Hacker News Reader

Hacker News

Comment by paxys | Hacker News Reader

Full thread

paxys

The tech industry has such bizarre economics. If I told you I had a business with:

- $120M in annual revenue

- 1M fiercely loyal customers who paid every month

- 5 distribution centers spread across the country

- 100 happy employees, each with a tenure of a decade or longer

You'd probably say that I had achieved the definition of success in the business world and should be proud of myself. To Netflix, on the other hand, this business is so irrelevant that they'd rather take it out back and shoot it in the head just to save the bother of continuing to run it.

View on HN

You didn't mention how profitable the business is - thats the only metric that really matters.

All those happy employees have to be paid.

The 1M fiercely lyal customers will only be 950K next month.

The lease on 3 of the 5 distribution centers comes up this year and business would have to commit to another 5+ year lease.

Not even profitability, but growth. Even if it wasn't profitable now it could be worth doing for a growing market, but surely the market for physical discs is shrinking and will continue to do so.

It baffles me so much when people put ecology out of the question. Great Netflix is shutting down the business that produces so much unneeded plastic. Sad others would gladly keep that business forever when it makes money. Fuck the planet, hell yeah.

The physical disks let you access far more movies than are showing on streaming because there are no rights issues.

Valid. I never thought about it, but the problem not in the medium here. It’s more in the laws/contracts. It could be done differently, I assume.

Not really. When you (or Netflix) buys a disk, you own it. It’s yours.

When you license a show via a streaming service, you don’t own anything.

This is the problem with the tech economy. The consumers don’t own anything. They just rent.

Well, many of us know that popular phrase ‘piracy, it just works.’

When I download a movie this way, I truly own it. Same as I own a DVD disk. It’s just the medium that is different. E.g. I have a collection of Friends on disks, which is legal, I own it. But when it’s ripped as files and stored on an old hdd so I could rewatch some episodes just plugging the disk via USB. I assume it is likely to be illegal.

The thing is, copyright holders think it’s wrong, and they want us to rent the content, not own it. I mean it could be done other way technologically, avoiding physical medium and still making it legal somehow. It could be done if the party was interested in it. The problem is not in the physical medium itself.

> [Piracy:] When I download a movie this way, I truly own it.

When you download a pirated copy, it's more likely that you _possess_ it, rather than _owning_ it. You are in control of the bits and bytes, they will not just disappear; but since your copy is unlicensed and illicit, the copyright holder could take legal steps to make you delete your copy (and pay for your infringement on their copyright).

> Same as I own a DVD disk.

That's different. You own the physical disc, and the right to re-sell or potentially lend out that physical disc. (However, you can't take the data from that disc, and stream it to a public audience on the internet.)

> [...] rewatch some episodes just plugging the disk via USB

Depends on your jurisdiction, but in many places it is legal for you to create a backup of a physical disc that you own, and make personal use of that backup. In some places you are allowed to share your backup copy with friends and family (on a non-commercial basis, of course). It gets nuanced.

Ripping is pretty much undetectable though unless they decide to torrent it for others. So in practice they own it. As to the 2nd point, it's not really 1:1, a more accurate equivalent would be a netflix dvd rather than a bought one.

> When you (or Netflix) buys a disk, you own it. It’s yours.

Only because the laws say that physical media is treated differently. If the law said that you could buy a disk and then stream as many copies as you have of the disk, it would completely change the business model.

But the law doesn't say that.

And? As if the law in these things has no relevance. Of course it does. You can't just discount this because it's in the law. Good luck seeing these kinds of laws applying to digital media. It's just not treated the same.

> It could be done differently, I assume.

Yes, we could have compulsory licensing, like with music on the radio.

If radio stations have a copy of a song, then provided they pay the legally-mandated royalties to the rightsholder, they can play it. They don't need to negotiate with the rightsholder, and the rightsholder cannot prevent them from playing it.

We have a working model for how it can work, so we could do the same thing with TV shows and movies on OTA/cable/streaming... but we just don't.

https://en.wikipedia.org/wiki/Compulsory_license

None of it is "legally" mandated, i.e. there are no laws specifying what a recording artist should get paid. All of it is a complex series of contracts and rights agreements between various corporate entities that have generally become standardized, in order to eliminate negotiations for every song or every artist. But that doesn't mean these agreements are necessarily fair or equitable to all parties.

In my personal opinion, we should fix this in the streaming market -- basically force media producers to be blind as to the buyer (as with DVDs), if they sell at $X per unit, in order to maintain their copyright then $X is the sale price and any distributor can acquire a license to redistribute (for private use) a work at that price.

I would give a grace period to allow for exclusives; 2 years from release, maybe.

Popcorn Time (free torrenting service) but with a payment of a few cents for each work would be possible. Instead of subscription to lots of expensive services.

IPR is a system maintained by the democratic government, make it work for the people.

I can't remember the last time I wanted to watch something which wasn't available to buy on amazon or apple

> with a payment of a few cents for each work would be possible

This is your problem. You expect millions of hours of work to be available to you for pretty much free.

If your only issue is price then I'm happy, market will decide that surely, I'm not suggesting prices be changed from what they are now just distribution monopolies would be removed.

