What’s going on?
Netflix is not putting its back into
the DVD service anymore.
• No more Saturday DVD mailings.
• Plunging marketing efforts for DVD products.
• And of course, the division is shrinking – fast.
No more Saturday mailings.
Netflix’s DVD users have worried for years
about the USPS ending Saturday delivery,
forcing Netflix to follow suit.
Well, the company has been scaling back
weekend mailings for months.
The last Saturday mailer shipped in early
…and nobody noticed for several weeks.
What’s in it for Netflix?
Netflix was on track to pay $140 million in DVD
postage this year, according to Janney Montgomery
analyst Tony Wible.
Removing Saturdays from the shipping schedule
will slow down the flow of disc mailings to and fro.
Wible expects about 10% lower shipping costs.
Erasing 17% of Netflix’s shipping days leads to 10%
lower costs? Sure – Saturdays were always kind of
How much is that, really?
To put these savings in perspective,
Netflix reported $163 million of net
profits over the last 4 quarters.
Cutting DVD costs by $14 million
should boost annual earnings by
In other words, that’s $0.23 per share.
If it isn’t streaming, it doesn’t matter.
The incredible disappearing ad budget.
Honestly, Netflix hasn’t cared to
promote its DVD services since
mailers and digital streams were
first separated in 2011.
I mean, not at all.
See the DVD marketing effort here?
Data from Netflix
I’m sorry, let me zoom in…
Data from Netflix
Marketing costs for domestic streaming have
grown 14% in two years, stopping at $80
million last quarter.
International marketing budgets increased 9%
to $57 million over the same period.
Meanwhile, DVD marketing dropped from
$140,000 to zero dollars.
That was then…
Two years ago, DVD and Blu-ray mailers
had 10 million active subscribers.
That was 17% of the total subscriber
It was Netflix’s most profitable division,
delivering twice the operating profits of
…and this is now.
With minimal marketing support, DVD services
Today, 6.5 million DVD subscribers make up just
11% of Netflix’s customer base.
The tables turned in the spring of 2013, when
domestic streaming passed the DVD segment
in operating profits.
Now, U.S. streaming delivers twice the DVD
So what’s next?
DVD profits fell 34% in two years.
Domestic streaming profits nearly
With absolutely no marketing
budget, DVD profits are unlikely
to bounce back.
Time to take action!
It might be time to kick DVD mailers to
Profits are still there, but fading fast.
The medium is growing obsolete anyway.
Simply killing the DVD business would be a terrible idea.
Current customers would loathe it.
Far better, then, to unlock some value and sell DVD
operations to the highest bidder.
I can think of exactly one company that still cares enough
about DVDs to find this deal interesting: Redbox parent
Adding the only DVD mailer service that matters could
help Redbox get by for a couple of years.
Done right, DVD subscribers might not even notice the