I'm curious, do you have numbers backing the higher profitability of their streaming business over DVD-by-mail?
I do agree that, if they wanted to get rid of their original line of business without looking like that's what they were doing, this would be the best way.
> I'm curious, do you have numbers backing the higher profitability of their streaming business over DVD-by-mail?
Simple reasoning will get you to that conclusion. There are no physical plants to maintain. No physical inventory to maintain. No postage costs.
You do have the costs of bandwidth, computing power, and licensing fees. I would imagine those are less than the above.
On top of that, they wouldn't be throwing everything into streaming unless they were making more money there. Even the most retarded of businesses will focus on a more profitable line than a less profitable one.
Yeah, you mention it, but I think you're vastly underestimating licensing costs. Hollywood / content producers have them over a barrel, especially now that they're spinning off the DVD business.
On top of that, those servers don't run themselves and those infrastructure costs you so quickly dismiss are significant.
This. When you own a DVD, you can rent it out as many times as you want and you don’t owe the studio another dime. When you have a digital movie on a server, every act of streaming it to a customer constitutes “copying”, subject to a license fee. And the studios want to milk that revenue source for all it’s worth and then some.
You're simple reasoning seems to be: "I don't know if the costs for handling physical media are cheaper than streaming low-latency high-bandwidth video over the internet, but I imagine that it is." I'm failing to see how "I imagine" == "simple reasoning." Just sayin'.
You're also making the assumption that aside from the distribution mechanisms, everything else is the same. That's far from the truth. Netflix most likely has to do separate deals with the content owners for DVD and for streaming that likely have vastly different terms.
You're also ignoring the possibility that Netflix views the DVD side of the business as a noose around their neck in negotiating deals for streaming content with the content providers, and the separation is an attempt to free up their hands.
For other similar* businesses that I'm aware of, streaming isn't more profitable on a per unit basis as compared to DVD rental/sale (but subscriptions to unlimited streaming are much more profitable, because usage tails off but people don't cancel).
* similar = streaming and disc media - it's the adult space, not mainstream video
I do agree that, if they wanted to get rid of their original line of business without looking like that's what they were doing, this would be the best way.