Netflix Indifference to Disc Rental Not Surprising

NEWS ANALYSIS — Netflix’s pending (Sept. 29) exit from the by-mail disc rental business it created 25 years ago underscores the company’s longtime indifference to packaged media as it focused on creating a business model (SVOD) that would turn the entertainment industry on its ear.

Netflix, years ago, stopped reporting by-mail subscriber numbers, opting not to include hundreds of millions of dollars of annual “immaterial” revenue in its fiscal reports. That the company devoted almost 175 words to its disc rental swansong at the end of the first quarter shareholder letter is an accomplishment in itself. It’s more attention to disc than Netflix has expressed in more than a decade.

“We feel so privileged to have been able to share movie nights with our DVD members for so long, so proud of what our employees have achieved and excited to continue pleasing entertainment fans for many more decades to come,” co-CEOs Ted Sarandos, Greg Peters and CFO Spence Neumann wrote in a letter. “Thanks to all our employees over the years that worked so hard to build the booster rocket that got streaming to a leading position.”

Indeed, as Netflix was establishing a global streaming empire, disc rentals helped pay for it. The service delivered its 1 billionth DVD rental in 2007 with little fanfare. Five years later, the business was operating under a separate banner — — and office building.

That transpired quietly after co-founder/CEO Reed Hastings — in a blog post from his hot tub in Santa Cruz in September 2011 — infamously announced plans to split and rename the disc business (“Qwikster”) from streaming, in addition to implementing a price hike.

While the price hike stuck, the Qwikster idea was canned after three weeks, with Hastings issuing repeated apologies as the service lost 800,000 subscribers and the company’s stock price plummeted.

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“I think they should have been paying much more attention to [disc] because that was their customer base,” Stuart Skorman, a Bay Area entrepreneur who worked with Netflix, told The New York Times at the time. “That’s what made them special.”

But that was a business lifetime ago. Despite generating $32 million in disc rental revenue in the first 90 days of 2023, Netflix is finally pulling the plug — after reportedly delivering 5.2 billion discs. That the company wouldn’t respond to overtures from Redbox owner Chicken Soup for the Soul Entertainment to buy the business suggests either enduring sentimentality and/or arrogance to legacy.

Netflix long ago gave the cold shoulder to packaged media, the by-mail disc rental business model that created the company, and co-CEO Ted Sarandos’ history as a former video store manager in Phoenix,  possibly drew a line in the sand that precludes any third party sale.

But business is business, and Netflix has shown over the years it isn’t shy from making tough decisions. And selling a money-losing subsidiary ($355,000 a day renting discs is apparently unprofitable) to a willing buyer would seem a no-brainer.

Michael Pachter, media analyst with Wedbush Securities in Los Angeles, believes selling the disc rental business would enable Netflix to cash out one last time on a segment that has been margin positive for a long time.

The longtime Netflix bear turned bull has sung the streamer’s praise more recently as the company ups its annual free cash flows. And selling a DVD business that isn’t officially included in the financials would greatly add to that.

“Hard to understand why they would be so disinterested in selling,” Pachter said.

Redbox Entertainment Picks Up Rights to ‘Johnny & Clyde’ Starring Megan Fox

Redbox Entertainment, the original content division of Redbox, has signed a deal for North American rights to Verdi Productions’ action crime film Johnny & Clyde.

Starring Avan Jogia (Zombieland: Double Tap), Ajani Russell (Betty), with Tyson Ritter (Preacher) and Megan Fox (Transformers), and directed by Tom DeNucci (Vault), Johnny & Clyde will premiere in theaters and will be available on the same date in Redbox kiosks and on demand.

The film is a spin on the iconic Bonnie and Clyde story and follows two serial killers (Jogia, Russell) who are madly in love and on a shocking crime spree. They ultimately set their sights on robbing a prosperous casino run by a crime boss, Alana (Fox), and her head of security Guy (Ritter).

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Rounding out the cast are Vanessa Angel (Kingpin), Bai Ling (The Crow), Robert LaSardo (The Mule), Armen Garo (The Departed), Sean Ringgold (American Gangster), Nick Principe (Vault), Brett Azar (Young Rock), Sydney Jenkins (Don’t Look Up) and Charles W. Harris III (Glass). 

Verdi Productions produced and financed the project and VMI Worldwide is handling international sales.

“Fans of dark, gritty action movies are going to love Johnny & Clyde,” Redbox CEO Galen Smith said in a statement. “Tom has created a film that will have fans on the edge of their seats. We’re looking forward to releasing the film later this year.”

