The Netflix earnings call today revealed an interesting tidbit of information for the gaming industry: Netlfix has dropped plans to rent games, according to statements made by CEO Reed Hastings today on the call. The company had announced plans to rent games through its Quikster service, the planned spin-off that would handle DVD rentals. That whole plan died in the firestorm of user response to the idea of splitting off the DVD rental service from streaming (that, and the 60% price hike at the same time).
No doubt the news makes GameFly happy that they won't be getting some major competition. Netflix could revisit the idea later, but that seems unlikely since they are planning on the whole DVD-by-mail thing gradually becoming less and less important to their business as streaming becomes more popular. The tough part with that idea is that margins on the DVD business run about 52%, while margins on streaming are only 11% (due to the high costs of content for streaming).
The company's streaming users now outnumber those getting DVDs by more than 2 to 1, and in the last quarter they lost some 2.76 million DVD subscribers. The company expects DVD rentals to continue to decline over time. Netflix's profits declined for the quarter, but their earnings beat Wall Street expectations, and the stock has climbed 10% in after-hours trading.
