Is Netflix’s DVD Service Doomed?

Image courtesy of Jeffrey

When we talk about video nowadays, the conversation is usually about streaming content and the services that provide them. While Netflix’s DVD service is still kicking — and even has its very own app — it’s been losing customers steadily for years. And now, with the latest quarter’s subscriber exodus, some are wondering whether the disc-based service’s time is limited.

According to Netflix’s fourth-quarter earnings report [PDF], the DVD service lost 159,000 subscribers during the final three months of 2016, finishing December with 4.1 million customers.

That’s the lowest subscriber tally in 11 years, the Associated Press notes. During that time, streaming video has become Netflix’s golden child, with almost 94 million subscribers in 190 countries.

Despite customer losses, it seems the DVD service isn’t going anywhere — at least for now — mainly because it’s profitable for the company: Netflix makes an operating profit of about 50% on DVD subscriptions, the AP reports. And unlike the almost $1 billion Netflix spent marketing its streaming service last year, the DVD service has a marketing budget of zero.

The DVD service kept the company profitable in the last five years as well, raking in $1.9 billion, while Netflix suffered $1.5 billion in accumulated losses during that same period. That’s a pretty good reason to keep it around.

“We’ve never discussed shutting down DVDs since there are still lots of folks who subscribe, often to both streaming and DVD by mail,” a Netflix spokeswoman told the AP.

All that being said, industry experts think it’s only a matter of time before it just doesn’t make sense for Netflix to mail discs to customers. And as more titles hit streaming services, folks just won’t want to — or need to — wait for days for a red envelope to show up.

So how long does Netflix’s DVD service have? About five years, one analyst predicts, when there are only around one million subscribers left. The company will then start shutting down warehouses used to store and mail the discs, he believes.

“As they consolidate those warehouses, the turnaround time is going to be slower,” Wedbush Securities analyst Michael Pachter told the AP. “Then, it’s not going to take two days for the next DVD to arrive, it’s going to be more like six days. Then people will be upset and quit.”