Many Netflix customers expressed ou

Many Netflix customers expressed outrage over the new plan to split the services, catching the company off guard. However, from the company’s perspective, it was a good decision. Management saw the DVD mail exchange business as underutilized, expensive to support, and close to obsolescence, like the storefront outlets it had largely replaced. The separation of services would help by allowing online-streaming-only subscribers to pay less while capturing additional revenue from the continuing DVD mail exchange business. There were also compelling cost issues that Netflix management was attempting to address. Content owners, such as movie and TV studios, were growing more aggressive in negotiating their royalties and were demanding to be paid based upon the potential number of streaming viewers rather than actual views. All Netflix subscribers, including those that received content exclusively via mailed DVDs were being counted as potential online streaming customers. Giving customers the option to be specifically DVD-by-mail-only customers would lower the royalties Netflix was required to pay.