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Netflix’s closure cultural destruction or reality check?nScreenMedia

A WSJ oped said that Netflix’s closure was cultural destruction. But DVDs are not the way to preserve movies. They are headed the way of the VHS tape.

Netflix’s as US cultural archive?

Last week, a piece by Ted Rall in the Wall Street Journal attracted the attention of the press due to a strongly worded reaction to Netflix’s decision to shutter its DVD-by-mail business. Mr. Rall said:

“Netflix’s recent announcement that it will discontinue its physical DVD distribution business later this year is a catastrophic act of cultural destruction, yet it was greeted with a shrug.”

His concern is that with each technology transition, the number of movies available is thinned out:

“Of the 23,000-plus movies released in the US since 1899, streaming services offer only 7,300—and that includes foreign titles.”

For example, he claims many of the movies available on VHS tape never transitioned to DVD and, by extension, that many DVD movies won’t survive the transition to streaming. So, with Netflix shuttering its comprehensive library of DVDs in September 2023, it effectively means many movies are no longer available to most people.

I certainly agree with where Mr. Rall is going with his argument: the preservation and continued availability of all US movies are culturally important. However, discs and Netflix’s isn’t the way to achieve that goal.

Disc sales and rentals are a shadow of what they once were

VHS and disc sales and rentals US 1999-2008In 1999, the VHS tape rental and sales market was worth $12 billion in the US. In 2011, disc sales and rentals generated $14 billion, and the VHS market was effectively dead. In 2022, disc sales and rentals generated $2.3 billion, while streaming video (SVOD, digital rentals, and sales) generated $34 billion.

The quality and convenience of DVD and Blu-ray discs made the VHS tape’s demise inevitable. Streaming is an even bigger leap in immediacy and convenience, making the disc’s demise just as inevitable.

Most people can’t watch discs

According to Nielsen, 86% of TV homes (100 million homes) had a DVD or Blu-ray player in 2011. In 2021, penetration had fallen to 56% (68 million homes.) However, I don’t think those 68 million homes could play a DVD if they wanted.

Disc player penetration of TV homes US 2011 2021When was the last time you watched a DVD or Blu-ray disc? Many disc players probably haven’t been used in months, maybe even years. Their remotes may lurk in the back of a drawer somewhere, and they may not even be connected or working anymore. Disk player sales have fallen to a replacement rate or less.

The right time for Netflix to bow out

The disc rental market in the US was worth $600 million in 2022, with the largest portion of the revenue going to Redbox Kiosks. Since Netflix earned $31.6 billion in 2022, represented a tiny proportion of that amount. The company is pushing into the game and advertising markets, which have much more potential than DVDs. It was absolutely the right time for the company to shut down its disc business.

So, if DVDs are not the best way to protect the huge catalog of US movies, what is? A non-profit trust is probably the best way to go because there surely isn’t a huge amount of money to be made from them. And that type of approach is what Mr. Rall suggests in his WSJ piece. And while Netflix’s direct involvement with the project might not work, perhaps Reed Hastings, Netflix Chairman, and co-founder, could step up and help get the effort going. After all, he owes the American movie industry a lot for making Netflix what it is today.


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