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Netflix adding video games to its rental options

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For years, customers and analysts have pestered Netflix to add video games to its rental operation.

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Netflix HQ

In a few weeks, they'll finally get their wish.

Netflix has announced plans to add titles for the Xbox 360, PlayStation 3 and Wii to its catalog in the coming weeks. The new options will come as part of the company's plan to split off its DVD-by-mail service into a separate brand and website called Qwikster.

"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," said company co-founder and CEO Reed Hastings.

Netflix didn't offer additional details on the breadth of its games catalog or the number of titles in its library. Users who want to rent games will have to pay an extra fee per month, similar to what customers who want Blu-Ray discs must pay.

That's not likely to sooth people who are still upset at the company's July decision to separate subscription fees for its streaming and DVD rental service, effectively raising the rates for people who subscribe to both by 60 percent (customers also don't seem very happy at having to go to another site to add DVDs to their rental queue.)

Controversy aside, though, the entrance of Netflix into the game rental business is a notable one -- and something that's likely to cause indigestion in the executive suite of several competitors.

Most notable, of course, is Gamefly, which pioneered the game rental-by-mail business. The company announced plans for a public offering last year, but has continually delayed the action. At the time, it boasted a membership base of 334,000 subscribers. That number could be higher today, but as it stands, it's less than 3 percent of the 14 million-plus Netflix subscribers who receive DVDs by mail.

Redbox, which began offering video games in its vending machine rental kiosks in June, will also likely feel an impact. Even streaming service OnLive is likely to catch some heat.

Despite Netflix's recent missteps, it's still the biggest player in the rental space — and, in an effort to smooth over those bad feelings, Hastings extended an olive branch to users with a blunt apology for the way the price hikes were handled.

"Many members felt we lacked respect and humility in the way we announced the separation of DVD and streaming, and the price changes," he said. "That was certainly not our intent, and I offer my sincere apology."

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