Time for a new Netflix?

The original Netflix business model was clever. You would queue up the films you wanted. They would mail you a DVD of a film that you would mail back after watching. It was easy. There were no due dates and no overdue fees. All it required for them was to purchase DVDs and stock a warehouse with them, with little other overhead since once you purchase a DVD, you can rent it out as many times as you like. It is little wonder that these low overhead costs drove the brick-and-mortar Blockbuster out of business.

But then Netflix went into the streaming business. This is trickier and more expensive since this requires negotiations with the studios for streaming rights for each film and they were only available for a limited time. Then Netflix went even further and started producing new content, which is extremely expensive. It is not surprising that the subscription rates are rising. Jason Mittell writes that the company seems to have become overextended.

Netflix needs to produce and acquire desirable content to make the service indispensable. But making original content is expensive. Hiring talent and producing movies and television series costs the company more than $15 billion annually. Netflix spends much more cash than it brings in, leading to consistent negative cash flow and a mountain of debt that amounts to more than $10 billion.

Even though it reported a record $1.2 billion in profit in 2018, those profits are based on an accounting model that ignores many costs and debts. This has led some financial analysts, like NYU professor Aswath Damodaran, to believe that Netflix’s business model is unsustainable.

I use both the streaming and DVD services but have the sense that Netflix is paying less attention to the latter and that it is not purchasing DVDs at a significant rate. Netflix is very secretive about its practices so one does not really know. Streaming is convenient but I am not one of those people who watch a lot or on impulse and so do not use that a lot. I am perfectly content to watch one DVD every few days.

Now many more companies are going into the streaming business. I don’t know how many people are like me but it seems like there might be a market for a new low-cost company that is based on the original stripped-down Netflix model that only deals with mailed DVDs. They could even allow people to get up to three DVDs at a time so that people would have one to watch every day if they wanted to, while the others were going back and forth in the mail.


  1. ionopachys says

    But how many people (in the U.S.) watch DVD’s, or even have a DVD player for the T.V.? I wouldn’t be surprised if a lot of kids don’t even know their computers can play DVD’s.

  2. sonofrojblake says

    There’s a generational thing here I think. I’m 50 almost, and I’m about the youngest person I know who even owns a DVD player any more. To my brothers kids, physical media up to and including Blurays are about as relevant as Betamax. Their enrire entertainment offer (films, TV, “radio” (podcasts), music, video games, even books) ALL of it is streamed or otherwise delivered online. They’d be baffled by the concept of having to wait more than an hour to have access to something.

    Also… I watched the latest episode of Game of Thrones about 90 minutes BEFORE it was first broadcast. Compete with that, Netflix.

  3. Tracey says

    I’m also 50, and I have a library of DVDs. Sometimes I want to see X, sometimes I want to see Y, and you can’t count on any streaming service having your favorites when you want to see them. Additionally, Netflix has been buffering endlessly and downright crashing for days at a time: a couple of weekends ago, it was down all weekend.

    The laptop I’m typing this on doesn’t have a DVD player, but my desktop does. I got a Blu-ray player or the tv for $40 last Christmas.

  4. says

    I have been ripping dvds to mpeg4s for almost 20yr now. My media archive is several years worth of music (about a decade) and 24,000 or so movies and show episodes. When netflix switched to only carrying media from their partners I switched to catching up on my archive. All the media companies trying to divide the market can kiss my ass forever.

  5. Rob Grigjanis says

    Never streamed, never watched DVDs. If I want to watch a movie without going to the cinema (which covers most movies in the last 30 years or so), I wait until it comes to telly. What’s the rush?

  6. Marshall says

    My biggest problem with DVDs are the (now) awful quality. I don’t think I could stand to watch anything in 480p anymore--good lord, you can barely make out peoples’ faces! Now that 4K has become the standard (literally 27 times more pixels), even downloading content isn’t really feasible, and I’m not about to buy a special purpose ultra-HD 4K bluray player when streaming works just fine.

  7. Mano Singham says


    Our old DVD player died a few weeks ago after many years of loyal service. We got a Blu-Ray player. I had heard about its amazing image quality so watched bits of two identical films, one in DVD format and the other on Blu-Ray. I could not tell the difference. They were both viewed on an ultra-HD TV screen.

  8. sonofrojblake says

    Re: seeing the difference: I think this is a function in part of screen size. If you’ve got a screen of 40″ or less across the diagonal, you’ll likely not see much difference between SD and HD. It’s pretty clearly visible on my 50″.

    Similarly, it’s a waste of time “upgrading” to a UHD screen if you’re not also going to get one of at least 65″, as you just won’t notice any difference. At 65″, the difference is pretty clear, not just in picture clarity (i.e. number of pixels) but in depth of blacks, contrast and in particular aliasing in dark areas.

    On an SD screen with an analogue source there’s no aliasing because there’s no compression or coding to generate artifacts, so a scene in (for example) a dark cave looks as it should, smooth gradations of darkness. An SD digital source (e.g. a DVD) compresses the information and you end up with visible contours between areas of differing darkness. It’s less prevalent in HD sources (e.g. Bluray), and it’s almost entirely absent on the UHD content I’ve seen.

  9. Dunc says

    It’s also a function of eyesight -- a friend of mine didn’t see any difference going to HD, until he got new glasses.

  10. lanir says

    I kind of feel like the dvd vs bluray comparison was helped along a bit by vendors. I purchased some anime on dvd after bluray came out and magically it started getting more pixellated. Which is silly. The streams had no such pixellation. And frankly, anime is simpler than a picture of the real world by far because even with more advanced shading techniques it still has large areas set to the same color. This should make it simpler to encode, compress and decompress.

    There are a number of other options if you’d like something other than Netflix for streaming, including some that are aiming at having more working class values behind them. You can see some of them listed in this article:


    The only big player left in the physical disc rental space that I know of is Redbox. Caveat: Several years ago I was a contractor working on a streaming service for them. I have no current financial interest in the company nor am I a customer. I think the streaming service had an option to mail discs to you but it shut down a couple years after I left. I can’t seem to find any information on the remaining service about mailing discs to you so you’d have to check whether one of their boxes was nearby, but they tend to be all over. I’ve found them at supermarkets even in some pretty tiny midwestern towns.

Leave a Reply

Your email address will not be published. Required fields are marked *