Netflix To Wind Down DVD Service
Online video streaming giant Netflix is planning to close down its very first business of DVD rental service amid ongoing struggles to keep subscriber growth.
While announcing its first-quarter results, the company said it would wind down DVD.com later in 2023 and will be shipping final DVDs on September 29. In a letter to investors, Netflix described the DVD service as the booster rocket that got streaming to a leading position.
Netflix co-chief executive Ted Sarandos said, “After an incredible 25 year run, we’ve decided to wind down DVD.com later this year. Our goal has always been to provide the best service for our members but as the business continues to shrink that’s going to become increasingly difficult. So we want to go out on a high…”
The company was launched in 1997 in California as a DVD sale and rental business by sending DVDs through the mail in easily recognizable red-and-white envelopes. The first DVD shipped was Beetlejuice in March, 1998, and the company so far has shipped 5.2 billion plus DVDs. Over the years, the service had 40 million unique subscribers.
Sarandos now noted that those iconic red envelopes changed the way people watched shows and movies at home — and they paved the way for the shift to streaming.
“To everyone who ever added a DVD to their queue or waited by the mailbox for a red envelope to arrive: thank you,” he said.
In 2007, Netflix introduced streaming media and video on demand. The entertainment services currently holds 232 million paid memberships in over 190 countries.
The news comes as the company recorded weak profit in its first quarter, despite 4 percent higher revenues. Global Streaming Paid Memberships grew 4.9 percent year-over-year to 232.50 million members. Meanwhile, Global Streaming Paid Net Additions in the quarter was just 1.74 million, compared to 7.66 million members in the preceding fourth quarter. Average paid memberships increased 4 percent over last year.
On its revenue and profit, Sarandos stated that the company is growing, “not as fast as we believe we can, not as fast as we would want to, but we are growing and we are profitable, and we have a clear path to reaccelerate growth in both revenue and profit and we are executing on it.”
The company, which had its global launch in 2016, last year introduced a lower-priced ad-supported streaming option to gain more viewers, and recently reduced prices in 116 countries as it faces strong competition worldwide.
Netflix is also introducing paid sharing of passwords as a way to boost revenues, amid widespread account sharing of more than 100 million households against rules. The company launched paid sharing in four countries in the first quarter, and is planning on a broad rollout, including in the US, in the second quarter.
Netflix said it expects paid sharing to ensure a bigger revenue base over longer term, from which it can grow as services are improved.
As per Nielsen data, in the first quarter, Netflix was the most watched of any broadcaster or streamer in the U.S. by a good margin.
In pre-market activity on Nasdaq, Netflix shares were losing around 1.1 percent or $4 to trade at $330.
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