“This film will keep fans engaged from beginning till the end — a true thriller with a twist of humor,” stated producer Chad A. Verdi.

DEG Panel: Transactional Business Still Hardy — and Poised for Takeoff

Despite being squeezed by the pandemic, the transactional business is still sturdy and is poised to take off once new releases in the pipeline grow from a trickle to a steady stream.

That’s according to Galen Smith, CEO of Redbox, and Eddie Cunningham, the former Universal Pictures Home Entertainment president who now runs Studio Distribution Services, the Universal-Warner Bros. disc distribution joint venture. The two executives spoke on a virtual DEG Expo panel March 24 moderated by Media Play News publisher and editorial director Thomas K. Arnold.

As industry pundits have observed, content in the transactional arena, which includes physical disc and digital purchases and rentals, dwarfs what consumers can find via subscription or other streaming services. That content has helped the transactional business survive recent jolts, the executives said.

Even the Blu-ray Disc and DVD business, which has been steadily declining for the last decade, remains a viable business, Cunningham said.

“In 2020 despite a pandemic and despite all the pressure of retail closures around the world … and pretty much no new releases after the first couple of months of the year — there’s still a $7 billion retail market, globally,” Cunningham said of the disc business.

“Obviously the last few months, there haven’t been that many new releases. But as that starts to come back in the second half of this year I think you’re going to see a real resurgence,” Smith added, noting that Redbox, with kiosk rentals driven by new releases, is looking forward to a more consistent flow of new content.

Cunningham said he’s been getting a similar message from the big retailers.

“Everybody’s incredibly excited about the new releases starting to come back into this business,” he said. “And I think we feel good about the fact that the big retailers … seem very, very committed to this category. We’ve got new titles every single week. We spend marketing money. We drive people into stores. We introduce fun. We introduce theater into the stores. … So a lot of them are pretty excited about us getting back into the new-release business. … Maybe we could even find a way of sort of growing this [physical] business or certainly hugely flattening the decline over the next year or two after the numbers we made during the pandemic.”

In the meantime, Cunningham said catalog has been picking up the slack, with such series as “Harry Potter,” “Game of Thrones,” “The Office” and even children’s stalwart “Curious George” selling well despite streaming availability.

“If content is available on subscription services, you can still sell a lot of content physically on those same franchises,” Cunningham noted.

“Then there’s a huge amount, about 40% of consumers, who’ve never ever until this day ever transacted digitally, so they’re a huge target for us,” he said, adding “I think physical’s going to be around for a long time to come.”

The disc rental business, which Redbox dominates with thousands of kiosks in the United States, is here to stay as well, added Smith.

“We obviously have a view that it’s going to be sustainable for the long term,” he said. “It’s a great value to consumers. It’s incredibly convenient. … The fact that we’ve got 41,000 kiosks around the U.S. really helps with that. I think what we’ve been able to do is augment that experience. We’ve got this massive loyalty program with over 37 million people in it, and so we’re rewarding them for behavior and then rewarding them with things like free content and so it gives up a great opportunity for us to reinforce that value ecosystem.”

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Redbox marketing makes sure to let consumers know when new releases are available and doesn’t discriminate between the different ways a consumer might access content. The company offers consumers both physical and digital transaction options, letting them choose.

“We’re communicating with them on a regular basis in terms of what are those [new release] movies, and again, however you want to watch it, physically or digitally, we can be there to serve you with that,” he said.

Even though the company is offering a digital alternative, physical transactions aren’t suffering, Smith noted.

“Even when our customers started to transact digitally, it didn’t mean they stopped transacting physically,” he said. “They actually started transacting physically more. It reminded them again of all these great new movies that are available.”

As head of the disc distribution joint venture, Cunningham said he’s tasked with creating efficiencies and providing a focus on the physical business. The joint venture’s mantra is “two plus two equals five,” to make a bigger whole from the combined parts, he said.

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“The coming together of Universal and Warner and other third-party distribution partners is going to enable us to do things like share boxes coming out of Technicolor, which in turn saves a lot of in-store labor, transport costs and so on,” he said. “I think we’re in a position to start maybe talking a bit more again about some front-of-store displays in some of these big retailers where we’ve lost that.”

Two plus two equals five also means finding ways to leverage the studios’ combined content.

“Over the next year or 18 months you’re going to see some amazing things coming out of [the joint venture],” Cunningham said. “There’s going to be huge opportunities on Middle Earth, DC, Bond, classic monsters. It’s actually the 90th anniversary of Dracula coming up, so we’ve got an opportunity around anniversaries. ‘Fast and Furious,’ ‘Jurassic,’ ‘Dune,’ ‘Halloween,’ there are huge opportunities to draft off these kinds of things.”