That said, how much should I pay for an episode of a TV show from 30 years ago where the producers are dead and the other creators are mostly comfortably living in retirement having already earned their living and been paid for their work? The offspring of the people working on the show in many cases probably don't even know that their forbears did such work.

> I can't remember the last time I wanted to watch something…

…filmed in the USA, I assume? There’s a tremendous amount of content from other countries that’s not available on any major streaming platform. I wouldn't be surprised if there were a lot of the USA movies that have never been streamed as well.

> You expect millions of hours of work to be available to you for pretty much free.

I don’t think there’s a legal way to watch the majority of movies that have ever been filmed.

I would say The Scene have solved it by exercising the first sail doctrine. First to the topsite gets the the 0sec.

Can you give some more details? "The Scene" is a very common name. Presumably you're taking about first-sale doctrine in USA, is that relevant to re-broadcasting?

I was admittedly being a bit tongue in cheek about it.

https://en.wikipedia.org/wiki/Warez_scene

The DVDs avoid all the licensing issues that properly licensed streaming media has because the profit and control for the rights holder ends when the sale of the media happens.

Similarly, the profit and control of the media ends for the rights holder when it enters The Scene for release amongst their myriad distribution channels.

LOL. Imagine the amount of plastic created by Netflix DVD. How many people you can rent one DVD to and how much plastic is in one DVD compared to the packaging in your trash can right now.

I assume it all delivered by bicycles.

You said plastic specifically.

And the postal service, to a rough approximation, already goes by every mailbox every day. Adding an envelope has a smaller impact than a bicycle delivery.

It’s still not free to deliver, as something other can be delivered by that car. You’re right, saying ‘plastic’ was slightly incorrect, as it’s not just the plastic involved. But also the management of the disk itself, its delivery and the people involved. I agree that we have other wasteful things to care about. They just don’t make that extra disk also free (ecology wise), we’re just so immersed in the waste that it’s truly a tiny drop into the ocean.

There has to be a certain point where the cost is okay and sustainable, compared to the amount of entertainment people get out of it.

Would a bicycle delivery have been okay? How about 1/10th of the impact of a bicycle delivery?

It takes a lot of people to make internet connections work too.

Data centers / the internet are not ecological either: Similar energy consumption as the airline sector.

(And that a significant part is wasted on running ads doesn't make it any better.)

This is valid statement. But I assume that will get much better over time, as computers are getting more energy efficient, which could change a lot en masse. Delivery of disks is harder to optimise, as you cannot just teleport them as easily.

In practice it doesn't though. Greater efficiency just leads to higher usage, if you look into it. Total emissions go up, this is why we can't just technology our way out of this thing. We need to actually reduce total emissions not just per unit.

I guess the fundamental problem is that there is money in showing webpages for the sake of it, due to ads.

It is like litter.

Paper ads are somewhat limited due to consumer complaining about having their mailboxes filled with them and someone has to go there and put it in and can't avoid a homeowner guarding the mailbox if they would force the issue.

Using e.g. uBlock Origin might be the most impact for no effort environmentally friendly thing you could possibly do.

This is called Jevon's paradox.

US residential electricity usage per capita has been relatively flat for a decade or two[1] so I think efficiency increases can offset higher usage.

In regards to Netflix I suspect there's a streaming bandwidth plateau we will hit (if we have not already): there are only so many hours per day people can watch content, population growth isn't that strong (and can't increase forever), and video resolution then becomes the driver of increased data use (and that probably can't increase forever either).

[1] https://www.eia.gov/todayinenergy/detail.php?id=49036

In the US pollution per capita is one of the highest on the planet. So flat electricity consumption is not really sufficient to save the planet. A significant reduction would be needed.

>(And that a significant part is wasted on running ads doesn't make it any better.)

Right, which is why it's a moral imperative to use an ad-blocker. Ad-blockers avoid displaying ads, which reduces CPU usage for displaying those ads, thus reducing power wastage, and helping the planet.

And selecting the pages you visit. I have yet to see ads on HN, Wikipedia and similar :) Yes, I do visit pages with few ads. But tye worst offenders are on my mental black list. I just don't visit them. And I pay for ad-free versions of what I really find worth paying for (Unfortunately that's still not offered widely enough, and sometimes a yearly subscription seems overhead. I mean in the old days people bought a magazine or journal at the station just because the felt like reading it occasionally. But now in our great internet this is typically not possible.)

> Right, which is why it's a moral imperative to use an ad-blocker. Ad-blockers avoid displaying ads, which reduces CPU usage for displaying those ads, thus reducing power wastage, and helping the planet.

You shouldn't be special-casing the ads that pay for the pages you visit. All of the tech behind the page is equally good or bad in this sense.

They're not special-casing ads, surely. the page content is desired by the user, creating a benefit. The ad "content" is not desired, create a deficit, paying with CPU time for a deficit is moronic.

Just because someone tries to give you an advertising flyer as you walk by, doesn't mean you should take it.

> the page content is desired by the user, creating a benefit

That doesn't mean there isn't by the OP's logic a moral imperative to not look at that content, due to the environmental impact. My point is that same imperative should apply equally.

> Just because someone tries to give you an advertising flyer as you walk by, doesn't mean you should take it.

