The Netflix red envelope is slowly going extinct

Netflix reported its earnings Monday night, and it was great news for investors, but bad news for wannabe customers: profits are up, but the company will be upping membership costs for new subscribers by $1 to $2 per month.

streaming membership grew by 60 percent in just over two years, while dvd membership fell by 40 percent

If those new, higher-paying members continue the company's recent pattern, they'll be only in for the streaming. The company's membership has grown by 60 percent since the end of 2011 — impressive growth over a period of just over 2 years — despite a steady decline of DVD members. Since the fourth quarter of 2011, after the company first separated its DVD and streaming business, DVD subscriptions have fallen by more than 40 percent. Today, there are only around 6.65 million DVD customers.

Because these figures don't separate out the number of people who get DVD subscriptions only and those who get them in conjunction with streaming, it's impossible to know exactly what share of Netflix subscribers get the regular red envelopes in their mailboxes, but it's clear that the mail service is steadily falling off. Indeed, on its membership FAQs site for Americans, DVD service is presented as almost an afterthought.

Revenue has followed a similar pattern. While the company's sales have crept upward, the revenue form DVD subscribers has steadily been replaced by revenue from streaming customers. Streaming revenues are more than double where they were in late 2011. DVD revenue, meanwhile, has fallen by 44 percent.

This has led to speculation about the future of Netflix's DVD service, some even suggesting it might have to die off. But there is at least one good reason why Netflix might keep the service around: profits. Netflix made a profit of $166 million on nearly $1.1 billion in streaming revenues — a margin of just under 16 percent. Meanwhile, it made around $97.5 million on $204 million in DVD revenues, a margin of around 48 percent.

Will you support Vox’s explanatory journalism?

Most news outlets make their money through advertising or subscriptions. But when it comes to what we’re trying to do at Vox, there are a couple of big issues with relying on ads and subscriptions to keep the lights on:

First, advertising dollars go up and down with the economy. We often only know a few months out what our advertising revenue will be, which makes it hard to plan ahead.

Second, we’re not in the subscriptions business. Vox is here to help everyone understand the complex issues shaping the world — not just the people who can afford to pay for a subscription. We believe that’s an important part of building a more equal society. And we can’t do that if we have a paywall.

So even though advertising is still our biggest source of revenue, we also seek grants and reader support. (And no matter how our work is funded, we have strict guidelines on editorial independence.)

If you also believe that everyone deserves access to trusted high-quality information, will you make a gift to Vox today? Any amount helps.

One-Time Monthly Annual

$5/month

$10/month

$25/month

$50/month

Other

$

Yes, I'll give $5/month

Yes, I'll give $5/month

We accept credit card, Apple Pay, and Google Pay. You can also contribute via