DVD Rental Company Not Affected By Digital Technology
Many people were not shocked to hear that the iconic DVD rental shop in Auckland, Videon, has already closed its doors for good. This has been expected as technology transformed from VHS to DVD and now DVD is giving way to on-demand services. In fact, many are surprised that the DVD rental companies are able to last this long given that the on-demand services has been introduced a few years back.
With headlines of DVD rental shops closing left and right, one would think that the DVD business is already doomed. This is far from the truth because according to Netflix, they are still making a lot of profit from their DVD rentals department. They are not just earning enough but they are earning a lot.
It was in 1997 when Netflix was brought to life. The company was mainly selling DVDs and offering titles for rent. This is done through an online system wherein the order is done via the Internet and the DVDs are sent to the customers through snail mail. Inside the mail is another envelope they have to use once they are done and ready to send the package back to the company.
Ten years after establishing the company, it went through a huge change when it decided to offer streaming services to consumers. Despite the change, the company decided to continue the DVD rental business. The truth is that for the past few years until June of 2018, the company has been compensating the losses of the on-demand services with the profits they are earning from the rental department.
It was not until the end of 2017 when the on-demand service started to earn stable profits to be able to lift the company without the help of the profit from DVD rentals. For the 12 months until December 2017, the DVD rental section of Netflix was able to earn total revenue of $450.5 million and they were able to earn a profit of $247.9 million.
This is proof that while we are mourning the era of VHS to DVD, there is still hope for the DVD rental industry to stay on top until a few years more.