The current Netflix employee describes how the company has recently cut costs by tweaking the algorithm that determines which customers receive new releases first. It has managed to keep an impressive profit margin by steadily making the business more efficient.įor example, one of the big recurring costs for the business is buying new DVDs. If you visit the office of each business "you won't believe it's same company," one current employee tells CNBC.Īlthough Netflix has no incentive to kill off the business yet, it also doesn't want to spend any more money than is necessary to keep operations running smoothly. That business, DVD.com, has its own website, management team, benefits package and headquarters located near the main Netflix headquarters in the Silicon Valley town of Los Gatos, California. The company also surpassed $100 billion in market cap for the first time after its earnings announcement Monday.Īlthough there's only one "Netflix" that reports earnings, the business really does think of itself as two separate companies: one for the ambitious streaming service and one for the waning DVD business. Netflix just announced a whopping 117.6 million digital subscribers worldwide and plans to spend $7.5 billion to $8 billion on content this year. After all, it still pumps out profit - $62.7 million last quarter - which the company can inject into its fast-growing streaming business. On Monday, Netflix reported 3.4 million remaining DVD subscribers in its fourth-quarter earnings release, down 186,000 since Q3, 731,000 year over year and 16.6 million from 2010's peak of about 20 million subscribers.īut even as the service sheds members, Netflix has no motivation to formally phase out the DVD business. Scalise, who first signed up for Netflix in 2000, is one of the several million people who still wait expectantly for those once-iconic red envelopes.
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