Netflix Generated $59 Million in Q3 Legacy Disc Rental Revenue

At Netflix, the disc may be forgotten, but it’s not exactly gone.

Entering 2020, Netflix effectively closed the door on its legacy by-mail DVD rental business, launched in 1998. The company considers itself a streaming video company, and ties to its packaged-media roots are all but ignored by senior management. Netflix no longer reports the number of DVD/Blu-ray Disc subscribers, which last year hovered around 2 million — a number that keeps declining.

This fiscal year Netflix is excluding packaged-media rental income from its overall revenue reporting, except for a line item under the “regional information” section of the financial statement. In the third quarter (ended Sept. 30), Netflix generated $59 million in disc rental revenue. Through nine months of the fiscal year, the service has generated $185 million in disc revenue.

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Effectively, Netflix generated $655,555 a day in Q3 renting movies on DVD and Blu-ray sent through the mail. Through nine months this year, the service is generating $685,185 daily via packaged media rentals.

Even if Netflix replicates Q3 disc rental revenue in the current fourth quarter, 2020 would see a revenue decline compared to previous years. In 2019, by-mail disc rentals generated $297 million in revenue, and $366 million in 2018.

Not surprisingly, many Netflix disc subscribers live in rural areas where broadband connectivity is spotty — but access to the U.S. Postal Service isn’t. Netflix at one time was the Postal Service’s largest commercial client.

“Streaming movies was a no-go, so I just went with the disc service that Netflix offers,” Dana Palmateer, who lives in the Black Hills of South Dakota, told CNN Business last year. “As all of us are doing in these parts.”

A Netflix spokesperson told CNN the service actually still has disproportionately large numbers of disc-renting subscribers in tech-savvy regions such as the Bay Area and New York.

“People assume that our customers must either be super seniors or folks that live in the boonies with no Internet access,” said the rep. “Actually, our biggest hot spots are the coasts.”

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