At first I wasn't sure what to think of the news that Netflix is splitting its streaming and DVD operations into two distinct businesses, yet still (if I'm interpreting this correctly) keeping everything under the Netflix corporate banner. (Netflix announced this in a stealth-like way Sunday nightin a blog.)
Then I wondered: Would they be doing this if it were a private company?
Answer: Likely not, because Netflix, after all, is attempting to morph into a stock market play as a "streaming "story by shedding the old, stodgy DVD image.
This move, in my opinion, is the company's way to create the illusion it is something that it is not: A hip, new company.
Unless Netflix spins off its newly named Qwikster DVD business into a separate entity it is, in realilty, the same old Netflix with the same old corporate structure that includes the same old $2.5 billion off-balance sheet contents costs AND the same old shipping and fulfillment centers, which account for 9.4 percent of overall corporate expenses.
Again—it will, for stock market purposes, be the illusion of something else.
And if the ultimate game plan is to do a genuine spin-off of the DVD business (which would appear to be the next logical step) the NEW Netflix will just be another streaming start-up.
The good news: In the blog, CEO Reed Hastings did something few execs ever do: He conceded recent mistakes by saying that "I slid into arrogance based upon past success."
Normal human condition/trap with successful entrepreneurs. Few admit it. (I'm guessing Hastings has been humbled by his hubris.)
The bad news (showing the arrogance still isn't completely gone): The company leaked out this latest change, with Hastings' mea culpa, in a Sunday night blog on Netflix's website rather than a press release.
Bottom line: Probably a smart move, but short of spinning off the DVD business, it doesn't really change anything.
The beat goes on...
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