That's a bad analogy, unless someone holding a flyer out pays for a service you consumed.

Suppose you go to some kind of event, and it's paid for by an advertiser. At the event, the advertiser walks around and hands out booklets for whatever they're selling, and insists you spend some time reading the booklet.

Are you obligated to actually read the booklet? Or is "no thanks" OK?

You're not obliged to read the booklet or to read ads online. I don't know why you'd talk as though I said you were.

You seem to be claiming that I shouldn't visit a web page without viewing the ads on it.

But here you seem to be claiming it's ok to visit the event without reading their ad booklet. That's inconsistent.

I would assume in a direct comparison - streaming a couple gb from a data center is probably much more environmentally friendly than moving a physical disk across the country.

Only if you need to stream/ship it a huge number of times.

It would depend on the specifics of each implementation, but shipping 10 discs total over a year is likely to be more efficient than to keep streaming infrastructure up and running for that one movie.

Obviously, the same streaming infrastructure would be used for other content, but how many (unpopular) shows are only watched a few times a year yet they take valuable infrastructure capacity?

And then we get into lack of popularity leading into obsolecence, and we are now talking a much wider topic.

> but how many (unpopular) shows are only watched a few times a year yet they take valuable infrastructure capacity?

Disk space is cheap. I would assume that they don't really take infrastructure capacity.

Well they had 50 distribution centres in the past. It wasn't across the country then.

Streaming is also bad for the planet, it needs a ton of servers which all need energy to run and produce emissions. I don't have figures to mind right now but it wasn't nothing. I'm not sure how it compares to distribution though.

It is much cheaper. A server can easily handle hundreds to thousands of simultaneous streams. Even if the server is requiring 1kW of power for that, it makes a worst case of 10W per client. Maybe double it if you want to count in the datacenter overhead (like AC), but realistically Netflix is doing more like 4 digits of concurrent streams than 3 digits, so 10W as an upper bound feel wrong.

That's less than an end users TV will utilize, and it's probably also less than a standalone DVD player requires.

You're not counting the energy costs of producing the DVD's, shipping, storage and all the people involved who have to travel to work etc.

Or energy costs of producing hardware to serve from, buildings to house those servers, ship them around, replace and fix them, cool them down...

It is likely still more efficient to stream than ship on DVDs (I wonder how much it changes with eg. USB flash drives, SD cards or other rewriteable media), but have upfront energy costs that are harder to estimate.

> Great Netflix is shutting down the business that produces so much unneeded plastic.

I'm baffled to see such an innumerate take on HackerNews of all places. Yearly US per capita plastic consumption is a few hundred kg. How much do you think a netflix subscription adds to that?

You are calling it innumerate while forgetting those plastic consumption number consists of lots of tiny things like the Netflix DVD consumption.

Almost every problem can be divided into many tiny ones, and solution to each tiny problem can be ridiculed that it solves only tiny bit of a problem.

Honestly this sort of climate & environment tokenism frustrates me - spending a lot of energy trying to reduce and elimate things that barely matter (or even actually make things worse by displacement), while ignoring the big ticket items. At best it's innumerate, at worst it's greenwashing.

But nobody was doing that in this thread. Walteweiss was just pointing that Netflix DVD service closing has a significant positive side - less trash generated. Pointing it was called as "innumerate".

There are bigger problems for sure but there is also "there are bigger problems" fallacy (aka fallacy of relative privation).

The disagreement is precisely over whether the positive side is significant.

Again, ignoring the data centre side. It's not from thin air that you can stream.

Considering each disk is reused countless times, it wouldn't surprise me at all if streaming causes more pollution in aggregate.

What about shipping the disc back and forth?

It goes through the envelope sorting system. Incredibly efficient and due to ads being a usps money maker, you'll get mail regardless.

I replied in the other comment, but I thought I’ll mention you as well. I agree that this is a tiny drop into the ocean, but I thing it’s still a positive change.

How much plastic does this actually produce? The DVDs are reused multiple times, as are the boxes. They are comparatively unlikely to end up in the environment, since they are in a closed and controlled environment - people are unlikely to just throw them out in the garbage. Packaging may be an issue. But there are many better ways to reduce plastic pollution - for example just driving a few miles less per year, or driving a lighter car: Tires are a much bigger source of plastic pollution and they shed microplastic directly into the environment and water runoff: https://www.nationalgeographic.com/environment/article/tires...

I'd rather have people kick back on their couch and watch a Netflix DVD instead of feeling great that they saved so much plastic, and then smugly drive their SUV to the next shopping mall.

I wonder if the total amount of energy required to stream the same movie from a datacenter across the country might even lead to more CO2-emissions in total. The internet isn't carbon neutral yet.

It's probably an impossible question to answer.

Maybe, but the point here was plastic pollution. And there, streaming clearly wins, but I believe only marginally.

> Honestly this sort of climate & environment tokenism frustrates me

As an hn'er you should be used to premature optimization ;)

Plastic consumption only consists of lots of equally important tiny things like Netflix DVD subscriptions if you unable or unwilling to do basic arithmetic (i.e. are innumerate).

