Wednesday, October 24, 2012

The Future of DVDs in a Digital World

Netflix is a widely known entertainment distribution company that offers DVD and streaming content to its subscribers. As tablet PCs, fast Internet access on cell phones, and Smart TVs continue to work their way into more homes across America, does DVD distribution have a place in the modern world? Let’s take a look at Netflix’s most recent financial report to find out.

Content is the bread and butter of Netflix’s core value. To understand the importance of DVD content in their lineup, let’s peek into the valuation of its media assets.

The value of its total content library consisted of $3,434 million streaming assets vs. $552 million DVD assets as of June 30, 2012. Netflix has made a dramatic shift toward more streaming content since the end of 2011 when the value of streaming content consisted of $2,552 million and DVD content was $599 million. That’s an increase of nearly 35 percent in streaming content and a drop of 9 percent in DVD content in the first half of this year.

Total subscriptions for Netflix services as of June 30, 2012, consisted of 23.9 million for streaming and 9.2 million for DVD.

Netflix has heavily emphasized the expansion of its streaming business segment. As a result, its subscriber base has shifted in a way that reflects its efforts. As of the fiscal quarter ending June 30, 2012, its streaming subscriber base has increased by 528,000 while its DVD subscriber base has decreased by 840,000. The trend of Netflix’s subscribers is clearly moving more toward its streaming content and away from hardcopy DVDs.

DVDs are far from extinct, however, as they still generate healthy revenues for the company. Streaming revenue consisted of $532 million for the three months ending June 30, 2012, while DVD revenue consisted of $291 million.

In addition to expanding its streaming service domestically, Netflix has also expanded its digital content to service other parts of the world including Latin America, the Caribbean, Canada, the UK and Ireland. It has no visible plans to introduce DVD distribution to these areas.

What do you think about DVD distribution in the modern movie market?

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