Here’s Why Netflix, Inc. (NFLX) Should Kill This Service

There are now 36.3 million streaming accounts worldwide, and that’s more than 80% of Netflix’s audience. Are we really going to worry about the feelings of the 8 million disc-based customers who may very well be just 4 million disc-spinning fans in two years? What if the DVDs are keeping streaming from improving?

A sound argument can be made that Netflix doesn’t need to give up its DVDs. It’s still a cash-cow business, and it wasn’t until last year’s final quarter that Netflix’s domestic streaming business surpassed DVD rentals in contribution profit. However, that line item has been shrinking with every passing quarter at Netflix. Why wait until all the squeezing is done? Why not cash in by selling its mail-order business to Coinstar, Inc. (NASDAQ:CSTR), which would combine the regional distribution centers with its thriving kiosk business or Blockbuster as it tries to offset store closures?

Netflix’s DVD business is valuable, but it will become less and less worthy with every passing quarter.

Perhaps more importantly, studios need to know that Netflix is willing to work without a net. They will never give Netflix fresh content that studios know folks can get in Netflix’s red signature mailers. It doesn’t matter that more than 75% of them don’t have a disc-based plan. The possibility is there. However, if you remove that access from the equation, it then becomes a question of whether the content creator wants to reach Netflix’s 36.3 million-strong — and growing — user base.

I believe that studios would be more likely to crack open their digital catalogs for Netflix if that was the only way in. Yes, I’m going there. Netflix would have a more complete streaming catalog if it had unloaded Qwikster.

Keeping DVD plans around has slowed both Netflix’s progress and its destiny.

If you still don’t believe me, consider Apple Inc. (NASDAQ:AAPL). Do you think it would have a nearly complete digital music library if it also sold CDs? You know the answer, even if you’re in denial. The labels realized that digital was the only way into iTunes, so they didn’t hold back on content. If Netflix wants to be the iTunes of video streaming, it may as well start acting that way.

Nothing but Netflix
Are you convinced? Have you at least had your beliefs challenged? Share your thoughts in the comment box below.

The article Netflix Should Kill DVDs originally appeared on Fool.com.

Longtime Fool contributor Rick Munarriz owns shares of Netflix. The Motley Fool recommends and owns shares of Apple and Netflix.

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