SAN FRANCISCO — Netflix is on the verge of ending the DVD mail-by-mail rental service that laid the foundation for its groundbreaking video streaming service, ending an era that began a quarter-century ago when mail-in disc delivery as revolutionary concept was valid.
The DVD service, which still ships movies and TV shows in the red-and-white envelopes that once served as the Netflix emblem, plans to ship its final discs on September 29.
Netflix ended March with 232.5 million global subscribers to its video-streaming service, but years ago it didn’t disclose how many people still pay for DVDs to be delivered in the mail as that part of its business steadily dwindled. The DVD service generated revenue of $145.7 million last year, which translated to approximately 1.1 to 1.3 million subscribers based on the average prices paid by customers.
The growth of the video streaming service Netflix has slowed down This prompted management to place more emphasis on increasing profits. This focus may also have contributed to the decision to close an operation that was becoming a financial drain.
But the DVD service was once Netflix’s biggest moneymaker.
Just before Netflix stopped streaming video in 2011, the DVD-by-mail service had more than 16 million subscribers. That number has been steadily declining, and the service’s eventual demise loomed when the idea of waiting for the US Postal Service to deliver entertainment was completely obsolete.
But the DVD mail service still has die-hard fans who continue to subscribe because they appreciate finding obscure movies that aren’t widely available in video streaming. Many subscribers still evoke nostalgia when they open their mailbox to the familiar red and white envelopes instead of junk mail and a stack of bills.
“These iconic red envelopes changed the way people watched series and movies at home — and paved the way for the shift to streaming,” said Ted Sarandos, Netflix Co-CEO wrote in a blog post about the forthcoming closure of the DVD service.
The history of the service dates back to 1997, when Netflix co-founder Marc Randolph went to a post office in Santa Cruz, California to mail a Patsy Cline CD to his friend and co-founder Reed Hastings. Randolph, Netflix’s original CEO, wanted to test whether a disc could be delivered undamaged via the US Postal Service, hoping to eventually do the same with the still-new DVD format.
Patsy Cline’s CD arrived intact at Hastings, which prompted the duo to launch a DVD-by-mail rental website in 1998, which they always knew would be replaced by even more convenient technology.
“It was planned obsolescence, but we bet it would take longer to happen than most people thought at the time,” Randolph told the Santa Cruz Post Office in an interview with The Associated Press last year, where he sent the Patsy Cline CD in the mail. Hastings succeeded Randolph as Netflix’s CEO a few years after its inception, a position he hasn’t relinquished until his resignation in January.
With just over five months to go, the DVD service has shipped more than 5 billion discs to the US – the only country it has ever served. Its demise mirrors the demise of thousands of blockbuster video stores that have shut down because they were unable to counter the threat posed by Netflix’s DVD-by-mail alternative.
Even subscribers who have remained loyal to the DVD service could expect the end as they noticed the dwindling selection in a library that once numbered more than 100,000 titles. Some customers have also reported having to wait longer for discs to be delivered as Netflix shut down dozens of DVD distribution centers as it transitioned to streaming.
“Our goal has always been to provide the best service to our members, but as the business continues to shrink, that’s becoming increasingly difficult,” Sarandos admitted in his blog post.
Netflix renamed the rental service DVD.com – a prosaic name settled on after Hastings had the idea of calling it Qwikster, an idea that was widely ridiculed. The DVD service operates from a nondescript office in Fremont, California, which is about 20 miles (32 kilometers) from the sleek Netflix campus in Los Gatos, California.