Netflix’s success in the video streaming market has had a knock-on effect on its number of paying DVD subscribers – in the fourth quarter of 2019, there were just 2.15 million in the United States. Whilst this figure is still impressive in an age where DVDs are far less popular than they used to be, a glance at how many DVD subscribers Netflix had just a few years ago highlights the huge changes in the company’s focus. Netflix declined to report its DVD subscriber numbers in the first or second quarters of 2020.
In the final quarter of 2011, there were 11.04 million subscribers to the company’s DVD segment, but by the same time in 2012 the number had dropped to a little over eight million. Significant decreases continued for years, and in the second quarter of 2018 the number of DVD subscribers dropped below three million for the first time. Meanwhile, the number of Netflix’s paying streaming subscribers tripled in eight years.
How is Netflix’s DVD business still viable?
Netflix started out as an online DVD rental store in 1998 and is now leader of the video streaming market. Given the company’s long-established success in the industry, questions have been raised about the current and future success of its DVD segment.
Unsurprisingly, the growth in the video streaming has led to a decline in physical video formats. Just over 4.8 million DVD players were sold in the United States in 2017, less than half the amount sold three years previously. However, there must be a reason why millions of people still subscribe to Netflix’s DVD service (and there is).
Streaming shows online, particularly whole movies, means that the consumer needs a lot of bandwidth. Netflix itself has recommended the ideal internet speed required in order to enjoy a satisfying streaming experience, suggesting 0.5 Mbps for streaming in general and 5 Mbps for HD content. For the megabits per second required to enjoy Ultra HD or 4K quality content, multiply that last figure by five.
Large amounts of Netflix users share their account with other people, and more than half of households with users aged 18 to 34 years old stream an SVOD service on a daily basis. Should multiple members of the same household wish to stream Netflix content at the same time, the number of megabits per second for that household increases. Add online gaming, Spotify, YouTube and video calls into the mix and the necessary internet speed goes up and up. This costs money and requires the home to be within reach of a broadband provider that can accommodate heavy internet usage. Moreover, there are media lovers out there without any kind of broadband access at all. In contrast, ordering a DVD to be delivered to your front door relies purely on the postal service, which has access to every zip code in the country.
Internet speed aside, another majorly appealing element of Netflix’s DVD business is the sheer amount of content on offer. Licensing shows and movies to stream can be problematic and expensive, causing online content to appear and disappear without warning. This is not the case for DVDs, and users are able to access movies which may never be legally available on the internet. Whilst Netflix’s DVD segment is unlikely to see a significant resurgence, this part of the company’s business is still profitable, and whilst that remains the be the case, the smart business decision is to keep it running.
Number of Netflix paying DVD subscribers in the United States from 3rd quarter 2011 to 4th quarter 2019
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Netflix. (January 21, 2020). Number of Netflix paying DVD subscribers in the United States from 3rd quarter 2011 to 4th quarter 2019 (in millions) [Graph]. In Statista. Retrieved July 06, 2022, from https://www.statista.com/statistics/250940/quarterly-number-of-netflix-dvd-subscribers-in-the-us/
Netflix. "Number of Netflix paying DVD subscribers in the United States from 3rd quarter 2011 to 4th quarter 2019 (in millions)." Chart. January 21, 2020. Statista. Accessed July 06, 2022. https://www.statista.com/statistics/250940/quarterly-number-of-netflix-dvd-subscribers-in-the-us/
Netflix. (2020). Number of Netflix paying DVD subscribers in the United States from 3rd quarter 2011 to 4th quarter 2019 (in millions). Statista. Statista Inc.. Accessed: July 06, 2022. https://www.statista.com/statistics/250940/quarterly-number-of-netflix-dvd-subscribers-in-the-us/
Netflix. "Number of Netflix Paying Dvd Subscribers in The United States from 3rd Quarter 2011 to 4th Quarter 2019 (in Millions)." Statista, Statista Inc., 21 Jan 2020, https://www.statista.com/statistics/250940/quarterly-number-of-netflix-dvd-subscribers-in-the-us/
Netflix, Number of Netflix paying DVD subscribers in the United States from 3rd quarter 2011 to 4th quarter 2019 (in millions) Statista, https://www.statista.com/statistics/250940/quarterly-number-of-netflix-dvd-subscribers-in-the-us/ (last visited July 06, 2022)