Netflix and Qwikster

In 2011, Netflix announced changes that observers characterized as among the greatest missteps in the history of corporate strategy. First, the company significantly raised prices. Then, Reed Hastings, the founder and CEO of Netflix, described plans to split the company between streaming and disc rental, spinning off the DVD-rental business to a new entity called Qwikster. The outrage from customers and investors was extreme. Within two weeks, Hastings reversed the plan to split the company (though maintaining the price increases). During the debacle, Netflix lost 2 million subscribers and the stock dropped more than 75 percent in value. Before his controversial move to split the company, Reed Hastings had built a reputation as a savvy businessman. He founded Netflix in 1998 as a DVD rental business, which allowed subscribers to order discs online and then receive and return the DVDs through the mail. By the end of 2010, Netflix had grown to 20 million subscribers, gained revenues of