Netflix started out as a DVD rental and delivery service, but the latest subscriber and revenue numbers the company released to its investors show that streaming has already taken a front seat at the company, supplanting the traditional DVD rental service.
CEO Reed Hastings came under a lot of fire last year when he took steps to separate the DVD and streaming subscriptions, effectively increasing the cost for those customers who cared about bot, and arguably incentivizing customers to move completely to streaming accounts. But whether the change is happening because of his direction or he’s just responding to the inevitable, his prediction that streaming is the future of the company seems to be coming true.
In the first quarter of this year, Netflix raked in $320 million in revenue from its DVD service — down from $370 in the previous quarter. Meanwhile, the streaming service produced $507 million in revenue, up from $476 million. Granted, the DVD segment remains more profitable ($146 million in Q1 2012) than the streaming business (only $67 million). This is because of the remarkable costs of licensing thousands of TV episodes and films from the companies that own their rights.
However, the DVD profits have declined significantly while streaming profits have risen slightly. The future is written on the wall. More to the point, Netflix now has 26 million streaming customers worldwide (growing) and only 10 million DVD subscribers (shrinking).
According to a quote in Mashable, Netflix also claimed that there was ”no discernible change in churn or viewing levels” since Netflix lost Starz movies, which accounted for much of its big budget Hollywood movie library.
It was once assumed in the television and film industries that customers would value the ability to watch in the living room instead of the computer and the much larger library of shows and films on DVD as more important values than digital streaming, but that has proven not to be the case.
This is partly due to the availability of Netflix on living room TVs thanks to Xbox 360s, PlayStation 3s, Nintendo Wiis, Roku boxes, Apple TVs, and so on. But some folks may increasingly value the digital convenience over the content itself to some degree; if major studios aren’t giving Netflix access to their films, some customers might simply choose to ignore those films which don’t fit in their digital lifestyles rather than seek them out on physical media.