In reality of course there are a few big things that matter, and lots of tiny things (like Netflix DVD rentals) that don't. Two of the main sources of plastic waste are the packaging and textile industries. If you have a fast fashion habit it's pretty easy (and, at often single-digit $ prices per item, widely affordable) to rack up a few kg of plastic waste per year (a non-trivial fraction as micro-plastics). Now how much plastic waste do you estimate a Netflix DVD habit creates in comparison?

The best case scenario of the innumerate and self-righteous setting environmental agendas is that rather than addressing the big problems, attention gets frittered away on non-problems.

Often, of course what happens is that you end up with something that's much worse than doing nothing. Like for example the bogus plastic recycling policies enthusiastically enacted in much of the Western world, which saw to it that a lot of stuff which would have ended up harmlessly in landfills was loving hand-cleaned and shipped around half the world to Asia to be then dumped into the Oceans. Or “Green” politicians building brown coal plants like crazy.

You added "equally" to misrepresent my argument -> straw man.

You are comparing single DVD rental company with whole textile industry -> fallacy of relative privation.

Some of us just see a positive that less trash will be produced, less stuff will be moved around and you start mentioning "setting environmental agendas". How are those thing related? We cannot be happy until in single stroke we fix over 50% of a global problem? That will never happen.

You mention plastic recycling - I agree it is either pointless or harmful, depending how you look at. it. Do you really consider that not producing trash is also a failed policy? If not why are you doing this comparison?

Netflix is when I stopped buying plastic discs because I could rent them.

Such a flame bait hot take. While you are right in a vacuum, it is completely off topic: if this was a growing market, like the person you are replying to was saying, Netflix would give a rat's arse about ecology and happily ship its plastic.

I’m sad to say that it feels like you are right. I didn’t mean that Netflix is all good, I just meant that we also have an ecology question here that’s involved, not just the money. If it generates tons of money but also generates tons of waste— do we really need it?

I know it’s some naïve idealism, but I would love to see the world where we, as human race, choose to do nothing rather than trash our planet even more. I may sound like a crazy ecology fanatic (I’m not yet), yet I’m becoming more and more worried over all this. While the other commenter legitimately pointed out that servers aren’t free (ecology wise) either, I think they can be optimised over time. Shipping physical disks, I don’t see as rational these days. Even when it gets you money, discard half of your customers and the other half would switch to subscription anyway, you just push them to do that earlier.

We don't need it - that's why it's closing. It's been replaced by digital services.

I don't understand this comment - it might make sense as a (bad) pitch for digitising Netflix in the 2000s, but the millions of FTE days to do that have already been pitched, paid for and worked. What is this adding?

So Netflix has 100k titles like Netflix DVD had? Thought so. Not a replacement then.

You forgot to read the context. That's nothing to do with what we're talking about.

How? Define "need" and "replace." If something is not available on a digital service, it's not replacing anything. And if you want something and the only available place is that service, then you "need" that service to watch it.

If Netflix didn't exist, we'd all be fine. That's how we know we don't need it.

Replace - I'm not sure how much I can add on top of what we've already said, that Netflix has been replacing its mail order business with digital for the last 15 years or so.

Streaming video is completely controlled and customers have to hunt down each specific movie - if available - from specific streaming services.

Meanwhile DVDs are relatively democratic and unencumbered way of distributing video. Netflix can make any movie available via dvd without licensing or asking permission.

I found it to be a very good way of getting high quality movies from the largest selection.

But your complaint seems to sidestep all this, sort of like complaining that paper money wastes so many unneeded trees without acknowledging the huge benefits.

Going off on a tangent, it's actually not that much trees wasted on paper money. Some of it is made of plastic but a lot of it should be called rather cloth money - at least the US dollar and euro are made of cotton and linen fiber instead of cellulose from wood pulp.

Neither is much plastic wasted on DVDs.

On the other hand those data centers don't run on "normal" air, they need lots of cooling and lots of electricity.

Plus, a stagnating movie/TV shows market based on physical disks only (and on previous theatrical releases) is surely a lot more friendly to the environment compared to a always-going-up movie/TV shows market, a market which has to create a lot more content compared to past times. Creating that content is not friendly to the environment, those film crews don't live based on air alone.

Agree, that’s another thing to worry about. We opened a Pandora’s box with the advancement of the Internet. (And I’m not being sarcastic!)

But that won’t go anywhere, so at least physical disks would.

The planet is our lab. We have to keep the lab clean, ordered and well-functioning; it doesn’t mean we have to refrain from doing anything there.

I prefer many devastating events rather not happening at all.

This is what I mean by "ordered and well-functioning". Geoengineering and climate engineering should be improved. We worked in our lab for too long without cleaning up our mess.

The planet is helped if this shutdown actually does reduce plastic and/or gasoline use. For many people the alternative to Netflix dvd/bluray rental is buying their own copies of discs instead.

In my case I have a very good video rental store nearby but now I need to drive somewhere I wasn’t driving before.

It’s much more ecological than every customer buying their own discs. It’s keeping that plastic in circulation instead of being trashed, and Netflix can ensure that defective discs are properly recycled, which consumers often won’t do.

Streaming unfortunately is not a replacement, mostly due to the limited selection of titles and, in the case of Blu-ray/UHD discs, reduced quality.

