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Justin Fox

Netflix and DVDs, Still Together

Shipping disks by mail is a declining business, but still quite a profitable one
The wave of the past.

The wave of the past.

Photographer: Andrew Harrer/Bloomberg

Remember how, back in 2011, Netflix was going to spin off its DVD-by-mail service and call it Qwikster? And how, in the face of furious customer opposition, Chief Executive Officer Reed Hastings had to walk it back, New-Coke style, saying he had made “a mistake in underestimating the depth of emotional attachment to Netflix”?

Ah, those were the days. Yesterday, when the company reported fourth-quarter earnings and subscriber growth that got investors very excited, DVDs barely rated a mention. Of the 2,500-odd words in the quarterly letter to shareholders, just 45 were devoted to plastic disks. In the 44-minute “earnings interview” that followed, the DVD business didn’t come up till the 41:33 mark. “It’s going to continue to decline, we don’t have any illusions on that,” Chief Financial Officer David Wells said. “But we think that for a lot of people in rural areas and cinephiles, the DVD makes sense for them.” (He failed to include “people who got a disk of ‘The Monuments Men’ in the mail two months ago and will probably send it back without ever watching,” the category to which my family belongs.)