Netflix CEO Reed Hastings announced that Netflix is abandoning plans to add video game rentals to its DVD and Blu-ray rental offerings. Originally, the news that the company would be getting into the video game rental business was born out of the Quikster spinoff plan (which was aborted before it got off the ground).

The justification for the Netflix decision comes from a number of things; but the biggest reason is that Netflix is seeing a major drop in disc by mail, and at the same time seeing a major increase in streaming. The theory from Netflix is that the entire disc by mail business isn’t what it used to be, and consumers seem to be finding it less compelling. Given that information, Netflix apparently feels it just isn’t the right decision to add video game rentals and have to fight to establish itself in that space.

This news will be a huge boon for video game rental company GameFly. While GameFly didn’t publically comment when Netflix announced that it was planning to get into the video game rental by mail business, it did continue to beef up its own infrastructure to provide better service to its subscribers. It is estimated that GameFly has the vast majority of the video game rental business with so many other choices dropping out of the game.