Netflix requires high bandwidth, ever new high performance servers and routers and all the jazz, and thanks to DRM requires newer equipment to watch content. The pollution created by the digital Netflix is WAY higher than the physical one, it's not even a comparison.

Terrible argument. First stop pretending data centres have no impact on the environment. They do. Second, this is a great use of discs. They are being reused. They aren't just plastic that goes into a dump, it's something people rent and return for others. Plastic in of itself is not a bad material, it's that it's being mismanaged. One use plastics are the biggest offenders, and the amount people use those dwarfs the amount they get from reused rented discs.

It's such a disingenuous argument from people who hate physical media for irrational reasons and want everyone locked into the streamers platforms with no control over their media and streamers who have no incentives to preserve media. If you think that streaming is equivalent in availability to what Netflix DVD had you are mistaken.

Transportation of the disc to the house would probably use more resources than streaming it from a datacenter. But yea, disks could be reused. Spent gas - not.

> The energy intensity figures for data centres and data transmission networks were updated to reflect more recent data and research. As a result, the central IEA estimate for one hour of streaming video in 2019 is now 36gCO2, down from 82gCO2 in the original analysis published in February 2020.

> New passenger cars generally emit from 90 (smaller cars) to 150 (larger cars) grams of CO2 (yes, it's the weight of the whole carbon dioxide, not just the carbon in it) per kilometer.

Disks could be still better, if you rent 20 of them at once.

Every penny you redirect from ownership to renting will be treated with contempt by your new owner. And the only thing your new owner hates more than you is the planet.

We're only talking about the discs, right? Maybe they've changed in the last 10 years but IIRC the envelopes were all paper. One disc probably contains less plastic than the average Chinese takeout order, and surely even at Netflix the lifetime of that disc is measured in years. That's downright eco-friendly compared to all the disposable plastic consumed by our society.

Yeah, and it can be still be profitable right now but have continuously falling margins that they don't see that they can reverse.

Even given all that it seems totally possible to make profits for years to come. Managing a shrinking business might not be as sexy as managing a growing one but there's still money in it.

There might be money in it, or there might not

and there might be opportunity cost to not redirecting resources to other things.

Nothing is stopping them from negotiating shorter lease.

To support your point …

Just 3-years ago, the DVD business was generating $200M in revenue.

Today, it’s only $120m.

That means total revenues are down 66% in just 3-years.

You can’t fault Netflix for wanting to divest a business that is rapidly declining.

And that doesn’t even speak to the profitably of that business unit which is fair to assume to be losing money when you have such rapid revenue decline.

https://www.mediaplaynews.com/netflix-indifference-to-disc-r...

It's not a natural death. They've done nothing to maintain it. They reduced distribution centres (thus increasing wait times) and they haven't replaced many of the titles that have become damaged, so they are unavailable. It's no wonder people are leaving in large rates, because what they used to offer was unparalleled access to films and TV. 100k titles. No streamer has that.

Companies have a finite amount of money.

If the DVD and Blu-ray rental userbase is dropping, I could cut that division's budget in half and move it to another division that is generating much stronger traction (eg. Netflix Korea and their KDrama acquisitions making Netflix a market leader in Asia).

The TAM of the DVD/Blu-Ray rental market has fallen, so as a company, it's best for me to fire those customers - either by slowly degrading the service so they change to the mainstream service, or deprecating the entire service.

> 100k titles. No streamer has that.

But

1. Do does a large enough userbase actually want that?

2. Can that large enough userbase spend enough margins on that service to generate a healthy profit?

3. Are my operating costs for that division rising faster than the revenue from that division?

If all 3 of those answers aren't satisfactory, you end up shutting down an initiative.

Also, there's always FMovies or Pirating for those who really really want it.

It's a chicken and egg argument, we don't have access to the internal metrics to really know which came first, sliding users or diversion of resources to quietly kill the project.

No, it's really not. DVD sales are way down, DVD player sales are down, many young people have never touched a DVD.

I'm not particularly shocked dedicated player sales are down given how ubiquitous DVD players are in basically everything (laptops, desktops and game consoles) and how long they last. Also that doesn't really answer how that trend was spooling out to the mail order rental business over the recent past, people have been using streaming a lot for ages but the business still made sense to keep going before so what in the near term finally made the lines cross?

Off the top of my head, the costs of logistics has skyrocketed since COVID due to staffing shortages and Teamster Union actions/strikes.

Have costs actually increased for the kind of small packages Netflix is sending disks in? The rate for large shipments by the container load have fallen back to around their pre pandemic levels from what I'm seeing in a quick search. That's not really relevant to the kind of shipping costs Netflix would be seeing for it's disk service though but I'm not really finding a chart tracking that.

https://www.statista.com/statistics/1250636/global-container...

I haven't seen a DVD drive in a computer I have bought in almost 10 years.

I only see one today in the PS5 and Xbox Series X, and from the recent Xbox leak it looks like that's going away.

Ok, but my point is you can't just claim the revenue is shrinking as evidence there was no demand when the service itself is getting worse. Perhaps that alone explains most of the reduction. People using the disc service in 2020 had ample time to move to streaming so clearly there was something about the disc service that they found worthwhile.

