(Adds executive comments, company background)
By Dawn Chmielewski
April 18 (Reuters) – Netflix Inc is winding down its DVD-by-mail business, the company said in a blog post on Tuesday, ending the service it started around 25 years ago.
The company said its DVD rental business had been shrinking and it will not be able to continue to offer quality service. Netflix will ship the last discs on Sept. 29.
“Those iconic red envelopes changed the way people watched shows and movies at home – and they paved the way for the shift to streaming,” Netflix Co-CEO Ted Sarandos said in a blog post announcing the DVD service had entered its “final season.”
Netflix co-founder Marc Randolph described in his autobiography how he and co-founder Reed Hastings had flirted with the idea of challenging Blockbuster Video with mail-order VHS cassettes, but it would have cost too much. They instead landed on a more cost-effective proposition: DVDs sold and rented online.
It was a calculated risk that the nascent DVD player, which went on sale for the first time in the U.S. in 1997, would catch on with the consumer. The service launched in 1998 with fewer than 1,000 titles, according to Randolph’s account.
“Betting on DVDs was a risk,” Randolph wrote in his book, “That Will Never Work: The Birth of Netflix and the Amazing Life of an Idea.” He added: “But it might also be our way to finally crack that category.”
It was the first time Netflix’s gamble on an emerging technology allowed it to challenge an entrenched competitor. Rival Blockbuster filed for bankruptcy in 2010.
“From the beginning, our members loved the choice and control that direct-to-consumer entertainment offered,” wrote Sarandos.
When Netflix attempted in 2011 to split its DVD rental business from online streaming into a separate service called Qwikster, it provoked howls of protest from consumers. The plan was ultimately scrapped.
(Reporting by Dawn Chmielewski in Los Angeles and Yuvraj Malik in Bengaluru; Editing by Krishna Chandra Eluri and Matthew Lewis)