No, Netflix doesn't suddenly believe in DVDs againFebruary 17, 2012: 3:33 PM ET
Netflix is making the signup process a bit easier for customers who want to rent only DVDs. That doesn't mean the company has suddenly re-embraced the DVD business.
FORTUNE -- Netflix (NFLX) CEO Reed Hastings really can't catch a break. And it's only partly his fault. Ever since that whole aborted DVD-spinoff fiasco (Qwikster), which followed that whole new-pricing-plan fiasco, every one of his utterances has been examined by the media for evidence of either cluelessness or cynicism. Which is quite a turnaround from how he was treated before all that happened.
Now, Netflix's decision to make it slightly easier for people to sign up for DVD-only rentals is being characterized in some quarters as mercurial and clumsy. But it's really nothing. The DVD-only plan was still available; it just wasn't so easy to sign up for. Now it is slightly moreso. That is a backpedal, but a minor one. And it is a further acknowledgment that Netflix had previously jumped the gun. But what's wrong with that?
Enough people still want DVDs that Netflix feels it must accommodate them. And many of those people still want DVDs partly because there are still a lot of movies -- particularly older ones -- that the studios haven't made available for streaming. Furthermore, competitors are leaping onto the field, some of them offering DVD plans along with streaming. If Hastings had his way, all movies would be available via streaming, and he could dispense with the DVD business altogether. He basically says as much. Last month during a conference call with investors, Hastings said: "We expect DVD subscribers to decline steadily every quarter, forever."
"That is not a vote of confidence," concluded Greg Sandoval at CNET. No, it isn't. Hastings has no confidence in the long-term viability of the DVD business. Why should he? And why should the decision to make it easier to rent DVDs be characterized as hypocritical? The company is taking care of its customers who want DVDs now. It can do that while at the same time believing that the business is fading away. Hypocrisy would be if Hastings suddenly became a cheerleader for DVDs, and Netflix put a big banner on its homepage for the DVD-only service. But, tellingly, it's not even mentioned on the homepage.
It's never easy to shift from a shrinking legacy business to a new, growing one: just look at telecommunications and newspapers. Any company attempting such a shift is bound to make some big mistakes along the way. In that context, Netflix is doing a lot better than might be expected.