No room for nostalgia: Netflix ejects DVD business

25 years after launching its DVD-by-mail rental service, Netflix is finally pulling the plug on what has become a mere hobby to the global streaming juggernaut. As announced earlier this year, the company would be shipping its final disc on Friday, September 29, marking the end of the iconic red envelopes that paved the way from brick-and-mortar movie rental (RIP Blockbuster) to the age of limitless streaming.

The end of the DVD-by-mail service has been a long time coming, and if anything, it lasted longer than many people would have expected. After all, it’s been more than 15 years since Netflix introduced video streaming and 12 years since the company (controversially at the time) split the DVD business from the streaming service. Back then, the streaming part got to keep the Netflix name, while the DVD business was renamed Qwikster, albeit just for one very turbulent month.

“DVD by mail may not last forever, but we want it to last as long as possible,” Netflix co-founder and then CEO Reed

Hastings said in a blog post at the time, before explaining in more detail why the company is going all in on streaming: “For the past five years, my greatest fear at Netflix has been that we wouldn’t make the leap from success in DVDs to success in streaming. Most companies that are great at something – like AOL dialup or Borders bookstores – do not become great at new things people want (streaming for us) because they are afraid to hurt their initial business. Eventually these companies realize their error of not focusing enough on the new thing, and then the company fights desperately and hopelessly to recover. Companies rarely die from moving too fast, and they frequently die from moving too slowly.” And while Hasting’s big bet on streaming was controversial at the time, it did pay out handsomely, as our chart illustrates. Back in 2011, Netflix’s revenue from its combined DVD and streaming service amounted to $3.2 billion. Last year, the company made $31.5 billion from streaming alone, with the DVD business contributing less than $150 million or 0.5% to Netflix’s total revenue. While immensely popular in its day, the DVD-by-mail business could never have scaled the way that streaming has. In January 2016, Netflix went live in 130 countries simultaneously. Try doing that with a DVD-by-mail service. (Statista)