Netflix's DVD Rental Business Is Still Profitable (fortune.com)

Netflix might be focusing on its streaming business, but the product that made its name is still alive -- and apparently well. From a report: The company's DVD.com DVD rental business has 3 million subscribers and generated a whopping $56 million in profit on just $99 million in revenue during the first quarter, CNBC is reporting. That staggering profit margin aside, Netflix's business has a wide selection of 100,000 DVDs, which easily overshadows the 5,600 streaming titles available on Netflix, according to the report. DVD.com's profitability might surprise some who moved on long ago from disc-based entertainment in the living room to streaming. Indeed, Netflix itself seemed to have moved on in 2011 when it split the DVD division from its now-core streaming operation. And whenever Netflix discusses its business, the company focuses on streaming and its place in the original content market rather than DVDs.

Comments

Reasons

[Dan East]

1) Catalog. Pretty much any movie made is available. The titles available through streaming are a tiny, tiny fraction of what is available on DVD / blu-ray. This is especially true of any thing niche. Like old westerns? Martial arts flicks? Musicals? What about watching all the Alfred Hitchcock films? If there is a particular era / genre of film you are interested in pursuing you can't do it through streaming.
2) Only 81% of Americans have broadband internet. Rural areas may still be relying on wireless (cellular / satellite) broadband, for which streaming is not an option at all because bandwidth caps.
3) A great deal of the broadband in the US barely meets the definition of Broadband. I'm talking about you, DSL. Streaming quality is poor, and if anyone else starts using the internet at the same (or a device decides it's time for that 1GB OS update, etc) playback will stutter.
4) Some fraction of the population simply won't adopt to the latest in technology - that being streaming. I'm sure there are people still playing stuff on VHS. There are people that use 30 year old cars as their daily driver. There will be people using DVD for a long time to come. The number of DVDs out there exceed that of any other type of video media that has ever existed (8mm film, beta, laserdisc, vhs). As of 2011, 1 billion dvd *players* had been sold. Imagine how many DVDs have been pressed...