In a blog post published on Tuesday, Netflix Inc (NFLX.O) announced that it was abandoning the DVD-by-mail service it had started around 25 years earlier. The company claimed that because of the decline in its DVD rental business, it will no longer be able to provide top-notch service. On September 29, Netflix will send out the final CDs.
“Those iconic red envelopes changed the way people watched shows and movies at home – and they paved the way for the shift to streaming,” Netflix Co-CEO Ted Sarandos said in a blog post announcing the DVD service had entered its “final season.”
Marc Randolph, one of the co-founders of Netflix, wrote in his autobiography about how he and Reed Hastings briefly considered taking on Blockbuster Video by selling mail-order VHS cassettes but decided against it since the venture would have been too expensive. Instead, they settled on a more affordable idea: online rentals and sales of DVDs.
Customers howled in outrage in 2011 when Netflix tried to divide its DVD rental business into separate service
It was a calculated gamble to believe that the public would adopt the emerging DVD player, which initially became available in the United States in 1997. According to Randolph, the service debuted in 1998 with fewer than 1,000 titles. “Betting on DVDs was a risk,” Randolph wrote in his book, “That Will Never Work: The Birth of Netflix and the Amazing Life of an Idea.” He added: “But it might also be our way to finally crack that category.”
For the first time, Netflix was able to take on a firmly established rival thanks to its bet on cutting-edge technology. In 2010, rival Blockbuster declared bankruptcy. “From the beginning, our members loved the choice and control that direct-to-consumer entertainment offered,” wrote Sarandos. Customers howled in outrage in 2011 when Netflix tried to divide its DVD rental business from its online streaming operation into a separate service named Qwikster. In the end, the plan was abandoned.