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

Re:And it will be for a long time

[syn3rg]

== DVD Annual Business ==
396M Gross
224M Net
56.6% Margin

== Streaming Annual Business ==
11.3B Gross
336M Net
3.0% Margin

I don't think the disk-based business is going anywhere: not only is it a significant portion of Netflix' overall profit, but their margins are what give it staying power.

Re:And it will be for a long time

[UnknowingFool]

Which begs the question - why are physical DVD rentals so much more profitable? Wasn't streaming supposed to eliminate all the overhead of maintaining warehouses and inventory - and paying postal fees. What's gonna happen post net neutrality when Netflix's costs go up?

1) streaming licensing. The content creators (in the case of movie studios) can charge whatever they want for streaming rights as opposed to DVD rentals. Before 2011, Netflix offered lots more current movies but then their licensing agreements ran out. The studios wanted far more money and Netflix was forced to reduce their catalogs.

2) Netflix is making their own content. Because Netflix wants to stay relevant they have actually started to purchase and make their own content. This has greatly increased Netflix's costs.