Netflix has posted mostly positive financial results for its first quarter, but has made a notable announcement about a legacy service.

In a blog post on Tuesday, the streaming giant announced it is winding down its DVD-by-post business – ending the service that it started around 25 years ago (in 1998) to compete with the likes of Blockbuster Video.

Meanwhile the firm also posted a 3.7 percent growth in revenues and a 4.9 percent rise in paid subscriptions, as the firm looks to expand upon its password-sharing crackdown.

DVD via post

In a blog post, co-CEO Ted Sarandos wrote that “after an incredible 25 year run, we’ve decided to wind down later this year.”

“Our goal has always been to provide the best service for our members but as the business continues to shrink that’s going to become increasingly difficult,” said Sarandos. “So we want to go out on a high, and will be shipping our final discs on 29 September 2023.”

“Those iconic red envelopes changed the way people watched shows and movies at home – and they paved the way for the shift to streaming,” added Sarandos. “From the beginning, our members loved the choice and control that direct-to-consumer entertainment offered: the wide variety of the titles and the ability to binge watch entire series. DVDs also led to our first foray into original programming – with Red Envelope Entertainment titles including Sherrybaby and Zach Galifianakis Live at the Purple Onion.”

“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 achieved and excited to continue pleasing entertainment fans for many more decades to come,” he added. “To everyone who ever added a DVD to their queue or waited by the mailbox for a red envelope to arrive: thank you.”

Netflix said that the first DVD it had shipped was the Tim Burton movie Beetlejuice on 10 March 1998.

In total Netflix has shipped a total of 5.2 billion DVDs, with the most popular title being “The Blind Side” staring Sandra Bullock.

In total Netflix had 40 million subscribers to its DVD rental service.

Q1 financials

For the first quarter ending 31 March, Netflix posted a better than expected net profit of $1.3bn, down from a net profit of $1.6bn in the same year-ago quarter.

Revenues meanwhile grew 3.7 percent to $8.2bn from $7.9bn a year earlier, which was slightly below the forecast of $8.24bn.

Netflix managed to grow its global streaming paid memberships by nearly 9 million members, from 221.6 million in Q1 2022, up 4.9 percent to 232.50 million as of Q1 2023.

This was welcome news for investors after Netflix shocked the markets this time last year, when it revealed it had lost 200,000 subscribers – its first subscriber decline in more than a decade.

“In short, we’re off to a good start in 2023,” said Netflix. “As always, our focus remains pleasing our members and attracting great creators so that we can continue to build a wildly successful business.”

Password sharing

But the streaming giant delayed a wider launch of its crackdown on unsanctioned password sharing into the second quarter so as to make improvements.

“As we improve our member experience with more must watch stories, we also need to improve our monetisation,” the firm admitted. “This will not only help reaccelerate revenue growth and increase operating margin, it will also enable us to invest more in great entertainment.”

Netflix began rolling out its crackdown for password-sharing – offering a “paid sharing” option – in 12 countries in February but is delaying its expansion, after first testing the scheme in a small number of countries.

Netflix said the clampdown on password sharing will begin in the United States during the current second quarter.

Netflix is undertaking the move as the streaming market sees signs of market saturation, and it witnessed a sharp fall in subscriber numbers in the first half of 2022.

As a result Netflix cut hundreds of jobs and raised subscription prices to cover increasing costs.

In November 2022, it introduced a cheaper ad-supported subscription plan in 12 countries, including most of Europe, the UK and the US.

The password-sharing crackdown however has been a long time coming. In March 2021 Netflix had warned it was testing account passwords, as it sought to clampdown on the revenue-losing problem of password sharing.

Then in March 2022, Netflix began testing new tools to crackdown on password sharing between people who don’t live in the same household.

Tom Jowitt

Tom Jowitt is a leading British tech freelancer and long standing contributor to Silicon UK. He is also a bit of a Lord of the Rings nut...

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