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Behind the scenes of the Netflix DVD spinoff fiasco

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CNET takes an in-depth look at the run-up to, and fallout from, Netflix's controversial 2011 decision to spin off its DVD business. The mistake resulted in a 77 percent drop in share price in four months, and cost Netflix over 800,000 subscribers.

netflix factory
netflix factory

When Netflix announced plans last year to drop its successful $9.99 DVD rental and streaming video bundle, spinning off the DVD business, and charging customers 60 percent more for the same service they had been getting, reactions ranged from puzzlement to outrage. How could Netflix, darling of the tech world, have misgauged its customers so badly? To answer the question, CNet takes an in-depth look at the lead-up to the decision, explaining how a power vacuum allowed CEO Reed Hastings to pursue his dream of a disruptive, all-streaming Netflix unchecked. While the company is in a better position today, at the time, the mistake resulted in a 77 percent drop in Netflix's share price in four months, and cost it over 800,000 subscribers.