DVDs Are Netflix’s Past, Streaming is the Future

It’s no surprise that Netflix is removing the ability for users to add DVDs to their queue from streaming-only devices. After all, it costs Netflix 20 times as much to send a DVD round trip than it does to stream a single movie. According to Digital Society, Netflix spends $700 million a year on postage alone, a number that can only drop as it drives business toward streaming-only content.

Yesterday, we spoke with Netflix vice president of communications Steve Swasey and he assured us that the plan for the company in moving forward was to focus on streaming content, not DVDs.

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"We’re spending more on streaming content than on DVD," said Swasey. "As we add more countries, they will be streaming only. We simplified the process for streaming by taking away one process that not many people used."

Swasey said that the company had been very clear that any overseas offerings would come in the form of streaming-only, just as it had launched in Canada.

Of course, content providers are not unaware. The Hollywood Reporter offers the example of Starz, which struck a deal with Netflix a couple years ago for $30 million a year when many other providers wouldn’t. That deal is coming up for renewal and now estimates are that the deal could cost Netflix anywhere from $100 million to $300 million. And this is the big question – will streaming remain cheap enough to keep Netflix going and growing as it is?

From The Hollywood Reporter article (which takes a very in-depth look at the topic and is a must-read for anyone interested in the space):

A high-placed Time Warner executive says that if Netflix expects to get a meaningful amount of HBO content, it would have to raise the price of its streaming-only service from $7.99 a month to $20 before the economics made sense.

Netflix begs to differ.

“They make incredibly great product that is very expensive to produce,” [Netflix chief content officer Ted] Sarandos says. “But we’re buyers and they’re sellers, so we’ll figure out a deal that makes sense. If we don’t, then the service doesn’t have everything, and that’s OK too.”

While the economics of the entire situation may be fluctuating, as is Netflix’s entire business model, know one thing for certain – if you’re on the physical DVD end of the relationship, you’re costing Netflix money and you’ll likely be losing more and more in the way of features as time goes on. We’ll have to see if Netflix can strike a balance or if DVDs really are the antiquated, expensive past for Netflix, while streaming is its sole future.

Discuss