Probably not for rental, but they could run a store and/or studio publishing label and call it "The Netflix Archive", where they sell 4K UHD Blu-rays of their exclusive content after a period of time. I'd happily pay a premium; and while it's a niche, I think it's a sustainable one if done right, where there are still people like myself who value maximum quality, ownership, censorship resistance and mass-archival/preservation/availability.
The Irishman for eg. is only available on a Criterion Blu-ray which is 1080p, 8-Bit, SDR, AVC (H.264). And a lot of other good stuff is only digital.
I'm all for convenience being an option and the mass-market norm, but the idea of physical not being an option at all (and the subsequently quality / other benefits) really rubs me the wrong way.
I doubt it would eat into their subs, the sort of people who would go for these would be a smaller part of the audience who are willing to pay a premium; and even then, I'm sure most of them would still have or maintain a Netflix sub.