Netflix Still Renting Discs Despite Accounting Indifference

Netflix Still Renting Discs Despite Accounting Indifference

Netflix has quietly stopped including its legacy by-mail DVD rental service on quarterly financial reports. The Los Gatos, Calif.-based company launched in 1997 as the first home video service delivering DVD movie rentals in the mail. At its height, Netflix was the largest single customer for the U.S. Postal Service — generating hundreds of millions of dollars in operating profit.

Now it’s difficult to find mention of packaged media on Netflix’s balance sheet. To be sure, the company still offers two standalone DVD plans. The standard option ($7.99 monthly) affords subscribers access to one disc at a time, while the premier plan ($11.99) enables two discs out at a time.

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Beginning in Q1 (ended March 31), Netflix excluded disc rental revenue from quarterly financial tallies, opting instead to list revenue as a sidebar item. In the company’s North American segment, the $2.83 billion in revenue excluded $62 million from the rental of DVD and Blu-ray Disc content. Through June 30, Netflix has generated $126 million in packaged-media revenue.

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The service generated disc rental revenue of $366 million and $297 million in 2018 and 2019, respectively. Netflix ended 2019 with 2.1 million disc subscribers, which was down 553,000 from more than 2.7 million disc subs at the end of 2018. The segment remains immensely profitable, despite management indifference. For the 2019 fiscal year, discs generated $174 million operating profit.

“They have $445 million in revenue that is from something other than streaming,” Michael Pachter, media analyst with Wedbush Securities in Los Angeles, wrote in an email. “Impossible to know what portion is from DVD and what is from other stuff. But they don’t report it separately.”

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