Summary:

Netflix is moving ahead with plans to ween users off its DVD-by-mail service, announcing it would do away with the “Add to DVD Queue” feature on streaming devices. But an overwhelmingly negative response could mean that Netflix has underestimated the importance of DVD to its users.

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Netflix announced in a blog post Monday that it would be doing away with the “Add to DVD Queue” from its user interface on streaming devices, a decision that shouldn’t be too surprising considering its shift in focus from DVD-by-mail to streaming movies. What was surprising, though, was the overwhelmingly negative user feedback that the post received in the comments section.

In the post, Director of Product Management Jamie O’Dell explained the reasons for the decision:

“We’re doing this so we can concentrate on offering you the titles that are available to watch instantly. Further, providing the option to add a DVD to your Queue from a streaming device complicates the instant watching experience and ties up resources that are better used to improve the overall streaming functionality. This change does not impact the Netflix Web site, where most members manage their DVD Queues.”

Based on that rationale, it seems the “Add to DVD Queue” feature was getting in the way of Netflix’s streaming ambitions, and complicating users’ decisions on how they chose to watch movies. That is, rather than watching a streaming title right away, users were instead choosing to wait and rent the DVDs later.

Netflix, of course, is placing a big bet on streaming and trying to wean customers off its DVD-by-mail offering, which carries high costs due to postage and sorting infrastructure. By comparison, the relatively low cost of streaming videos — for about 5 cents a titles — offers up a higher-margin and more manageable business model. While its focus on streaming is clearly paying off, with 66 percent of users streaming titles in the third quarter 2010, up from 41 percent a year earlier. The number of hours of streaming content that its users consume now surpasses the hours they watch on DVD, Netflix announced during its last earnings call.

But comments on the post suggest that a large portion of Netflix users still aren’t fully on board with its streaming offering, preferring DVD-by-mail instead. Of the nearly 300 comments that have accrued over the past day, the vast majority expressed disapproval with Netflix’s plan to do away with the “Add to DVD Queue” feature. More importantly, a number of comments complained about the selection of titles available through Netflix’s streaming library, perhaps suggesting that the service doesn’t have enough content for some users.

It’s too early to say that the comments might represent a backlash against Netflix’s instant streaming plans, as the company continues to post increases in its subscriber count and percentage of users that use its streaming service. However, Netflix should remain aware that its DVD-by-mail business is still an integral part of what keeps many subscribers on board.

Image courtesy of Flickr user Scott Feldstein.

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