Netflix: We love DVDs, no we don't, yes we do

Netflix is making it easier for customers to sign up for a DVD-only subscription plan--after the CEO told investors a month ago he expects DVD revenue to keep declining.

Netflix's DVD-only plan is back in favor. Netflix

Netflix has a love-hate relationship with DVDs, and this month it appears that discs are back in favor.

The Web's top video-rental service posted a short note to its blog yesterday, notifying customers that Netflix has simplified the process of signing up for the $8 DVD-only rental plan. The company again appears to be tipping its hat to DVDs or else why bother streamlining the sign-up process.

"Starting today, our DVD and Blu-Ray loving audience can now easily sign up for a DVD only plan," the company wrote. "Starting at just $7.99/month, you can enjoy around 100,000 titles on DVD."

The irony is that a month ago, CEO Reed Hastings told investors that DVD revenue will do nothing but decline.

Here's how this will go if anybody asks Hastings about the DVD issue in public: he will practice his version of the Jobs distortion field, play up DVD attributes, say there are still customers who want discs, and assert that Netflix wants to give customers what they want. He's said the same thing in the past.

Hastings will say all this although he has steered DVD-only fans toward the streaming plan last year after almost spinning off the company's DVD operations. He will say this although he has said many times that the future of the company and home video is streaming movies over the Internet and after emphasizing, just last month, that interest in DVDs is in decline.

During a conference call with analysts to discuss his company's fourth-quarter earnings, Hastings was asked if he thought the number of DVD subscribers would decline.

"Yes," Hastings said, "We expect DVD subscribers to decline steadily every quarter, forever."

That is not a vote of confidence.

So? Hastings changes his mind a lot. Still, it hasn't seemed to hurt Netflix much lately.

Over the past six months, Hastings has quietly mounted a very nice comeback from last summer's public-relations calamity, when the company unexpectedly raised prices and spooked customers by telling them they would have to take their DVD-rental business to a Netflix-stepchild service called Qwikster.

He changed his mind about Qwikster too, killing the plan weeks after announcing it.

But following a period of huge customer dissatisfaction and when subscribers were cancelling by the hundreds of thousands, Netflix is now beating analysts expectations and the company's stock is shooting up again.

Netflix's shares fell in the wake of the price hike from $300 to $62 last year but were up around $122 today in morning trading.

Only, in the case of DVDs, one has to wonder why the company keeps flip-flopping. Is there a flaw in Netflix's strategy? Or maybe it's a problem with the company's much heralded data, and Netflix doesn't have a good read on demand for DVDs?

Or could it be that the company's streaming library hasn't much to offer right now and Netflix needs to supplement with DVD titles? The streaming selection hasn't seen very many new and popular movies lately (and when I say new, I mean new to Netflix). This is the month Netflix is due to lose the films from Sony Pictures and Disney that it once received as part of a deal with Starz, the cable premium channel. The license was not renewed.

For a long while, lots of people have wondered how Netflix would satisfy customers when the streaming library had so few popular titles.

The only real impact when Hastings changes his tune about DVDs as often as he does is that we're just not going to believe him as much when he plays up the virtues or derides the shortcomings of this distribution format.

Correction at 7:40 a.m. PT: This story incorrectly stated that Netflix had cancelled its DVD-only plan.

 

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