Mail service costs Netflix 20 times more than streaming

By on January 18, 2011, 3:48 PM
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.





User Comments: 25

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JMMD JMMD, TechSpot Chancellor, said:

So how come the streaming plans are only a few dollars cheaper than the mail plan? Hmmm...

jetkami said:

Same reason many new games are only a few dollars cheaper on steam. Companies are...anyone anyone... GREEDY!

Staff
Rick Rick, TechSpot Staff, said:

My assumption is there has to be some license agreement with the producers/owners of these streaming movie titles. It isn't quite like buying a copy of a movie and renting it -- you actually have to create a streamable copy of the media which is illegal, especially for commercial purposes.

Personally, I think it is a miracle it is only $8/mo for streaming. I'm surprised hollywood isn't asking that PER VIEW per movie.

Guest said:

While streaming is nice, it still isn't 1080P with DTS-MA or TrueHD audio. I will stick with my Blu-ray disks through the mail until they can accomplish this. How much longer they'll let me stick with this is the question, I guess.

Guest said:

As this streaming trend seems to be unstoppable, I'm going to really miss the 'extras' that were often added to DVDs -- things like 'making of...' and especially commentaries.

Guest said:

What this fails to talk about is the overall cost of each. I would have to imagine the cost for Netflix of buying a DVD is cheaper than the cost of buying rights to stream a movie. Now is it 20 times cheaper probably not.

Tekkaraiden Tekkaraiden said:

Yes it's pure greed that a company should actually make a profit.

lawfer, TechSpot Paladin, said:

They will never get rid of their mailing service. Never. So the best they can do is reduce it as much as possible.

Vrmithrax Vrmithrax, TechSpot Paladin, said:

I really don't understand why users are so up in arms about Netflix dropping the "add to DVD queue" feature in their various streaming software packages on streaming devices. If you think about it, the add DVD button really should never have been ON the streaming-only devices to begin with, it was probably just a holdover from adapting the original web-based queue and streaming system. The DVD queue only matters to those who have usage plans that include physical media, so why keep a function that is completely irrelevant to a large portion of streaming-only customers? The whole point of the devices where the "add DVD" button was removed, is that they are streaming systems intended to remove the need for the physical media...

People just love to get riled up about petty crap, particularly when they feel they are having something taken away from them - that false sense of entitlement that seems so prevalent in society these days. Nothing is really being removed, it's just being streamlined to simplify and maintain relevance for the entire audience, rather than pandering to a slowly shrinking portion of the customer base. You can still manage your queue online, as it was originally designed.

Relic Relic, TechSpot Chancellor, said:

I would love to do streaming only, unfortunately their current TV/Movie selection is still limited preventing me from completely dropping DVD's. Also I never noticed you could add DVD's via the streaming client =X .

Rick said:

My assumption is there has to be some license agreement with the producers/owners of these streaming movie titles. It isn't quite like buying a copy of a movie and renting it -- you actually have to create a streamable copy of the media which is illegal, especially for commercial purposes.

Personally, I think it is a miracle it is only $8/mo for streaming. I'm surprised hollywood isn't asking that PER VIEW per movie.

I don't think the industry realized how big Netflix would become, and I'm sure future negotiated deals will be significantly more expensive which means higher prices for us =( .

nazartp said:

I'm, personally, kind of pissed at them for a several reasons:

1. The quality of streaming is lower than that of BlueRay (not even speaking of the speed of the network and that it gets bottlenecked every once in a while);

2. Limited library - some of better or more popular movies being even upward of 10 years old are still not available for streaming;

3. What about ISP's implementing the bandwidth cap? Consumer gets stuck with the bill. A lose-lose proposition.

3DCGMODELER 3DCGMODELER said:

I have not tried the streaming yet, I should....But only on the computer... Oh opps forgot I have a PS3..Maybe I will try the streaming thingy, not to many movies yet to pick from..... The Movie Companies need to start making more movies.. New movies not remakes.... hmmmm my 2 cents worth ..

