Netflix currently pays up to $1 per DVD mailed round trip, and the company mails about 2 million DVDs per day. By comparison, the company pays 5 cents to stream the same movie. In other words, the company pays 20 times more in postage per movie than it does in bandwidth, according to The Hollywood Reporter.
Doing some simple math, Netflix is spending some $700 million per year in physical disk postage. Rising content prices are offset by declining postage fees for the company, as more and more users choose the streaming-only option. Furthermore, subscriber revenues will continue to increase as Netflix increases the size of its streaming library.
Two months ago, Netflix announced an $8 streaming-only plan, and raised its DVD prices. More recently, Netflix removed the "add to DVD queue" button on its streaming devices.
"We're doing this so we can concentrate on offering you the titles that are available to watch instantly," a Netflix spokesperson said in a statement. "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."
Users are very annoyed with the change, but as we've come to deduce, the reason the company is doing so comes down to cost. Streaming is the way to go, and Netflix wants to slowly but surely kill off its DVD mail service, or at least significantly make its streaming options look much more attractive.
Thursday, January 20, 2011
Mail service costs Netflix 20 times more than streaming - TechSpot News