Complete End of DVD Mail Delivery by Late September This Year
Crackdown on Password Sharing in the US to Intensify from End of Q2
Netflix is ending its DVD rental business, which formed the foundation of its video streaming service, after 25 years. The early business model of Netflix, which involved delivering movie DVDs in red envelopes to mailboxes, will now give way to a vast array of original content enjoyed online and fade into history.
On the 18th (local time), Netflix announced that it will terminate its DVD-by-mail service, which it has maintained since its early days, on September 29 of this year.
Netflix started its business of selling and renting DVDs by mail in 1997. After one year, Netflix discontinued the DVD sales business and focused on rentals. The red envelope used to deliver DVDs became a symbol of Netflix. At that time, Netflix charged a fee each time a DVD was rented.
Reed Hastings, co-founder of Netflix, reportedly had an experience of paying a $40 (about 53,000 KRW) late fee after returning the DVD of the movie "Apollo 13" late. The DVD rental business started from this experience. Hastings realized the need for a DVD service without late fees and aimed to apply this to the business.
Thus, Netflix launched its monthly subscription model two years after its founding, in 1999. This service allowed members who paid a monthly fee to order DVDs online and rent them by mail. In early 2000, Netflix completely eliminated the per-DVD rental fee. Subscribers could rent multiple DVDs without a separate time limit by paying a monthly fee. The business attracted great interest from the start, with 240,000 subscribers in its first year alone.
Netflix first introduced streaming to its DVD rental customers in 2007. At that time, The New York Times (NYT) published an article titled "Netflix Delivers Movies to PCs." Netflix, which went public in 2002, offered free video streaming services to existing DVD rental subscribers in 2007. At that time, there were about 1,000 movies available for streaming, while about 70,000 movies could be watched on DVD, so it was not easy for streaming services to surpass the DVD business.
In 2006, Netflix had over 6 million monthly subscribers for its DVD rental service. Although the business was growing successfully, some expressed doubts about whether the business model could be sustained long-term. In response, founder Hastings stated, "Because DVDs are not a format that will last 100 years, people are curious about Netflix's second act," explaining the launch of the streaming service.
Initially, the DVD rental business was the core business, and streaming was a supplementary service. Until 2010, Netflix had 20 million monthly subscribers for DVD rentals. However, the streaming service business grew afterward and gradually overtook the DVD rental business.
Especially from 2012, Netflix began producing original content and loaded a large amount of video content available through streaming services, leading users to start using online services rather than checking their mailboxes. The Wall Street Journal (WSJ) reported in 2013 that "House of Cards," released by Netflix, was the first original content not simultaneously released on DVD.
Netflix grew its streaming service and surpassed 100 million subscribers in 2017, ten years after starting the business. During the COVID-19 pandemic, which caused global fear, Netflix seized the opportunity, and by January 2021, streaming subscribers exceeded 200 million.
Netflix announced that it has shipped more than 5.2 billion discs over the past 25 years. The first DVD sent by mail was the movie "Beetlejuice" in March 1998, and the most rented title by mail was the 2009 American drama "The Blind Side," starring Sandra Bullock.
Ted Sarandos, current CEO of Netflix, stated on his blog that "after 25 years of operation, we have decided to shut down DVD.com by the end of this year." He also evaluated that "the iconic red envelope changed the way people watch shows and movies at home and paved the way for the transition to streaming."
Netflix has now moved beyond the growth phase of increasing subscribers in its streaming service business and entered the stage of securing profitability. After experiencing its first subscriber decline last year, it was evaluated as a "crisis for streaming services." Netflix announced that its subscriber count increased by 1.75 million in the first quarter of this year, which is less than the market expectation of 2.06 million. Netflix also announced that it will begin cracking down on password sharing in the U.S. starting from the end of the second quarter.
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