Technology

Netflix lets subscribers keep DVDs as DVD.com shuts down


Netflix is treating the end of the DVD era like a birthday party — or a funeral, depending on your point of view. The company announced in April that it would send its last DVD by mail on September 29, a little over 25 years after it sent the very first one. (Fun fact: The very first red Netflix envelope contained Tim Burton’s Beetlejuice.) If you’ve never heard of DVD.com or you thought Netflix got out of the disc-shipping business years ago, that’s understandable. But now is your chance to own a piece of it.

This week, Netflix said that DVD.com subscribers can keep all the discs they had rented just before the company went out of business. “We are not charging for any unreturned discs after 9/29,” the company explained in a tweet. “Please enjoy your final shipments for as long as you like!” And on top of that, DVD.com subscribers can sign up for a surprise shipment of up to 10 extra discs to show up in their mailbox after the site shuts down. Think of them as party favors on your way out the door.

You might not think this is so exciting if you’re one of the more than 1 million subscribers to DVD.com, many of whom are surely sore about the demise of the mail-order service. While the streaming wars have made it seem as though there’s more content online than anyone could ever watch or want, it’s easy to overlook the fact that Netflix’s DVD business still had huge appeal to people who lived in rural areas or who liked movies that were unlikely to show up on a streaming service. That Netflix is now going to let some of those folks keep a dozen or so discs for good makes the company look generous. But it also highlights how many of its most loyal customers it’s leaving behind.

The fact of the matter is that Netflix has been planning to abandon DVDs since the 20th century. Netflix co-CEO Ted Sarandos has recalled how Netflix founder Reed Hastings told him back in 1999 that he planned to take the business completely online as soon as the economics worked out. “Back then, [Hastings] said that postage rates were going to keep going up and the internet was going to get twice as fast at half the price every 18 months,” Sarandos told Variety in 2018. “At some point those lines would cross, and it would become more cost-efficient to stream a movie rather than to mail a video. And that’s when we get in.”

That happened in 2007, when Netflix launched its streaming business, which was not quite as slick as it is today. There were just 1,000 movies to choose from, and the system worked a lot like the DVD-by-mail service. If you had the $18-a-month plan, you could only download three movies at a time, and based on your plan, you would only be able to watch 18 hours of streaming content a month. A New York Times reporter also noted at the time that he had trouble getting started “because of a mismatch between the version of Microsoft’s antipiracy software expected by the Netflix viewer and the one loaded in the PC, and it took about 15 minutes to fix the problem with the help of a customer-support specialist.” That kind of thing never happened with a DVD.

By 2011, it was clear that streaming was the future not only for Netflix but for movies and TV shows in general. That was the year Hastings orchestrated what might be the most notorious move in Netflix history: the Qwikster pivot. Sensing that the DVD business could drag down Netflix’s burgeoning streaming ambitions, Hastings decided to split the company in two: Netflix for streaming and a new company called Qwikster for DVDs by mail. The problem was that existing Netflix subscribers would end up paying significantly more for two separate services if they wanted to keep getting streaming and DVDs. Many felt as though Netflix was taking the DVD service they loved away from them. Hundreds of thousands of people unsubscribed, Netflix stock plummeted, and three weeks later, Hastings reversed course and abandoned the Qwikster split.

And that’s why you’ve probably never heard of DVD.com. Although the company made a big deal of distancing itself from the Qwikster pivot, it still went ahead and quietly spun off its DVD business. It just called it DVD.com instead of Qwikster, and it left Netflix pricing alone. And millions of people kept getting DVDs by mail. In 2011, when the split happened, that number was about 16 million, and now it’s between 1.1 and 1.3 million. Netflix’s streaming service, by comparison, added 5.9 million subscribers last quarter alone, bringing its global total to 238.4 million.