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With the rising popularity of set-top boxes and an ever-growing array of streaming services, you might think that Netflix's original business of shipping out DVDs in its iconic red envelopes is obsolete and outmoded. But as Emily Steel reports for The New York Times, Netflix's DVD operation is alive and well. Approximately 3,400 discs are processed through the company's rental return machine each hour -- five times as many as when Netflix employees used to process them by hand. Steel reports that the machine, dubbed the "Amazing Arm" by the company's engineers, symbolizes the way that Netflix has managed to maintain a profitable DVD operation, even as it builds a global streaming empire.
Netflix now has more than 65 million streaming members in more than 50 countries, and has concrete plans to expand around the world within the next 18 months. But the company projects that its streaming business will only break even globally through 2016 as it spends billions of dollars on content and on expansion. The often ignored DVD-by-mail operation still has 5.3 million subscribers -- considerably fewer than the 20 million it had at its peak in 2010 -- but continues to generate hundreds of millions of dollars in annual profit, augmented by engineers' work to improve customer service and streamline the process of sorting and shipping millions of DVDs each week.
But why do users continue to subscribe to Netflix's DVD service, when there are practically endless options of services to stream movies and TV shows instantly? It turns out, there are still some pretty compelling reasons for users to keep the company's DVD-by-mail operation in business.
1. Access to a bigger library
One major reason to subscribe to Netflix's DVD service is to gain access to the entire breadth of its selection of titles. The New York Times reports that Netflix has Netflix about 93,000 titles available for next-day delivery service to 92% of its subscribers. Additionally, the most recently released films tend to be available only on DVD, and not on Netflix's streaming service, because of rights issues.
The licensing for physical rentals of DVDs or Blu-rays is significant simpler, and new movies are...