Call up your Luddite loved ones and your nostalgic friends who still cherish physical media. After 25 years, Netflix is ending its DVD-by-mail business.
Before it was upending the entertainment industry and ushering in the streaming era, Netflix was a company whose business model revolved around sending DVDs through the mail in easily recognizable red-and-white envelopes. At its peak, in 2010, roughly 20 million subscribed to the DVD service. But the practice has long felt anachronistic, and the company said on Tuesday that it will ship its final DVDs to customers on Sept. 29.
How many customers? Netflix doesn’t break out those numbers anymore. But whoever they are, it’s time for them to dust off any DVDs they might have lying around and send their red envelopes back to Los Gatos, Calif., where they can be retired to the landfills for good.
“Those iconic red envelopes changed the way people watched shows and movies at home — and they paved the way for the shift to streaming,” the company’s co-chief executive Ted Sarandos said in a letter. “To everyone who ever added a DVD to their queue or waited by the mailbox for a red envelope to arrive: thank you.”
The letter also noted some DVD trivia. “Beetlejuice,” starring Michael Keaton and Geena Davis, was the first DVD shipped by the company, in March 1998. The most frequently requested was the feel-good film “The Blind Side,” starring Sandra Bullock. And the company has sent out more than 5.2 billion DVDs over the years.
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The DVD announcement was part of Netflix’s earnings report for the first quarter, which illustrated just how dominant streaming has become for the company. Drafting off a strong fourth quarter, when it added 7.7 million subscribers, Netflix said that revenue had risen 4 percent from a year earlier to $8.1 billion and that profit had hit $1.3 billion.
The company also said that its average paid memberships had increased 4 percent over last year, and that it had added 1.75 million subscribers. Netflix’s subscriber base now totals 232.5 million around the world.
But Netflix just missed its revenue guidance for the quarter and fell short of Wall Street’s expectations for new subscribers, leaving analysts concerned that it has not yet rebounded from its correction last year.
The company faces serious headwinds, including a possible writers’ strike, increased streaming competition and a burgeoning live business, which faltered over the weekend when technical difficulties delayed Netflix’s much-hyped “Love Is Blind” reunion show.
The first-quarter results “leave open questions about the company’s ability to reinvigorate its business with an advertising tier and a paid password sharing program,” said Paul Verna, a principal analyst at Insider Intelligence.
Mr. Verna added that Netflix’s revenue outlook for the second quarter was also lower than what investors were expecting. “These are worrying signs for a business that, despite still being a market leader, is struggling to get its mojo back,” he said.
Mr. Sarandos downplayed any disappointment, calling the quarter — the first in which Greg Peters was also co-chief executive — “a business-as-usual quarter for us.”
Mr. Peters acknowledged the problems with the “Love Is Blind” live broadcast. “We didn’t meet the standard that we expect of ourselves to serve our members,” he said.
While revealing few details, Netflix said that it was pleased with the performance of its new advertising tier, which offers monthly subscriptions for as little as $6.99, and that it had seen scant evidence that people were switching from its standard and premium plans down to its cheaper ad-supported plan.
The company also said its attempts to crack down on password sharing in four markets — Portugal, Spain, New Zealand and Canada — were going well. In Canada, the company said, its paid membership base is now larger than before the crackdown, and revenue growth is now faster than in the United States.
The company intends to extend the crackdown more broadly, including to the United States, during the current quarter.
Netflix attributed the strong quarter to new seasons of shows like “Outer Banks,” “You” and “Ginny & Georgia” and release of the sequel to the film “Murder Mystery,” with Adam Sandler and Jennifer Aniston. Season 1 of the spy drama “The Night Agent” was a particular top performer, with over 515 million hours viewed.
At one time, Netflix’s greatest liability was its reliance on constantly churning out original shows and movies. Now the company is more often producing new seasons of already established shows and sequels to movies, a switch that has some analysts concerned.
“The health of any streaming service is going to be dictated by the strength of its catalog,” said Stephen Beck, founder of the management consultancy cg42.
He said he was worried that Netflix’s reliance on existing shows was making the service less valuable. He noted that a typical consumer was likely to subscribe to two or three streaming services, with Amazon Prime Video probably being one because of everything else a Prime membership offers.
“You need to get the portfolio fresh, and so it is by far the most important thing that they can be talking about and putting forward,” Mr. Beck said.
