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Netflix adds game rentals to newly formed Qwikster division

Physical media service to include 360, PS3 and Wii titles in "upgrade package"

Netflix, the long-running film rentals service, has added console discs to its newly deliniated physical delivery service Qwikster, at an as yet undisclosed price point.

Announcing the new service in an official blog post, CEO Reed Haastings called the new revenue stream part of an "upgrade package" to the Qwikster service, in the same vein as the recent addition of Blu-ray discs.

"One improvement we will make at launch is to add a video games upgrade option, similar to our upgrade option for Blu-ray, for those who want to rent Wii, PS3 and Xbox 360 games," explained Hastings. "Members have been asking for video games for many years, and now that DVD by mail has its own team, we are finally getting it done."

As the service is subscription-based rather than priced per rental unit, users will pay an additional premium per month to rent games if desired, although that premium has yet to be publicly confirmed.

Qwikster is a newly-formed division of the Netflix business which deals with purely physical media. The main Netflix brand will now deal only in streaming. The two sides of the business will be clearly deliniated with separate websites and payment systems.

That division, accompanied by a price-rise, has met with some resistance from customers, who feel that the two options should be combined into a single service once more to save searching for a film again via Qwikster should it not be available for streaming via Netflix. Hastings explains his motivations for the move in the same post.

"For the past five years, my greatest fear at Netflix has been that we wouldn't make the leap from success in DVDs to success in streaming," writes the CEO.

"Most companies that are great at something - like AOL dialup or Borders bookstores - do not become great at new things people want (streaming for us) because they are afraid to hurt their initial business. Eventually these companies realize their error of not focusing enough on the new thing, and then the company fights desperately and hopelessly to recover. Companies rarely die from moving too fast, and they frequently die from moving too slowly."

The post itself makes light of the introduction of games to the service, with the announcement warranting only the brief paragraph above, but in fact the move is a clear step towards taking market share from the major game-rentals service in the US, GameFly. Pricing will clearly be an important factor in the success of the new business arm, but given Netflix's size and resources, the company is likely to field an offer which compares competitively to GameFly's.