> revenue is shrinking as evidence there was no demand

Revenue shrinking means there isn't monetary demand. Consistent YoY shrinkage is enough reason to shut down an initiative.

Brownie point initiatives only make sense during a low interest rate environment. If revenue is dropping significantly with no foreseeable market growth, that money can be better deployed in other growth opportunities, or kept in a bank, or given back to investors via stock buybacks or dividends to ensure stronger investor relations and higher valuations.

If you feel there is actual market demand that can be satiated, feel free to build your own alternative. Maybe the economics work for you. This is a forum maintained by YCombinator...

Yup. People fail to realize that the question is not "can I use $100 to run a business that will generate $140 of profit over 7 years", but "in 7 years, what gives me the most return for my $100".

I can't watch DVDs in most of the places I want to consume media any more, and that's increasingly common. Other DVD suppliers are also seeing a big drop in revenue, not just Netflix.

Can you even get a 15" laptop with a dvd drive these days?

You can get an external blu ray drive powered off the USB connection for not much, maybe $50 but I haven't checked recently. I was recently in a vacation rental and easily plugged my laptop via HDMI cable to the large screen TV, worked great for watching disc-based movies.

It's 17", not 15", but I recently bought one of these

https://junocomputers.com/product/nyx-17-v3/

for watching DVDs.

Oh sweet it also has a VGA output.

It has been a decade since I owned a computer with a dvd drive and similarly long since I had to use a dvd at all, and I'm much more of a techie than the average person.

The simple fact is that most people by now don't even have the means to play dvds.

You say you're more of a techie than the average person, so it follows that you have no use for a DVD drive. What about the millions of other people that have had a perfectly fine DVD player in their homes for several years?

It isn't just DVD players. I've never purchased a standalone player, it came built in on my Playstation. It's only in the most modern generation of consoles that you have a choice to buy a disc drive-less version.

The counter point to that is that DVDs look terrible on modern 60" TVs. You don't have to be a techie to have one of those. Even my 93 year old grandmother has one.

Movies and TV shows before 2008 weren't commercially available in resolution above DVD quality, unless special efforts were made to upscale and re-release them.

"Upscale" is the wrong word here. The film is scanned at a higher resolution. If it was shot on tape then yes it has to be upscaled but almost no films were shot on tape.

By more of a techie, I mean to say that I am capable of buying an external reader and dealing with many more hurdles if needed to get something done (eg to read a dvd). So not having a built-in drive would've been less of a hurdle for me, if I had needed to read a dvd.

I have never been a TV console gamer (always been a handheld person), so I concede that point.

I don't think the Netflix DVD customer base is on the go all that much. If anything I would guess they are the segment most likely to still have a cable TV subscription, and do all their media watching at home on a TV.

Being a "techie" is irrelevant. It is straightforward to get a disc player if someone wants it. You clearly don't want it. But if someone does, the lack of tech knowledge is barely a barrier. I would guess people that are less tech savvy are more likely to still use discs to be honest.

I was pointing to being a 'techie' because in my experience, with non-techies, it isn't that obvious to just buy a reader/player.

My parents for instance were surprised to learn that the reader didn't need to be built into the laptop and could be a separate usb thing. They just figured that they'd need to pay for a service to get the discs converted to files on a flash drive similar to how they had previously done for taped videos rather than thinking that they can just buy a reader.

How do you maintain distribution centers with a rapidly declining customer base? Distribution centers closed because customers canceled their subscriptions.

Streamers do have unparalleled access to films and TV. Instantly. No waiting for DVDs that are out of stock.

Ignore the fact that streaming costs more. Why does that matter? It’s a better product.

Spotify disrupted a free product in pirated music.

Price is not the only consideration when it comes to product choice.

The US alone has almost a half a million active streaming service subscriptions. Netflix DVD has 1/500th of that subscriber base.

Apologies but I feel lile this is quite an important distinction to make:

> down 66%

down to 66%.

"down X" suggests/implies down by X.

also it’s 60%, not 66% like they said

My brother in Christ, that is down 40%.

and yet companies can make a successful business out of vinyl, and even cassette tapes - just not at the scale that Netflix demands. This is the OP's point I think.

Here's the hole in your logic: even if Netflix has no desire to operate a particular business anymore (despite presumed profitability), if the business was, in the general sense, desirable (i.e. because profitability), then it would be worthwhile to Netflix to simply sell the business to another entity. Surely, for a desirable business, Netflix should be able to find a buyer for $1 or higher. That would let Netflix liquidate the asset / business while keeping the business running.

Tech industry economics are besides the point. Suppose tech industry economics expects (for the sake of argument, insanely) an internal rate of return of 300% on every dollar spent, while the IRR of the disc business is some measly fraction of that. By liquidating the disc business, Netflix gets to take whatever proceeds from the liquidation - even if it's only $1 - and put it towards other internal usages that it expects that 300% IRR from.

A price like $1 is so small that, presumably, you would go to whoever the current salaried worker is responsible for managing the disc business, offer them ownership for $1, and the manager-worker would happily take the opportunity to become a manager-owner of the desirable business that employs him at a price that anyone could afford.

