Monday, October 24, 2011 at 6:19 pm.
Netflix’s plan to kill the DVD is working
Things are unquestionably messy for Netflix right now. It is losing subscribers. It is still in clean-up mode after a PR disaster. Its stock price is getting hammered. Is is making an expensive bet to grow overseas.
But despite all of this, Netflix CEO Reed Hastings’ master plan — to eventually kill the DVD and push his customers and Hollywood toward streaming video — is working.
Netflix said in its earnings Q3 report today that “only 7% of new streaming subscribers also currently sign up for DVD.” (Netflix doesn’t specify what percent of new subscribers are signing up for DVD-only plans, but I assume it’s very small.)
I have also broken down Netflix’s 23.8 million, end-of-Q3, U.S. subscribers by type. While 90% are streaming subscribers of some sort, only 58% are DVD subscribers of some sort. And it’s only been a few months since the big switch.
During the current quarter, the percentages will likely change further. Netflix is predicting a much sharper drop in its DVD subscriber base during Q4 (about 3 million, or ~20%) than its streaming base (about 700,000, or 3%).
“As of today, less than half of our streaming subscribers also subscribe to our DVD service, and we expect that number to continue to fall, given that only 7% of new streaming subscribers also currently sign up for DVD,” Netflix said in its quarterly letter to shareholders (PDF).
Hastings may have moved too fast, and Netflix may have scared its loyal customers with price increases and that whole “Qwikster” thing. But the big-picture shift seems to be working. Now it’s just going to take a while to clean everything up.