Netflix Inc NFLX, the streaming giant that once disrupted the entertainment industry with its DVD-by-mail service, is preparing to close the chapter on its iconic red envelopes.
The company's DVD subscription service is set to end this month, marking the culmination of an era that began in a nondescript warehouse near Disneyland, according to a report by The New York Times.
The warehouse, once a hub that processed over 1.2 million DVDs weekly and employed 50 individuals, now operates with a mere six employees. This will come to a complete halt on Friday when Netflix ceases its DVD mailing service, the report said.
Netflix's DVD operations still serve around 1 million customers, many of them very loyal.
From Humble Beginnings to Industry Disruption
Netflix's journey began in 1998 when it started mailing DVDs, with "Beetlejuice" being the first movie shipped. Founded by Reed Hastings and Marc Randolph, the company aimed to revolutionize the DVD rental business by offering no due dates, late fees, or monthly rental limits, the report mentioned.
This innovative approach not only led to the downfall of competitors like Blockbuster but also changed how people consumed movies at home, it added.
Transition to Streaming
Netflix's foray into streaming and original content production further solidified its position as an industry leader.
The shift to streaming, however, rendered the DVD business obsolete.
At its peak, Netflix operated 58 shipping facilities and 128 shuttle locations that allowed the company to serve 98.5% of its customer base with one-day delivery, the report said.
Also See: Netflix Faces Margin and Growth Equilibrium Challenges: Analyst
Today, only five such facilities remain, with DVD revenue for the first half of 2023 standing at $60 million, in stark contrast to the $6.5 billion from streaming in the U.S. alone, according to The New York Times.
Despite the decline, the DVD operation still reportedly manages around 50,000 discs weekly, with titles ranging from popular movies to lesser-known gems.
Legal Dilemma at the End of the DVD Era
Netflix encountered legal complications following its DVD distribution campaign, where the company decided to give away 10 DVDs to random subscribers.
The move caused uncertainty among the public regarding the return of the DVDs and sparked concerns over potential copyright violations. Although Netflix has allowed subscribers to retain the DVDs, the terms of service still restrict them from duplicating, selling or monetizing the content.
Read Also: Netflix Shares Tumble, Shed $9B In Value As CFO Lowers Margin Guidance
Price Action: NFLX shares closed lower by 1.13% to $379.81 on Friday. Shares were up by 0.02% to $379.89 after hours.
This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
Photo: Shutterstock
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