new hampshire-based slate staff writer ruth graham decided to go retro last year, replacing her subscription to the streaming service with a series of red envelopes full of dvds, courtesy of netflix-owned dvd.com . Surprised by the abundance of movies offered by the affordable DVD-by-mail service that she couldn’t play on Netflix as well, Graham was “excited,” albeit with a post office-interrupted schedule and a limit on the number of discs that I could have anytime, in classics like 1931’s frankenstein, billy wilder’s oscar-winning apartment and the work of german director douglas sirk.
“you realize your taste has all these little rivulets and nooks,” he says of viewing via dvd, without the distraction of an endless sea of algorithmically suggested options just a click away. “My husband and I would be watching David Lynch, then Orson Welles, then random westerns, and we’d think, ‘The algorithm just never would have created this for us.'”
In 2011, Netflix’s DVD-by-mail service had 14 million subscribers nationwide, who could select from a vast library of popular and rare movies that was hard to match. (Reports estimate that the service offered more than 100,000 titles at its peak.) Netflix was the best video store, with no late fees and deals that far outweighed any other option. At one point, it was shipping 12 million DVDs a week. seemed to have put the final nail in the coffin of the video store; dvd-by-mail would be the present and the future.
But also in 2011, Netflix spun off its DVD selection from its main platform, finally establishing on-demand streaming as the status quo. Netflix promised to continue sending DVDs by mail, but with a catch. they would be diverted to a separate service, now called dvd.com, completely divorcing physical media from digital.
Netflix’s persistent DVD business, which has grown from 14 million subscribers in 2011 to just over 2 million at the end of 2019, may seem strange as massive streaming wars begin. As many of the largest entertainment conglomerates like Disney and NBCUniversal launch separate platforms and begin a protracted battle for subscribers, Netflix remains focused on its own content. it had planned to spend $17 billion globally this year, before the coronavirus pandemic hit, to entertain a global streaming audience, and still expects its worldwide audience to grow to 190 million by the end of June.
And as streaming content becomes the default viewing option, DVDs have been largely forgotten; The company’s first-quarter financials were the first not to include separate information on DVD subscription numbers. Industry-wide, DVD sales have plummeted 86 percent since 2008, a clear indication of how much the market has changed.
But in the midst of the race to create and expand broadcast networks and make digital access the default over physical media, is there a danger of losing access to classic and rare movies? Some movie lovers worry that the generational shift in film and television content happening right now, including a fight over rights, analytics-informed production plans, and algorithm-driven discovery, favors the new, Exclusive and episodic, or, as Martin Scorsese put it in November 2019, “entertainment versus cinema.”
is a new economic model of entertainment that may have even less room for movies than the previous ecosystem of cable, movie theaters and house rentals, especially foreign classics and those from the golden age of Hollywood that have limited audiences . An analysis by Streaming Observer, a site that rates streaming services, found that the number of movie titles available on Netflix has dropped by 40 percent since 2014, from 6,494 to 3,849. While DVD.com offers all winners of the best movie in oscar history (yes, even 2019’s parasite), the streaming side of netflix only offers a fraction of them.
netflix’s dvd.com represents the dream of the best independent video store, one that has steadily declined over time; Variety predicted that the service could be closing its doors by 2022 at the current rate of subscriber loss (Netflix declined multiple requests for comment about dvd.com or its core business for this article). -size, dvd.com’s continued downsizing means more than more nostalgia for the era of red envelopes in our mailboxes. Its potential closure, based on declining subscribers and declining investment from Netflix, would represent the loss of an affordable service that grants near-universal access to decades of classic cinema, with no other options for movie fans to watch. gravitate
the laws of streaming economics
Netflix CEO Reed Hastings knew from the start that the future was an online platform. ted sarandos, chief content officer at netflix, said that in 1999, hastings told him that with postage rates rising and internet speed increasing to half the price every 18 months, online distribution was just a matter of weather.
“at some point those lines would cross and it would be more profitable to stream a movie rather than mail a video,” he added. “and that’s where we come in.”
Netflix is playing a game of scale by creating a massive content delivery system and audience, says Eric Schmitt, a media analyst at global market research firm Gartner. It has to, as the streaming wars pit Netflix against media giants like Disney, who can make massive bets and instantly garner a huge audience; The Disney+ service reportedly signed up 10 million households on its first day.
“You have to produce a basket of content each year that is guaranteed to have a few winners,” says schmitt. “You need to have super deep pockets because you’re going to have bad years.”
