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Netflix offers free gifts as the service ends

The curtain has finally come down on Netflix’s once-iconic DVD-by-mail service.

The steadily shrinking DVD service in the shadow of Netflix’s streaming video service was shut down after its five remaining distribution centers in California, Texas, Georgia and New Jersey mailed their final discs to US customers on Friday.

Fewer than a million recipients who subscribe to the DVD service get to keep the final discs that arrive in their mailboxes.

“It’s sad,” said Amanda Kunkle, a longtime Netflix DVD subscriber, as she waited for the arrival of her latest disc, The Nightcomers, the 1971 British horror film starring Marlon Brando. “It makes me feel nostalgic. Having these DVDs has been part of my routine for decades.

Some remaining DVD fans will receive up to 10 discs as a permanent gift to loyal customers like Konkle, 41, who has watched more than 900 titles since subscribing to the service in 2006.

At its peak, the DVD service had more than 20 million subscribers who could choose from more than 100,000 titles stored in the Netflix library. But in 2011, Netflix made a pivotal decision to separate its DVD business from its streaming business, which now has 238 million subscribers worldwide and generates $31.5 billion in revenue annually.

In contrast, the DVD service generated just $146 million in revenue last year, making its eventual closure inevitable against the backdrop of intense competition in streaming video that has forced Netflix to cut back on expenses to boost its profits.

“It’s very bittersweet,” Netflix CEO Mark Randolph said when the company shipped its first DVD, Beetlejuice, in April 1998. “We knew this day would come, but the miraculous thing is that it didn’t come 15 years ago.”

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Although he has not been involved in the day-to-day operations of Netflix for 20 years, Randolph came up with the idea for the DVD-by service in 1997 with his friend and fellow entrepreneur, Reed Hastings, who eventually succeeded him as CEO. — a job that Hastings held until he stepped down earlier this year.

When Randolph and Hastings were contemplating the concept, the DVD format was such a nascent technology that there were only about 300 titles available at the time.

In 1997, DVDs were so hard to find that when they decided to test whether a disc could pass through the US Postal Service, Randolph ended up putting a CD of Patsy Cline’s greatest hits in a pink envelope and dropping it in the mail to Hastings. From the Santa Cruz, California Post Office.

Netflix quickly built a base of loyal movie fans while relying on a new monthly subscription model that allowed customers to keep discs for as long as they wanted without facing the late fees that Blockbuster charged for late returns.

Renting DVDs by mail became so popular that Netflix was the US Postal Service’s fifth-largest customer while mailing millions of discs each week from nearly 60 US distribution centers at its peak.

Along the way, the red-and-white envelopes that delivered DVDs to subscribers’ homes became an eagerly anticipated piece of mail that turned Netflix night into a cultural phenomenon. The DVD service also spelled the end for Blockbuster, which went bankrupt in 2010 after its management rejected an opportunity to buy Netflix rather than try to compete against it.

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Randolph and Hastings always planned for streaming video to make the DVD-by-mail service obsolete once technology advanced to the point that watching movies and TV shows over Internet connections became viable. This expectation is one of the reasons they settled on Netflix as the name of the service rather than other monikers they considered, such as CinemaCenter, Fastforward, NowShowing, and DirectPix.

“From day one, we knew DVDs were going away, and that this was a transitional step,” Randolph said.

“And the DVD service did that job beautifully. It was like an unknown booster rocket that got Netflix into orbit and then returned to Earth 25 years later. That’s very impressive.”

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