M+E Daily

Netflix: No Retention Efforts for DVD Subscribers, As Streaming Base Grows

Three months after it aborted its Qwikster plans, Netflix now says it has no plans to invest marketing dollars in its U.S. discs-by-mail service, as it further focuses on growing the global subscriber base for streaming video.

“We expect DVD subscribers to decline steadily every quarter, forever,” Netflix chief executive Reed Hastings told analysts during an earnings call late Wednesday.

Hastings’ comment marked a shift in tone, at least, with his company’s stated intention last summer of “keep[ing] DVD as healthy as possible for as many years as possible.” The executive’s bluntness on Wednesday followed the company reporting a near-20 percent drop in its DVD subscriber base between the third and fourth quarters of 2011, from 13.93 million customers to 11.17 million.

Still, Hastings noted that Netflix would strive to keep its DVD business “stable” and “highly functioning,” adding that the company had no plans to consolidate its network of physical media distribution centers.

But the company has abandoned plans to add video game rentals to its discs-by-mail service — which Netflix touted during its short-lived Qwikster campaign.

Netflix said that some 40 percent of its 21.67 million streaming subscribers in the U.S. still maintain DVD subscriptions as well. The company added 220,000 domestic streaming subscribers between the third and fourth quarters of 2011 — a sign that consumer outcry over the Qwikster debacle had died down.

During the earnings call, Hastings and Netflix chief financial officer David Wells also shrugged off suggestions that deals with studios specifying longer delays for new releases on Blu-ray and DVD would hasten the decline of the discs-by-mail service. DVD customers remain largely catalog-focused, Wells said, with new-release titles accounting for fewer than 30 percent of the discs that Netflix ships.

Under a new agreement with Warner Bros., Netflix DVD customers will have to wait 56 days to rent new release discs from the studio; what’s more, subscribers won’t even be able to reserve Warner new releases in their Netflix queues until 28 days after they go on sale, according to a Los Angeles Times report.