Netflix's Profitable DVD Service is Clearly Dying Out

Did you know that Netflix still maintains a DVD/Blu-Ray membership service under the name of DVD.com?

In 1998, Netflix started their DVD-by-mail rental service. The service, which eventually offered unlimited rentals with no due dates or late fees, surged in popularity a year after opening and counted 300,000 people as paying members in 2000. Who can forget receiving those red Netflix envelopes in the mail? The US Postal Service was overwhelmed with them.

Eventually Netflix would pivot into offering streaming content, and eventually they would invest heavily in creating their own original content. Netflix currently has approximately 150 million members worldwide, with the vast majority signed up for the streaming service.

-

It may shock you to learn that there are still 2,411,000 million people in the United States that are still paying members of Netflix's DVD/Blu-Ray service.

It probably won't shock you to learn that the number of people signed up to DVD.com is dropping rapidly, with 500,000 people leaving the service from June 30th, 2018 to June 30th, 2019.

Netflix keeps the service operating for one reason - profit.

In the three months ended June 30th, 2019, DVD.com generated a total of $45.85 million in total profit, down from $52.98 million in profit in the same time period in 2018.

DVD.com, which is a completely separate division of Netflix from the streaming service, is profitable because they don't have to invest heavily in original content. Instead, their focus is on keeping their stock of DVDs/Blu-Rays up to date and fulfilling customer requests.

The dirty little secret for DVD.com is that a large number of their customers don't even realize that they still have active memberships. These members contribute nothing but pure profit each and every quarter.

There is a list of other types of people who subscribe to DVD.com in this day and age, including: people in remote locations that don't have access to high-speed Internet, people that prefer DVDs/Blu-Rays over streaming content and people who don't live in remote areas but still have low-speed Internet.

-

There is no doubt that Netflix will one day phase out their DVD.com service, though they are likely hoping to extract another 5-10 years of profit out of the company before it completely dies.

After all - why shut down something that is still making so much money?

Source: SEC.gov - Netflix 10-Q Filing

Filed under: General Knowledge