Those fools need to hire some competent marketing/branding/strategy help immediately
before they do any more damage to themselves.
They could have just called it Netflix By Mail. Or Netflix II: The Revenge. Or Netflix Old School...or...something...
However, the streaming just isn't good enough yet to justify this move so soon
Which is why they need to keep the DVD business bundled with streaming. The streaming part is the future, but until they can build a comparable library like they have with the DVDs, it will not be "there" yet. The DVD customers are the seeds from which the streaming business will grow.
They can charge a separate pricing structure for DVD vs streaming but really what I would have done is just played along with Starz, and priced Starz content at a premium right at the point where the customer makes the "add to queue/don't add to queue" decision. And make damn sure they understand that the price hike is for Starz, not for Netflix generally. I'd put their fucking logo right next to the icon that says this costs you two rentals not just one.
If customers want to throw a fit, let them throw a fit at Starz. If all this shit had blown up in Starz' face, that would have sent a chilling message to studios that they better not get egotistical about how much their content is actually valued by subscribers. Netflix could have used the shitstorm to their strategic advantage, to gain leverage over content producers, instead of being hurt by it. The whole logic of the internet is driving digital content down, down, down towards zero. Starz and the other content makers can fight all they want, but they are fighting the tide.
Netflix can still have a business as the YouTube of professionally produced content, and that is how they should start seeing themselves now. YouTube's value is in its size and its community which is rating and sorting content, and publicizing it, for free. Netflix's business is going to be the free labor provided by its customers because content will eventually be worth nothing. Starz is on the wrong side of that equation, but Netflix is apparently too stupid to understand that they are on the right side, and should take advantage of that!
First they remove the community features.
That's the stupidest thing - they need to be adding community features, because that's what their business is going to be one day.