By Ingrid Lunden
Netflix (NASDAQ:NFLX) has been making a few moves to separate its DVD business more from its streaming operation, and today brings news of the latest move in that direction: the company has bought the domain name DVD.com, the company has confirmed to us.
The news raises questions of Netflix possibly getting ready to pull a Qwikster on us after all and separate its streaming and DVD businesses - something others have suggested it might do - but TechCrunch understands that there are no plans to spin off its DVD business into a separate company, à la the Qwikster strategy of last year that so qwikly spiraled into a PR disaster for the company, and was then abandoned.
News of the DVD.com domain purchase was first reported by Domain Name Wire earlier today. We reached out to Netflix, which told us that this was part of its bigger strategy to improve user experience around its DVD rentals business, a service it offers only in the U.S.
"In the U.S. we look to provide a great experience for our members, those who have DVD only, streaming only and those who have both," a spokesperson told us. Indeed, on Netflix some reviewers pinpoint specific features in DVDs that do not appear on the streamed editions of certain pieces of content - for example extra features, commentary, and so on. Similarly, the streaming comments often related to the actual quality of the streams - again, not so relevant for DVD users.
Ratings, we understand, will continue to remain centralized and go across both streaming and DVD versions of the same piece of content.
Last time around, Netflix qwikly saw the err of its ways in trying to separate those two parts of its business, so this time around it's very unlikely to try to repeat the same thing again.
At this point, the DVD business is actually proving more lucrative in terms of revenues for Netflix than the streaming business. In Q4, Netflix had 11.1 million DVD subscribers, which represented revenues of $370 million. U.S. streaming subscribers for that quarter were nearly double, at 21.6 million, but only had revenues of $476 million.
Of course, there is likely to be significantly more overhead in running that DVD business longer term. But for now it seems that streaming isn't big enough to really stand on its own for the company. Also, there are very likely more promotional costs in building out that streaming business - that includes the increasing costs associated with getting exclusive rights to content in the face of a number of competing services from Amazon, Google and others also going for same users, and the same catalog of films and TV shows.
What this will mean, effectively, is that DVD users will eventually have their own web site to visit to order their DVDs and otherwise manage their subscriptions, rather than have to navigate through a Netflix site that will most likely be more completely given over to streaming promotions.
By separating DVD and streaming customers more, there seems to be a bit of a question mark over how successful Netflix has been in upselling those DVD customers to streaming. Perhaps that was the original idea, but by separating them even more, it seems to imply that those customers are being found elsewhere more readily. So why not make the experience for the DVD users a little nicer in the process?