Of course, in the real world, there are various costs involved. So presumably, (a) the costs associated with liquidation are lower than the costs associated with spinning off the disc business, and (b) whatever the cost associated with spinning off the disc business, no buyer could be found for at least the sum of that cost plus $1; that such costs are indeed above what the salaried manager-worker of the current disc business could afford.

Maybe that's bullshit, maybe not, I don't understand enough about Netflix's disc business to know. But Hanlon's Razor is the better guide here. Either Netflix's board is going where the money is leading them to go, or they're leaving money on the table for malicious reasons, and the second doesn't make sense since it would expose them to shareholder lawsuits.

Either the board knows something we don't know, or they're actively malicious? Are those the only 2 options?

What if the board is just too busy, or mistaken, or stupid?

Too busy: what typically happens is that the concern of the spin-off of the disc business would be delegated to one / a few board members whose responsibility would be to examine the issue and make a recommendation to the rest of the board. The board member(s) themselves are rarely the people doing the analysis of the options; instead they delegate to salaried workers (either of Netflix, a contractor, or working directly for the board member) who do the legwork. So the amount of time that a board member themself will spend on the deal is either zero (they're not a member of the committee responsible for sourcing the recommendations) or fairly minimal.

Mistaken is another form of stupid.

And do you really think you get to be on the board of a ~$168 billion market cap public company by being stupid?

It is possible for them to make suboptimal decisions without being actively malicious.

> And do you really think you get to be on the board of a ~$168 billion market cap public company by being stupid?

No but i don't think you necessarily get there by being intelligent either.

Board seats are traded as favours and nepotism all the time

I know quite a lot of board members of various companies from my days as a lawyer.

High intelligence is rarely a requirement. Maybe most aren't stupid, but more are more lucky than they are particularly smart.

A non-trivial number of boards have run great companies right into the ground, or at least been too stupid or cowardly to stop it from happening.

Boards of private companies or public companies with $168 billion market caps?

Private companies, sure. Boards of private companies often have an iron grip on shareholders and are often unaccountable. But the boards of public companies need to worry about shareholder activists, hostile takeovers, shareholder lawsuits. The margin of error to keep outright stupid, corrupt, nepotists is much smaller on large public company boards.

Do you have actual evidence ? You're just building another strawman here.

Plenty of examples of stupid but successful people.

None of that: intentional shutdown, as the DVD business served its purpose and no longer needed.

Such a disc-renting business would be a competitor to Netflix, both directly (especially in the hands of somebody who tried to focus on it, rather than reluctantly maintaining it, as Netflix has been doing recently) or because it could eventually try to repeat Netflix's own pivot into streaming. Consequently, selling it off would be rather risky.

The start-up costs and need of name-recognition are probably sufficient that it'd be hard for a new company try to fill this niche, but if they bought Netflix's distribution network they could likely manage.

It's not 2000 anymore. This strategy can't be repeated anymore as it depends on the environment being the same as 20 years ago.

> then it would be worthwhile to Netflix to simply sell the business to another entity

This assumes there was a buyer who was able to pay.

As someone who has worked on this kind of stuff, I guarantee the leadership team at Netflix considered and did their due diligence, but didn't find a satisfactory buyer or didn't even find a buyer.

From the marketing perspective it might look bad too if another company took over and did well.

As long as Netflix is a FANG there will be little incentive for them to take risks with their brand.

If it was so profitable there would be many copycats, like with their streaming business.

I don’t know of any copycat.

RedBox, those kiosks that dispense DVDs. Extremely popular in areas less well served by streaming services.

$80 million in revenue in Q2 2023.

so it sounds like RedBox will increase in revenue.

however reading on company "Redbox shares were down 40% in recent trading.

Redbox shareholders on Tuesday approved the company's acquisition by Chicken Soup for the Soul Entertainment." in August.

You would think Netflix getting out of the business should be a sign for shares to go up. Maybe they're not that profitable either.

Shareholders like VCs generally want growth and even if Redbox could gobble up Netflix's DVD rental market share, the market itself is stagnant if not shrinking at this point so a short-lived growth opportunity is not particularly appealing. Redbox could monopolize the DVD rental market and investors still wouldn't be excited because it can't move anywhere from there and it would end up plateauing in a very boring niche.

Investors don't care about profit of the business, they care about profit of their investment (ROI). Whether a company is profitable or bleeding money only matters as part of the prediction on where the share price will go.

> VCs generally want growth and even if Redbox could gobble up Netflix's DVD rental market share, the market itself is stagnant

Netflix IPOed in 2002 and Redbox's parent company is a penny stock (Chicken Soup of the Soul Entertainment // NASDAQ: CSSE)

VCs do not invest in public entities.

The companies that invest in public entities are Investment Banks and Private Equity, both of which are different industries with different norms and regulations from Venture Capital

>You would think Netflix getting out of the business should be a sign for shares to go up.

A massively corp with many experienced analysts considers a market no longer capable of producing a profit... to me that is a sign that the sector is dying.

There's probably a [small] steady-state business in there, but investors want growth.

"but investors want growth" which we know is a stupid mentality.

How many people do you think won't have access to high speed internet in 10 years? It's a dying business.

You are missing the content acquisition cost. With disks its a one time retail fee and you own it.

Are you allowed to rent out regular DVDs? I assume you enter some contract that it is only for private use. I have no idea though, actually.