He also envisioned boxed sets of titles from different studios as an added bonus for consumers.

“We’re going to work incredibly hard to see how we can put the two studios’ content promotions together and make something bigger,” he said.

Redbox, too, is looking to combine the advantages of different businesses. In addition to its digital and physical transactional offerings, the company also has ad-supported streaming and even a content acquisition and production arm.

“In terms of Redbox Entertainment, we have a ton of data obviously about what actors work, what genres work, and so what we want to do is say, ‘OK, we’re seeing a little less product from the studios, let’s go ahead and buy it, acquire it, produce it ourselves,’” Smith said. “We’re basically making sure that we program to our consumers what we know they are going to want. And we’re agnostic so we’re releasing it across all the digital retailers and then we’re actually selling it to streamers as well on the backend. We just want to make sure there’s good content made for consumers.”

Netflix Has Now Delivered 5 Billion Rental Discs

Netflix executives Aug. 26 took time out from prepping for a streaming war with Disney+ to celebrate a milestone: The delivery of 5 billion DVDs since the launch of its legacy disc-by-mail rental service more than two decades ago.

“The most heartfelt thank you to our incredible members that have been with us for the past 21 years of DVD Netflix,” the company announced on Twitter. “Five billion discs delivered is a huge milestone and we owe it all to our amazing members and team members.”

The 5 billionth disc: Paramount’s Rocketman.

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The milestone was preceded by a countdown at Netflix headquarters.

Netflix pioneered its celebrated monthly subscription service with DVDs back in April 1998, targeting Blockbuster and other traditional video rental stores with the promise of easier, cheaper transactions and no dreaded late fees, long the bane of video-renting consumers.

Less than 10 years later, Netflix shipped its billionth rental DVD around the same time it launched its streaming service.

Netflix last month (July) reported that its disc rental service ended the quarter with more than 2.4 million subs, compared to 2.9 million last year. The packaged media segment continues to be profitable, however, generating more than $45.8 million in contribution profit on revenue of $76.2 million.

Netflix currently operates 17 distribution centers to ship DVDs to subscribers — down from 50 at the height of the DVD rental business.

According to Netflix’s disc-rental website,, the first disc that was shipped was Tim Burton’s Beetlejuice. At first, Netflix was a money-losing proposition. According to the website, “At the end of 1998, Netflix posted an $11 million loss. A year later, it was up to $29.8 million. The year after that, $57.4 million, by which point the great dot-com bust was underway.”

In 2000, Netflix founder Reed Hastings offered to sell the fledgling disc-rental service to Blockbuster, the then-mighty video rental chain, for $50 million. No dice. Blockbuster subsequently launched its own disc-by-mail rental service.

That same year, Ted Sarandos, now chief content officer and Hastings’ top lieutenant, appeared at a trade show in Indian Wells, California, with Mitch Lowe, another early Netflix executive.

They explained the service’s concept — holding up a white plastic mailbox — and talked up its growing popularity, with 300,000 subscribers.

By 2005, Netflix was shipping an average of 1 million discs a day.

And in 2013, Netflix said it had shipped 4 billion discs.

Redbox, meanwhile, says it has rented 6 billion discs since launching its rental kiosks 17 years ago. Redbox now has more than 40,000 kiosks, many of them outside (or inside) supermarkets, drug stores and Walmarts.

Universal Pictures Continues Redbox Chart Streak With ‘Halloween’

Universal Pictures continues its run on top of the Redbox charts, with the latest installment in the gruesome “Halloween” horror movie franchise debuting at No. 1 on both charts the week ended Jan. 20.

Halloween, the 11th installment that began with the 1978 original also called Halloween, topped both the Redbox kiosk chart, which tracks DVD and Blu-ray Disc rentals at the company’s more than 40,000 red vending machines, and the Redbox On Demand chart, which tracks transactional video-on-demand (TVOD), both electronic sellthrough (EST) and streaming.

The new Halloween earned nearly 160 million in North American theaters. It comes full circle, following Laurie Strode (Jamie Lee Curtis) 40 years after she survived Michael Myers’ initial killing spree chronicled in the first movie.

Halloween bumped another Universal Pictures film, Night School, out of the No. 1 spot it had held for the past three weeks on the Redbox disc-rental chart and two weeks on the Redbox On Demand digital chart.

The Kevin Hart-starring comedy, which earned $77.3 million in North American theaters, slipped to No. 3 on both charts.

