Netflix to Shutter Legacy DVD-by-Mail Business – Hollywood Reporter

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The iconic red envelopes will be disappearing from mailboxes in September.
By Alex Weprin
Media & Business Writer
It’s the end of an era for Netflix.
Twenty-five years after the company was founded, Netflix says it will wind down its legacy DVD-by-mail business. Yes, the red envelopes will soon be no more.
In a FAQ and a blog post on its website Tuesday, Netflix says it will ship out its last DVD on Sept. 29, 2023.
“After an incredible 25 year run, we’ve made the difficult decision to wind down at the end of September,” the FAQ reads. “Our goal has always been to provide the best service for our members, but as the DVD business continues to shrink, that’s going to become increasingly difficult. Making 2023 our Final Season allows us to maintain our quality of service through the last day and go out on a high note.”

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Years before it ever streamed TV shows or movies, Netflix launched with a simple idea: Replace the outmoded DVD rental experience by delivering DVDs to customers and letting them mail them back when they were done (the first DVD it shipped was a copy of Beetlejuice, per the company). Soon, Netflix’s red envelopes were everywhere, and Blockbuster, the dominant DVD rental company of the era, was on the ropes.
The DVD division has shrunk over the years (it had $146 million in revenue in 2022, and $183 million in revenue in 2021, down from $239 million in 2020, and in Q1 of this year it took in $32 million, suggesting a further fall). But it was Netflix’s shift to a subscription model that turbocharged its growth, and it was quick to adopt algorithmic recommendations to help users identify what to rent next. Both the subscription model and the recommendation engine forged by Netflix’s DVD effort underpin its streaming business today.
The DVD business was also the subject of one of the most infamous moments in Netflix’s history: When it said it would spin off its DVD service as a new company called Qwikster, separating its streaming and DVD offerings. Customers revolted, and the DVD service stuck around as part of the main Netflix service (ultimately, however, the streaming plans and DVD plans diverged).
Streaming, it turns out, could grow a lot faster than the DVD business, which relied on old-fashioned infrastructure like warehouses, DVD inventory and mail service to function. And it proved to be game-changing for the way entertainment was consumed, even if some hardcore fans continued to use the DVD service for those hard-to-stream titles.

Ultimately, while the end of Netflix’s DVD division is the end of a defining era in the entertainment business, the writing has been on the wall for years. Netflix hasn’t broken out how many DVD subscribers it has since 2019 (when it had just over 2.1 million subscribers and revenue of $300 million), and co-CEO Ted Sarandos has made it clear that the company had no intention of trying to prop it up.
“Once your primary role is trying to save a business, you are dead,” Sarandos told TH’Rs Kim Masters in an interview in March 2021. “When we made the transition from DVD to streaming, we never spent a minute trying to save the DVD business. Our future was always going to be in streaming, and any effort we spent trying to save the DVD business was energy that wasn’t being spent trying to create the streaming business.”
In the Tuesday blog post, Sarandos reflected on the legacy of the service.
“We feel so privileged to have been able to share movie nights with our DVD members for so long, so proud of what our employees achieved and excited to continue pleasing entertainment fans for many more decades to come,” he wrote. “To everyone who ever added a DVD to their queue or waited by the mailbox for a red envelope to arrive: thank you.”
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