Yes you are! You’ve let IP rights holders rot your brain.

Are you aware that there are publicly funded buildings in most towns in the US that permit you to rent one or multiple books without a monthly subscription fee? And that the late fees charged by those institutions do not share any of those revenues with the author? And that this model has been around for hundreds of years?

Ok, it seems you are right. But it is not as obvious as you make it sound. I looked into this a little bit more. So, apparently software and audio recordings cannot be rented out and are excluded from the first sale exception to copyright. Movies studios tried to do get congress to do the same for movies but were unsuccessful. So, movies can actually be purchased and then rented out as you stated. But one can still not do whatever one wants with a DVD e.g. public performances (even free of charge) are not legal unless one buys the appropriate license.

>apparently software

millions of people rented nintendo/sega cartridges in the nineties. N actually tried suing blockbuster https://www.nintendotimes.com/1989/08/19/nintendo-sues-block... but couldnt on game lending grounds so went for xeroxing manuals. Blockbuster in return switched to third party manuals, but lawsuit failed.

N heavily lobbied for Computer Software Rental Amendments Act, but ultimately failed and games are excluded https://www.congress.gov/bill/101st-congress/senate-bill/198

Internet penetration is only estimated at 65% today (5.3 billion people), so I can quite confidently say that billions of people will still not have Internet access in 2033.

There are still places without running water and sewage, never mind electricity and Internet access. I'm going to guess that everyone you know has a smartphone, if not a laptop, kindle, and a tablet, plus home Internet access. But not everyone is so lucky, and even in the US, there are poor areas. Huge swaths still don't have cell phone service, never mind 5G. $500 for a Starlink disk, with a monthly service charge, ain't happening.

Some of these places are intentionally devoid of Internet - there are places in Napa, outside of San Francisco, where none of the landowners will allow cell-phone towers in the hilly region, because they don't want it, so there's still no cell access. 10 years won't change that.

Whether that's enough to sustain Redbox, specifically, is a different question, and sure, more people will have Internet access in 10 years than today, but "dying business" is just a perception. Just because you don't have a use case for it doesn't mean that others won't. OG tech company Yahoo! could be called a "dying business", but they did $280 million in revenue for Q2, 2023.

There are a few, we use one and my family uses another. Cinema Paradiso is one.

It's not a growth market so any copycats are likely too small and boring to have received any attention. The licensing landscape also means it's not something you can easily bootstrap. It's a bad example really because while it would have been easy for Netflix to keep around as a profitable but shrinking side business, it isn't something that at this point in history lends itself to creating a new businesses around.

It's worse than that, they want it dead. Presumably because it competes with (and is better than?) the streaming service. IIRC, Redbox offered to buy it. No interest.

https://www.theverge.com/2023/4/21/23692665/redbox-netflix-d...

Look at this as 1M new fiercely loyal netflix streaming customers. They may bring less than 120 M per year, but at much lower cost per customer..

Why would they be fiercely loyal to a company that has just canceled their preferred product?

That is correct, the missing piece is that companies are not valued only on their current p&l they are also valued on the future that is P/E ratio

Netflix has P/E ratio of around 40, when the stock doesn’t look like it’s meeting the ratio why would I buy the stock at that price, I’d buy it (your point) but at a lower price

what about the margins

I can build that selling a dollar for 95 cents. How much are you willing to pay for that business?

Or sell it.

But you need to save the other business of "renting and not owing stuff"

Stopping services for loyal and long time consumers is insane. Even if your profit margin is lower in that business you keep it alive because you respect people who have carried you to where you are now. The hubris...

> Stopping services for loyal and long time consumers is insane

it's not, unfortunately. If the business isn't making _enough_ money (where "enough" actually means maximum possible out of all of possibilities), then you are better off switching the investment to the other investment that is returning more.

Even better would be selling it to someone who wants it.

Netflix is a public company, so that investment tradeoff decision is being made about allocating money not between online netflix and mail netflix, but more like borax and mail netflix.

[flagged]

"Please don't fulminate."

https://news.ycombinator.com/newsguidelines.html

120M in annual revenue for 100 employees is not that high. That's only about 1.2M in revenue per employee.

Netflix's main business makes 2.4M per employee (31.6 billion for 12k employees), and given the nature of such businesses, is almost certainly much more profitable per employee.

Thanks for making OPs point is just so many words.

It's not about the "unusual tech economics", it's about the profit.

Making more money than you spend is not a tech-specific concept.

Seeing 1.2m revenue per employee as a something you might loose money on as "tech", or rather VC backed SV bubble, specific as it gets.

Even more hilarious when people utterly fail to see that. If people weren't serious, it would be peak meta irony.

You're not thinking of "tech", you're thinking of late stage capitalism. "Tech" is just one of the clearest manifestations of that because the revenue per employee is less tightly bounded than in manufacturing or direct services, especially now that rent-seeking has replaced selling.

Revenue per Employee alone is bullshit.

To calculate operating costs it's best to look at Net Income per Employee, which is $378k [0]

Out of that $2.1m, only $378k is left after expenditures, payroll, R&D, etc.

[0] - https://www.macroaxis.com/financial-statements/NFLX/Revenue-...

Reply on news.ycombinator.com