Debuting at No. 2 on both charts was another new release, Goosebumps 2, from Sony Pictures. Like Halloween, Goosebumps 2 was released theatrically in time for Halloween. A sequel to 2015’s Goosebumps, the followup racked up a $46.7 million domestic gross.

Venom, a superhero film based on the Marvel Comics character of the same name, slipped to No. 4 from No. 2 on the kiosk chart, and to No. 6 from No. 4 on the digital chart.

Rounding out the top five on the Redbox disc-rental chart was a third new release, Speed Kills, from Lionsgate. The film stars John Travolta as a rich speedboat racing champion who leads a double life that gets him in hot water with both the police and a team of drug lords. It’s the latest in a string of theatrical flops starring the one-time ‘A’ list star.

On the Redbox On Demand digital chart, Lionsgate’s A Simple Favor moved back up to No. 4 from No. 6 the prior week, while the No. 5 spot went to 20th Century Fox’s Bad Times at the El Royale, down two spots from the previous week.

A fourth new release, Warner’s A Star is Born, debuted at No. 8 on the Redbox digital chart. The film – which received eight Oscar nominations, including a nod for “Best Picture,” won’t be available on DVD and Blu-ray Disc until Feb. 19.


Top DVD and Blu-ray Disc Rentals, Redbox Kiosks, Week Ending January 20

  1. Halloween (2018, new)
  2. Goosebumps 2 (new)
  3. Night School
  4. Venom
  5. Speed Kills (new)
  6. White Boy Rick
  7. The Equalizer 2
  8. The House With a Clock in its Walls
  9. Smallfoot
  10. Peppermint


Top Digital, Redbox On Demand, Week Ending January 20

  1. Halloween (2018, new)
  2. Goosebumps 2 (new)
  3. Night School
  4. A Simple Favor
  5. Bad Times at the El Royale
  6. Venom
  7. The Old Man & The Gun
  8. A Star is Born (2018, new)
  9. The Equalizer 2
  10. White Boy Rick


Visit the Redbox website.

Buy or rent Redbox On Demand movies.

Redbox Customers Still ‘Crazy’ About ‘Rich Asians’

For the second consecutive week, Crazy Rich Asians, the surprise blockbuster from Warner Bros. that earned nearly $174 million in North American theaters, took the top spot on the two Redbox charts for the week ended Dec. 2.

The romantic dramedy, about an American professor who travels to meet her boyfriend’s family in Singapore and is surprised to find they are “crazy rich,” again took the No. 1 spot on the Redbox kiosk chart, which tracks DVD and Blu-ray Disc rentals at the company’s more than 40,000 red disc vending machines, as well as the Redbox On Demand digital chart, which tracks digital transactions, both electronic sellthrough (EST) and transactional video-on-demand (TVOD) streaming.

The monster shark movie The Meg, also from Warner Bros., was again No. 2 on the Redbox kiosk chart but slipped to No. 3 on the Redbox On Demand digital chart.

Sony Pictures’ Searching, the only new release in the top 10, debuted at No. 2 on the digital chart and No. 4 on the disc-rental chart.

Mile 22, a spy thriller from Universal Pictures about a CIA task force that has to escort an Indonesian police officer on the run from the government 22 miles to an extraction point, was again No. 3 on the kiosk chart but slipped a notch to No. 4 on the Redbox On Demand chart.

Rounding out the top five on the Redbox disc-rental chart was Walt Disney’s The Incredibles 2, down from No. 4 the prior week.

On the digital chart, the No. 5 spot went to Alpha, a historical adventure film about a young hunter who befriends an injured wolf during the last Ice Age. The film came in at No. 6 on the kiosk chart.

Two films that were original released to the home market in April, 20th Century Fox’s The Heat and MGM’s Creed, reappeared in the top 10 on the digital chart, coming in at No. 7 and No. 8, respectively.


Top DVD and Blu-ray Disc Rentals, Redbox Kiosks, Week Ending December 2

  1. Crazy Rich Asians
  2. The Meg
  3. Mile 22
  4. Searching (new)
  5. The Incredibles 2
  6. Alpha
  7. Kin
  8. Christopher Robin
  9. Skyscraper
  10. The Spy Who Dumped Me


Top Digital, Redbox On Demand, Week Ending December 2

  1. Crazy Rich Asians
  2. Searching
  3. The Meg
  4. Mile 22
  5. Alpha
  6. The Spy Who Dumped Me
  7. The Heat
  8. Creed
  9. Skyscraper
  10. Ocean’s 8


Visit the Redbox website.

Buy or rent Redbox On Demand movies.