OM in the News: The Life Cycle of the Netflix DVD

“Products are born. They live and they die. They are cast aside by a changing society,” we write in Chapter 5 (Design of Goods and Services, on page 162). And so it is with Netflix DVDs. The headline in The Wall Street Journal (April 21, 2023) reads “Netflix is Mailing its Last DVD, The Die-Hards are in Mourning.”

Netflix said it would close the DVD-rental business it was built upon after shipping more than 5.2 billion discs in 25 years. Viewer tastes—and Netflix’s core revenue pool—have shifted to streaming. Many movie buffs and DVD die-hards have clung to the Netflix DVD service even after others decided discs were too cumbersome. Subscribers say they like the service because Netflix has a bigger catalog of older films than they can find on any streaming platform.

When Netflix first started mailing DVDs, it was a revolutionary alternative that saved subscribers a trip to video rental stores like Blockbuster or Hollywood Video. Subscribers can choose up to three movies or TV shows at a time, and the company sends those discs in the mail.

Netflix has known since 2009 that its DVD business would go the way of other aging technologies as broadband internet access became faster and more affordable. The company began investing more in original streaming content than in new DVDs. That strategy paid off. Netflix’s streaming service ended the first quarter with more than 232 million subscribers. (It had 40 million DVD subscribers over its lifetime).

Netflix didn’t say what it plans to do with its disc catalog after it mails its final DVD in September. Subscribers need to send back their last discs by Oct. 27. Figure 5.2 in your Heizer/Render/Munson text illustrates the sales, cost, profit, and loss in a life cycle such as this.

Classroom discussion questions:

1. Describe the 4 phases of this product’s life cycle.
2. Name three other products and identify the phase each is in.