Guest said:

Of course it's not as good as Blu-ray. A Blu-ray disk requires up to 54Mbps of throughput. Your ISP is probably selling you closer to 10Mbps, and delivering around 4Mbps if you're lucky. That's less than 8% of the data transfer of Blu-ray. DVD data-rates can be up to 10Mbps - it's actually strange how good Netflix quality is, considering how little they have to work with.

It's not Netflix's fault - it's the fault of your ISP.

Guest said:

I like the streaming feature but every time I want to watch a movie (mostly documentaries) I can't find it in streaming.

I find their selection really poor (at least in the streaming side). Hopefully it will get better with time.

I think Netflix should start looking into deals with foreign productions so it might have exclusive deals to stream european/asian titles in the US (imported DVDs are rarities).

Let's globalize the market (not just the working force).

nazartp said:

@Guest. Of course, I'm expecting streaming to be worse than BluRay. That's not the fault of Netflix. Their fault is that they are nudging customers to consume the lower quality product with no alternative.

Guest said:

Well, you won't have to worry about that. Hollywood is starting to make rental only DVD's that do not have any of the extras. They are saving those for the people who buy the DVD.

Guest said:

Streaming is OK, but I still prefer DVD's. The picture and sound quality is better than streaming and searching for chapters on the disc is faster. Also, I prefer to see sub-titles as some dialogue is difficult to hear.

And what will happen to streaming if my service provider decides to throttle my bandwidth at some future date?

Guest said:

Yes, jetkami, for-profit companies exist to make money, and to make as much money as possible. You can condemn them as "greedy" if you like, but you might as well condemn crows for being black. It's simply the nature of the beast.

The upside is, if you think Netflix's prices are too high, you are free to use some competing service instead (or no service at all). Nobody is forcing anyone to use Netflix, and if enough people go elsewhere, Netflix will lower their prices to lure customers back.

Guest said:

What's most amazing is that it looks like Netflix is about 1% of the post office's revenue!

Guest said:

Umm...perhaps because $7.99/month is the going market rate? Set by Hulu.....duh!

Guest said:

"I think Netflix should start looking into deals with foreign productions so it might have exclusive deals to stream european/asian titles in the US (imported DVDs are rarities)."

It is interesting you say that.....Netflix already offers several titles that are available for streaming only that are either Region 2 (NON-USA) DVD's or not on DVD at all.

So...yes....your selection on streaming only is steadily getting better and better.

Guest said:

What about those of us who don't have fast enough internet to stream movies? You take away the add to dvd queue button, and then I can't watch that movie anymore because I can't stream it. That's why I'm not happy about it.

SNGX1275 SNGX1275, TS Forces Special, said:

What about those of us who don't have fast enough internet to stream movies? You take away the add to dvd queue button, and then I can't watch that movie anymore because I can't stream it. That's why I'm not happy about it.

And thats how I can tell you didn't read the article or these comments.

More recently, Netflix removed the "add to DVD queue" button on its streaming devices.

If you don't have fast enough internet to stream you aren't going to be using a streaming device (like a game console, new tv, or bluray player) to add to your dvd queue, you will do it just like you have been, through a web browser.

Guest said:

I love Netflix's overall strategy to go streaming only. I want - I'm really trying - to love the quality and functionality of Instant Watch. On the same devices, VuDu is just fantastic and Netflix is PAINFUL. Netflix = contant buffering, poor quality, little 5.1 audio, audio sync problems, terrible compression artifacts, etc. Meanwhile, on the SAME devices, VuDu is damn near flawless. VuDu is CRUSHING netflix on true 1080p+5.1. Like I said, I really WANT to love Netflix, but their streaming is just painful to deal with. Not sure where in the world their servers are, but i'm guessing the south pole. Looking forward to Netflix noticing blu-ray titles in people's queues get rated and removed from the queues before they are shipped or instant watched... this has happened with a number of titles in my queue. Loving VuDu quality, not love Vudu cost. But for people with 1080p projectors and 5.1 systems, VuDu HDX is the ONLY way to stream.

Guest said:

How do you feel now :)

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