin off or sell that part of its operation, leaving it more room to develop its exploding streaming business, said Stifel Nicolaus & Co. analyst George Askew.

Rich Greenfield, an analyst with BTIG agreed, saying the two businesses inherently are different.

"One business is global, one is domestic," Greenfield said. "One is based on physical media and the other on digital. It's about aligning the business up and down."

But selling the DVD business could be tricky, said Janney Montgomery analyst Tony Wible.

"I think you'd find a lot of skepticism, like the Postal Service trying to do an IPO right now," Wible said. "There are issues that are only going to get worse."

Netflix CEO Reed Hastings over the weekend in a blog posting and email apologized to subscribers for not communicating better the company's decision to raise prices at the beginning of this month. Subscribers who wanted access to both physical and digital media saw their monthly subscription fees increase by 60 percent.

The company last week lowered its target for subscriber growth for the third quarter because of adverse reaction to the price increase and, possibly, because it had been unable to cement a deal with Starz for movie content from Sony and Disney (NYSE: DIS).

For more:
- see this Bloomberg article

Related articles:
Scrambling Netflix CEO Hastings apologizes, renames DVD-by-mail biz 'Qwikster'
Netflix could be profitable in Canada this quarter
Netflix's deal with Starz isn't kaput, the real negotiations are just beginning
Dish set to launch Netflix competitor next month
Netflix starts roll out in Latin America with launch in Brazil

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