Netflix’s video streaming service is surging during the coronavirus pandemic as millions of homebound Americans binge on movies and TV shows, but the digital media giant is still in the mailstream, too.
More than 2 million people received DVDs in the mail through Netflix’s rental service last year, according to the most recent data available. Although that number is down sharply from 2011, when the company’s DVD service peaked at 14 million subscribers, lots of people continue to receive Netflix’s iconic red envelopes in the mail.
Industry experts point to two main reasons: broadband access and catalog size.
Video streaming requires access to broadband internet, which isn’t available in many rural areas. But those locations are served by the Postal Service, as part of its universal service obligation.
For other Netflix DVD customers, the issue is choice.
The company won’t disclose numbers, but industry observers estimate Netflix has the rights to stream about 5,000 titles in the United States.
However, the company’s DVD catalog exceeds 100,000 titles.
“Initially, we did DVDs because video stores were phasing out and it seemed convenient,” said Martha Blair, a resident of The Dalles, OR, who has been a Netflix DVD subscriber since 2010.
“We tried streaming early on and I didn’t like it because I couldn’t get the movies I wanted to see. The DVD service offered a wider variety of movies,” she said.
Blair and her husband watch around two DVDs a week. They’ve re-added Netflix’s streaming service to their subscription so their teenage children can stay current with what their friends are watching.
“There are some shows I’ve started watching with the streaming,” she said.
Netflix began life in 1997 as a DVD-by-mail service. By 2009, the company boasted 10 million subscribers to its DVD service and was shipping 900 million DVDs a year through the Postal Service, accounting for 1.3 percent of all mail in the United States.
Netflix’s business model not only proved wildly popular for customers, it changed how people rented DVDs, eventually helping to push the Blockbuster DVD rental store chain — its largest competitor at the time — into bankruptcy in 2010.
But Netflix’s mail-order DVD business would soon face stiff competition — from the company’s own video streaming service, which it introduced in 2007.
By 2012, DVD subscribers had fallen to 10 million and continued to fall to 2.1 million at the end of 2019. By comparison, the company recently reported it had 70 million U.S. streaming subscribers at the end of March.
Last summer, the company celebrated shipping its 5 billionth DVD — all through the U.S. Mail.
“5,000,000,000 shipments. FIVE BILLION. The most heartfelt thank you to our incredible members that have been with us for the past 21 years of DVD Netflix,” the company said in a tweet last August.
Though its DVD business now only has around 2 million subscribers, those customers contribute heavily to Netflix’s bottom line — $174 million in profit for 2019, or $80.81 per subscriber.
Netflix’s U.S. streaming business brought in $54.30 per subscriber in 2019.
The company has been mum on its plans for the DVD business, going so far as to not break out figures for it in its most recent quarterly filing. But observers expect that as long as it remains profitable, Netflix will keep mailing DVDs.
Not all of its customers are so sure, though.
“I assume they’ll stop mailing DVDs in the next couple of years,” said Blair. “Times change, and that’s fine.”
