Netflix to wind down red envelope DVD rentals

Netflix's (NFLX) red DVD envelopes will be no more. 

The company said Tuesday that it is ending its 25-year DVD rental business, noting that it plans to ship its final discs on Sept. 29.

“Our goal has always been to provide the best service for our members, but as the business continues to shrink that’s going to become increasingly difficult,” the company wrote in a release.

DVDs have become a shrinking percentage of Netflix’s revenue over the past several years as consumers increasingly shift to streaming services. Netflix reported 2022 DVD revenue of $145.69 million, down 20% from the prior year. By comparison, Netflix’s streaming revenue last year totaled $31.46 billion.

Netflix forever disrupted the movie rental industry with its first shipment of 'Beetlejuice' in 1998. The company's initial business model of shipping movies to subscribers homes eventually transitioned into the modern streaming model where movie watchers enjoy new films without leaving their couches. 

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The shift to streaming eventually unseated traditional movie rental companies that focused on DVDs, such as Blockbuster which filed for bankruptcy in 2010.

"From the very beginning, our members loved the choice and control that direct-to-consumer entertainment offered, including the variety and quality of our titles and the ability to binge watch entire series," Netflix said in a letter to shareholders Tuesday. "DVD paved the way for streaming, ensuring that so much of what we started will continue long into the future."

The announcement came about an hour prior to the company's first-quarter earnings report. Netflix shares traded lower the report, which revealed fewer people signed up for its service than analysts expected during the first quarter.

Josh is a reporter for Yahoo Finance.

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