Whether it’s movies or television, content is an inherently risky business; even today, there is no algorithm that chooses what is going to be successful. so the strategy is to distribute online on a large scale, to integrate vertically by owning both the production and the means of distribution, and to go global. that means consolidation.
after the scale come the subscribers. Netflix’s rivals, a growing lot that includes Hulu, HBO Max, Amazon Prime, Apple TV+, Disney+ and Peacock as of 2020, are your real competition among the more than 270 streaming services available in the United States. each is high-profile and currently or about to fight for subscribers, trying to get new viewers, avoid losing established ones, and secure recurring revenue. Success means having content that appeals to most people, which Schmitt calls “maintenance to protect the customer base,” which is why billions of dollars are spent annually on new programs.
It also means knowing who your potential audience is, which is primarily a younger audience less interested in the classics, according to Tom Nunan, a former film producer and television executive who teaches at the UCLA School of Theatre, Film and Television. .
“The audience for classic movies is generally much older, and the older demographic is not what the streaming giants want to attract,” he says. “You want to appeal to the 18-54 year old or, for Disney+, maybe 12-34. [Streaming services] don’t mind reaching a 75-year-old.”
Then there are the high costs, especially for licensing, where it becomes even more difficult to make the business case for rare and classic films. Rival services don’t want to give each other any content advantage and are ending licensing deals so they can lure new subscribers with their old catalogues. Netflix’s loss of friends to HBO Max was one of the most high-profile examples of studios and streaming services taking over popular television and film; Disney has also been keeping classic 20th century Fox movies, which it recently purchased, in its infamous vault in anticipation of making them available exclusively to streaming subscribers, some critics speculate.
Streaming classic movies can also come with extra costs just to make them viewable for a modern audience. older black-and-white films typically need to be retouched to deliver the higher resolution and audio quality that today’s viewers expect. With fewer new DVDs being made and sold, studios are losing out on that revenue stream, which can help defray the cost of these conversions and digitization. Streaming services want content that can be translated internationally, and there may be entangled rights issues with movies made in an era when studios weren’t thinking about global distribution, says Schmitt.
Then there is the issue of sunk costs. emphasizing or acquiring classics for a streaming catalog means no new product placement deals to strike. Schmitt says that as of last fall, 74 percent of Netflix shows — and nearly all of Amazon’s top series — tap into this revenue stream and work with brands to get their wares on streaming original content. making these services an estimated additional cost of $50,000 to $500,000 per episode. .
With all these new rules of the game for content producers, it’s no wonder that the least risky option – binge-ready episodic series that support audience retention – has become the most popular format. as schmitt says, we are living in an episodic world.
“Obviously the movies have to matter, because Netflix wouldn’t spend $160 million on the Irishman” otherwise, he says. “But as a business, it’s probably wiser to spend $160 million on a full season of a show than on a single movie.”
the not so sorry state of dvd.com
Netflix and its rivals want to invest in content that is broadly appealing to today’s new and episodic audience. classics and niche movies, especially if they arrive on disc by mail through dvd.com, don’t fit that vision of the future.
even dvd.com’s peerless library is shrinking in response to this change. at this time, the entire operation of dvd.com is conducted in a single facility in fremont, california. Its large selection of movies has traditionally met the needs of a “weird genre, horror movie guy” like Jim Vorel, an Atlanta-based film writer who has remained a DVD-by-mail subscriber since he was the main online of netflix business.
vorel has long been a service evangelist. But he’s seen the overall pick deal significantly since the rebranding to dvd.com, to the point where dvd.com is now a “shell of what it was before,” he says. Whether it’s just discarding titles that aren’t requested or not selecting replacement copies (again, netflix declined to answer any questions), especially in recent years, the dvds that vorel has kept in his queue have tended to disappear. /p>
“You can’t really blame them from a business perspective,” he says. “we are the weirdos that want to be sent weird hong kong martial arts stuff and lots of b-horror movies. it’s just not your bread and butter; it is much less profitable for them.”
Complicating the idea that dvd.com’s downfall is inevitable, however, is that dvd.com is not a waste of Netflix’s money. By contrast, the DVD-by-mail service remains profitable. Its 2,153,000 users generated $37.3 million in revenue for Netflix, or $17.34 per user, during the fourth quarter of 2019, the last time such figures were publicly available. it actually made more money per user than the streaming service, which, according to newly released financials for the first quarter of 2020, made a return of $13.09 per US subscriber. At this point, the company has a large library estimated to contain tens of thousands of titles, has maximized efficiency, and can get by with minor infrastructure investments. the service may still be able to count moviegoers and Americans with poor broadband access as major groups.
And DVD.com doesn’t have to worry about losing rights to film or TV, even if the streaming service loses licensing rights, according to property attorney and media expert Glenn Peterson.
