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It's no secret Netflix would like to see its DVD-by-mail business go the way of the Dodo so it can focus its attention entirely on the streaming scene, and with streaming subscribers almost twice as profitable as DVD customers, who can blame 'em? Company CEO Reed Hastings jumped the gun when he attempted to put Netflix's DVD business out to pasture by spinning it off into a separate company (Qwikster), a move that sparked an intense backlash from its customers, but if he's patient, it will die off all on its own, and in fact that's exactly what he anticipates will happen.
During an earnings call to discuss the company's fourth-quarter financial results, BTIG analyst Rich Greenfield asked Hastings at around the 37-minute mark if he expects the number of DVD subscribers will decrease throughout 2012.
"Yes, Rich, we expect DVD subscribers to decline steadily every quarter, forever," Hastings said.
In case that message is not heard loud and clear, Hastings and Co. also indicated it will not market the DVD service in 2012. Due primarily to costs associated with physical media, as well as postage, it was revealed that DVD subscribers are barely more than half as profitable as streaming subscribers, so if it comes down to the two, Hastings would much prefer a customer choose streaming over DVD.
That doesn't mean streaming is a walk in the park. In a letter to shareholders, Hastings indicated HBO Go is the biggest threat to Netflix's long term business model.
"As we’ve often said, we see the biggest long term threat as TV Everywhere, and in particular, HBO Go, the leading implementation of TV Everywhere to date," Hastings said. "HBO has some great content, particularly their original series, but today for most people it is locked behind a linear interface, or at best, behind a DVR interface and in all cases tethered to a linear subscription plan. As HBO Go grows and becomes the primary way that consumers experience HBO, it will become a much more effective competitor for viewing time."
Netflix currently has 21.67 million streaming subscribers in the U.S., and another 1.86 million internationally, compared to 11.17 million DVD-by-mail subscribers.
Image Credit: screenrant.com