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Tuesday, October 22, 2013

Netflix Might Not Be in the DVD Business for Much Longer

Posted by Paul Constant on Tue, Oct 22, 2013 at 9:44 AM

Much is being made of the fact that Netflix now has more subscribers in the US than HBO. But Vadim Rizov at The Dissolve makes note of something hidden in the earnings indicating that Netflix's DVD-by-mail model might not be long for the world:

...until recently, [Netflix's] physical rental business was more profitable than streaming, with 47 cents of pure profit on every dollar spent by subscribers on DVD rentals. That stopped being true in the first quarter of this year, when for the first time, domestic streaming revenue ($151 million) trumped the DVD rental returns ($109 million).

All this means the end of Netflix’s DVD rental business is only a matter of time, possibly accelerated by a January increase in postal rates, among other factors.

Netflix has seemingly been getting ready to drop their DVD-by-mail service for some time now. And now that they've wiped out video stores all around the country, they don't really have any competition from that space aside from highly specialized competitors like Redbox. But Netflix's streaming library is still tiny compared to their DVD selection. If they pull the DVD part of their service, millions of people will be looking for movies they can't get on any streaming service. Those people won't be able to turn to video stores for help.

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