“Reproduction of a DVD does not infringe the exclusive distribution rights of the copyright owner, since the purchaser paid for an authorized copy and the DVD is not copied for viewing,” says Peterson. “Distributing physical copies is not bad for studios, nor is it bad for artists. authorized copies are priced such that they make a lot of money from the original sale. Just as vinyl records never disappeared, I doubt DVDs either.”
There is a real business case for keeping dvd.com going until it is no longer profitable. Netflix built its entire streaming service on profits from those red envelopes, after all. but the writing is on the wall. The company’s spending on purchasing or replacing DVDs has followed the drop in subscribers. According to quarterly earnings statements shared with the public and investors, Netflix spent $77 million buying DVDs in 2016, $54 million in 2017, and $38.5 million in 2018 (the company’s 2019 financial statement did not disclose investment in dvd). Netflix seems to be sailing with dvd.com, spending enough to keep up with big new releases and reaping the rewards of past investments, but it doesn’t seem like consumers are stopping the migration to streaming.
Will a major back catalog one day give bragging rights?
The nascent era of streaming looks set to challenge people’s access to classic and rare movies, whether through consolidation, licensing deals, or giving more weight to new and original content. but what if these fears are based more on the momentary challenges of transitioning to a streaming future, rather than welcoming the possibilities that lie ahead?
schmitt, the gartner media analyst, believes this “building the subscriber base” phase of the streaming wars will be temporary. As streaming services grow, they will become more technologically advanced and server space will continue to get cheaper. that will mean more money in what is called the long tail. In a digital economy, shipping bytes rather than physical products, there is money in streaming lots of rare titles in small numbers for small groups of fans, as well as streaming blockbusters that appeal to everyone.
It’s foolish to hope that all movies will finally be instantly available on your smart device, says Joe Adalian, who writes Buffering, a newsletter about the streaming industry for New York Magazine (owned by Vox Media). but arguably today’s movie buffs and movie buffs have more access to a variety of movies. Right now, it can be a challenge to find classic, niche, or independent movies on a major streaming service, but niche offerings and digital rentals have made plenty of movies available, like the Criterion Channel, which offers a library. depth of world cinema (although that model of niche content failed in the past with filmstruck, which only lasted a few years and attracted about 100,000 subscribers).
In the ’90s, finding a rare or older movie might have meant finding a nearby independent video store and hoping the only copy wasn’t on loan. Back in the ’70s, it might have meant having access to an independent cinema and being lucky enough not only to know that a particular foreign film was coming, but also to see it during its short run. vast swathes of film history have always been largely inaccessible or out of print.
“You can make the case that 2020 and eventually 2030 moviegoers are better off than the classic 1970s moviegoers,” says Adalian. “Right now, streaming services are focused on what gets the most subscribers. but I wouldn’t rule out this being reviewed later. Five years from now, they’ll say, pull out the back catalog and create HBO Ultramax for an extra $3 a month. [with his peacock streaming service, nbc] talked about having curated sections; They could decide to do an ad-supported classic broadcast, just like the cable channel [turner’s classic movies]. there are different ways libraries can be mined in the future.”
tom nunan of ucla believes that eventually, as the flood of new subscribers cools off, new content will keep subscribers signing up. but a large library of content will be even more of a “comfort food” amid an increasingly dizzying array of options that set rival services apart. with the film and tv production industry shut down due to the coronavirus pandemic, perhaps a prolonged delay will lead to more services starting to lean towards classic and older movies (although netflix already has most of the year’s programming on can).
Classic content like comfort food has largely happened already, with friends and the office routinely ranked as the most watched content on netflix (until their production studios accepted them for exclusive streaming on their own streaming services). transmission). Technology is evolving at such a pace, Nunan says, that “searches for anything we’re looking for will be faster and more efficient, including cutting-edge or experimental content.”
schmitt agrees that today’s streaming wars could lead to a “renaissance,” not an elimination, of classic movies.
“As these streaming wars unfold, the thirst for content is going to be just as great,” he says. “Studios and publishers are relatively good at chopping and dicing content. as things stabilize, you will find content owners who will find creative ways to license content.”
for movie fans like ruth graham, this revival of the classics can’t come soon enough. As dvd.com and its vast library slowly shrink and fade, many subscribers may feel like they’re losing an irreplaceable vault of movies. it is more than a novel business model that provokes nostalgia, like betamax tapes or blockbuster video stores. the loss of dvd.com won’t make the classics go away, especially for diehards. but graham sees the loss of easy access as a matter of mass taste.
“The fact that these classic movies are so hard to find degrades people’s taste,” he says. “If no one grows up watching these movies, it’s incredibly depressing to think about what cinema as an art form is doing over the course of a decade.”
correction (april 23): an earlier version of this article misrepresented ruth graham’s charge. she’s a staff writer at slate, not a freelancer.