I don’t understand this corporate logic:
Netflix has given up all hope that there’s a future in DVDs.
…On an earnings conference call with analysts Wednesday, Hastings said Netflix now has no plans to spend any marketing dollars on its DVD-by-mail service, which lost 2.76 million subscribers during the last three months of 2011.
“We expect DVD subscribers to decline each quarter forever,” he said.
(click here to continue reading Netflix sees DVD business withering, gives up on video games – latimes.com.)
especially when the DVD rental is the bulk of Netflix’s business, and generates most of its profits:
While the streaming business is growing (adding 220 subscribers domestically in the quarter), and the DVD business sis shrinking (it lost 2.76 million subscribers domestically), it’s margins are much worse than the legacy DVD business. The streaming business has an 11 percent profit margin, compared to a very healthy 52 percent margin for the DVD business.
Out of Netflix’s total $847 million in revenues last quarter, $476 million came from streaming and $370 million came from DVD rentals (the remainder came from international). The streaming business also twice as many subscribers: 21.7 million versus 11.2 million. But the DVD business contributed the vast majority of Netflix’s profit: $194 million versus $52 million.
If you break that down, each streaming subscriber is worth only $2.40 in profit each quarter to Netflix, compared to $17.32 for each DVD subscriber. The old business was very lucrative. The new business kind of sucks. The economics are very different. The DVD business had fixed costs, while Netflix is forced to negotiate streaming licenses on a case by case basis with each media company.
(click here to continue reading Netflix Streaming Margins Are 11 Percent, DVD Margins Are 52 Percent | TechCrunch.)
Maybe Netflix can sell its DVD business to someone who cares about it still. From my perspective as a long time Netflix subscriber (since September, 2001, actually), the streaming option is occasionally useful, but most films I want to watch are not available as a streaming option, nor are their “extras” included. Often my streamed film is fuzzy, pixelated, the sound doesn’t sync, subtitles are unreliable, or unavailable, and so on. Unfortunately, there is no other solution, or I would have dumped Netflix over the summer.
There is also the issue with the DVD throttling practice. I returned two films at the same time; one was received by Netflix the next day, the second took an extra three days, presumedly because it was supposed to go to Bloomington, IL first. If Netflix despises its DVD rental business so much, perhaps they ought not to care enough to throttle anymore. There is no limit to the amount of streamed video one can view, why the rental restriction?