Netflix pulls the plug on mail-order DVD rental service

Netflix co-CEO Ted Sarandos announced Tuesday that the company plans to stop operating its mail-order DVD rental service in September after 25 years. The change comes months after Netflix launched an ad-based streaming tier that confirmed the moribund status of the DVD.

Sarandos acknowledged how the mail-order service “paved the way” for the streaming giant, but implied that a declining demand for physical DVDs caused the change.

IndieWire reports that Netflix boasted a million subscribers in 2000 after launching the online rental service in 1998. Before Netflix launched its digital streaming sector in 2007, users searched a website for movies they wished to rent from Netflix and added them to a digital list. Netflix then mailed movies one by one in red envelopes, starting at the top of your list and sending a new choice once users returned their previous selection.

Today, 85 percent of U.S. households maintain at least one streaming subscription, with global video streaming raking in $60.1 billion in 2021. The fact that a majority of the billion dollar streaming companies (Hulu, Amazon Video, Disney+, etc) didn’t even exist 20 years ago truly illustrates the bull nature of the streaming boom. With over 200 streaming platforms offering instantaneous video delivery, any snail-mail rental service would be hard pressed to remain financially viable.

Netflix began offering streaming video with its DVD rental service in 2007. Blockbuster filed for bankruptcy three years later, and many blame the chain’s slow death on its unwillingness to add a digital tier. That same year, Netflix started offering streaming-only plans.

Chain stores like Walmart and Target acknowledge the DVD’s march toward obsolescence, with both retail giants dramatically reducing shelf space reserved for movies and TV shows. With Netflix retiring its red envelopes, one company now commands the market for physical DVD rentals–Redbox.

Founded in 2002, Redbox has rented over 6 billion DVDs and operates 32,000 rental kiosks. Redbox continues to grow despite its dependence on DVDs, partly because of its market dominance. The same day Netflix announced it was axing discs, RedBox announced a partnership with Dollar General, resulting in 1,500 kiosks installed in stores across the country. In fact, Redbox CEO Bill Rouhana told The Hollywood Reporter he wants to buy Netflix’s soon-to-be-retired discs.

“I wish Netflix would sell me that business instead of shutting it down,” Rouhana said. “I have tried three or four times to reach out to the corporate development people about it but just got rebuffed each time.”

Rouhana acknowledges that Netflix abandoning discs remains a boon for Redbox. “There are a whole bunch of people who are going to look for a new place to get their DVDs, and we’re close to 90 percent of them based on where our kiosks are located,” Rouhana said.

Although Redbox maintains a streaming platform, Rouhana firmly believes in the longevity of the DVD. “We believe in it, and we believe it’s going to be around for a while. Like most legacy things, it’s a lot harder to kill them than people say.”