Netflix Founder Reed Hastings holding one of the envelopes used by Netflix to ship DVD’s in 2004. Source: REUTERS
The Market Herald - At The Bell

Join our daily newsletter At The Bell to receive exclusive market insights

Netflix has declared the end of an area, announcing it would end its DVD-by-mail offering to customers later this year.

The NASDAQ-listed giant said it marked the end of a 25-year service renting out physical copies of DVDs, choosing instead to prioritise its streaming services moving forward.

Netflix Executives announced the last red DVD envelopes would be shipped on September 29.

On Tuesday, a letter signed by Co-Executive Ted Sarandos expressed that the decision stemmed from a decline in demand but insisted the offering once paved the way for Netflix to become the streaming giant it is today.

“Those iconic red envelopes changed the way people watched shows and movies at home — and they paved the way for the shift to streaming,” Mr Sarandos said.

The demand for DVDs has shrunk in years gone by as Netflix’s DVD-by-mail business fell from more than US$900 million ($1.3 billion) in revenue in 2013 to less than $150 million last year.

On Tuesday, the giant reported its year-on-year revenue grew by just 3.7 per cent to $8.16 billion, falling below its guidance of $8.24 billion for the March quarter.

Netflix also announced it added 1.75 million customers during the quarter. The giant had nearly 231 million subscribers worldwide as of the fourth quarter of 2022.

As well as announcing plans to narrow its focus on its streaming services, Netflix confirmed a crackdown would occur on password sharing in the US.

It follows a rollout of the new paid-sharing feature in four countries which saw positive results in the giant’s earnings report.

Back in February, Netflix launched its “buy an extra member” feature in Canada, New Zealand, Portugal and Spain.  

The new feature lets customers pay an extra fee to share their accounts with someone outside their household.

Upon release of the new feature, Netflix expressed that each account was meant for one household.

“Today, over 100 million households are sharing accounts — impacting our ability to invest in great new TV and films,” it said.

While the prioritisation of its streaming services may be welcome news to investors, it spells the end of an era for its DVD business, joining Blockbuster Video in the grave.

The need for relevance and Netflix’s ability to adapt

Netflix’s ability to adapt and stay relevant to changing market conditions has led it to become the streaming empire it is today.

Netflix originally launched its DVD business at a time when demand for physical DVDs was much greater, but it offered something different to Blockbuster’s brick-and-mortar stores.

Rather, Netflix allowed its customers to have DVDs mailed to their homes and to return them at their leisure, which eventually helped lead to the demise of Blockbuster.

Blockbuster had success in earning a buck off late return fees — something which Netflix, through its offering, also sent to the grave.

Netlifx’s growth led it to launch streaming services in 2007, and Blockbuster ultimately couldn’t compete. It tried to follow suit, launching Blockbuster Online, but it was too late, as it ultimately declared bankruptcy in 2010.

Netflix’s decision to ditch its DVD business and crack down further on account sharing highlights its focus on staying relevant in a bid to see a further rise in its subscriber figures.

More From The Market Herald

Building Approvals up 7.5 per cent, CapEx also climbs

The number of dwelling approvals rose 7.5 per cent last month, in a big turn around…

Will the RBA raise interest rates again? Analysts weigh in

Reserve Bank of Australia Governor Michele Bullock is set to deliver her second interest rate decision…

58pc of 700 companies fail to protect virtual data: ASIC cybersecurity report

More than half of respondents to an ASIC cybersecurity survey have been flagged for lacking adequate…

RBA acting Assistant Governor Marion Kohler confirms Aussie 2024 GDP downgrade

The RBA acting Assistant Governor Marion Kohler has confirmed national inflation is set to remain for…