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Mail Service Costs Netflix 20x More Than Streaming 473

Posted by samzenpus
from the costly-snail dept.
Jake writes "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. 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."
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Mail Service Costs Netflix 20x More Than Streaming

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  • Mail Service Costs Netflix 20x More Than Streaming

    Umm... Is this news to anyone? Ok, perhaps the exact figure of 20x, but otherwise?

    • by MoonBuggy (611105)

      It's a surprising disparity, at least to me. If I'd made an offhand guess I would have probably estimated $0.15 in bandwidth or maybe $0.60 in postage - only a factor of four. Not something that'll keep me up at night, sure, but a moderately interesting little bit of information.

      Seems like half decent "News for Nerds" in my opinion.

      • It's not just postage. You have to figure in the cost of handling as well. Picking the product. Packing the product. Unpacking the product. Shelving the product. Goto 10.

      • "Up to $1" != $1 (Score:4, Insightful)

        by timeOday (582209) on Wednesday January 19, 2011 @04:00PM (#34932316)
        It's a surprising disparity to me to, and the wiggle words "up to $1" are probably there for a reason. With mail delays, you can get basically 2 DVDs per week for each you are allowed home at once. For the two at a time plan, that would be $16 per month on shipping alone for a plan that costs $14.99 per month. It's possible netflix runs that way, since most customers probably aren't nearly that efficient. But I am that efficient, and you'd think they would have throttled me by now if I were an unprofitable customer.
        • by markdavis (642305)

          But they *DID* start to throttle customers like us (yes, I ship back quickly too). Don't you remember all the news about it? Lots of customers complained loudly, and rightfully so- there was nothing in the terms or agreement that allowed Netflix to throttle. They were doing it secretly on plans listed as "unlimited" (sound familiar- like secret cell phone data caps?). I remember quite well being throttled and being penalized at the end of the month when they decided I had rented too much. But then, aft

    • by h00manist (800926)

      Mail Service Costs Netflix 20x More Than Streaming

      Umm... Is this news to anyone? Ok, perhaps the exact figure of 20x, but otherwise?

      I'm sure there are many who still think DVD-over-net is expensive.

  • Until....buffering......buffering..... pesky.....buffering...buffering.... Comcast et al does their dirty deeds.
    • Seriously? My wife and I watch maybe 40-50 hours a month of Netflix Streaming content over our Comcast connection, and have only had a problem once. I'll live with that to have an entire content library at my fingertips.

    • Until....buffering......buffering..... pesky.....buffering...buffering.... Comcast et al does their dirty deeds.

      Huh. If only the someone would adopt rules that specifically preventing ISPs from block, degrading, or discriminating against content providers that compete with services offered by the ISPs, particularly calling out voice and video services.

      Oh, wait, they did [fcc.gov].

    • You knows it would be a real shame if that stream of yours got slowed down..

    • Comcast has oversold your local drop or you need your lines fixed.

  • Unfortunately (Score:5, Insightful)

    by BrianRoach (614397) on Wednesday January 19, 2011 @02:16PM (#34930818)

    I don't want to watch old movies or flops all the time.

    Their streaming selection is ok for TV shows, but for movies it's fairly poor. This is no doubt directly due to the MPAA restricting what they can stream.

    • Re:Unfortunately (Score:5, Insightful)

      by MrDoh! (71235) on Wednesday January 19, 2011 @02:20PM (#34930864) Homepage Journal

      Totally. I'd be happy paying another 10bucks on what I currently pay to be able to stream something released in the last 15 years.
      Caught up on my early 80's Zombie flicks, just want more recent (well, better!) films... Big film companies need to make this work as an awesome service before everyone heads back to Bittorrenting.

      And as for ISP's wanting to charge more? Why did you sell me a high speed link if you didn't expect me to actually use it?

      • Re: (Score:3, Informative)

        by h4rr4r (612664)

        They actually have lots of pretty decent indie and foreign films. If you really must have something that Michael Bay directed you can always get the DVD.

      • Re:Unfortunately (Score:4, Informative)

        by genghisjahn (1344927) on Wednesday January 19, 2011 @03:00PM (#34931440) Homepage
        Here's a list of movies available on Netflix Instant that have been released in the past 15 years...

        Last 15 Years List [cloudapp.net].

        Requires Silver Light. It's pretty cool.
    • by kellyb9 (954229)
      Streaming is slowely taking over their entire model. They have plans that don't even include the disk service. I'm assuming that as more and more people have set top boxs/game consoles, they'll have a better selection. It really isn't that terrible at this point compared to other comparable services.
    • I don't want to watch old movies or flops all the time.

      Their streaming selection is ok for TV shows, but for movies it's fairly poor. This is no doubt directly due to the MPAA restricting what they can stream.

      The flip side of that, though, is that you can find stuff to watch while you're waiting for the next batch of stuff to arrive.

      I agree with you whole-heartedly, but it hasn't been as impactful as I first imagined.

  • Margins (Score:5, Insightful)

    by 99BottlesOfBeerInMyF (813746) on Wednesday January 19, 2011 @02:16PM (#34930820)

    This article seems to be missing something important. How much does Netflix pay to the content provider for a license per movie played? Last I saw, estimates for most big players were something like $.50 to $.80 per view. For DVD's Netflix has to maintain a huge network of warehouses, staff, and buy replacements for what is broken, and the shipping, but in many cases that still seems to be cheaper than getting a license to stream the same film.

    • by donnyspi (701349)
      wouldn't they still need some special license to rent out the DVDs?
      • Re:Margins (Score:5, Informative)

        by 99BottlesOfBeerInMyF (813746) on Wednesday January 19, 2011 @02:27PM (#34930964)

        ...wouldn't they still need some special license to rent out the DVDs?

        No, the media companies lost that battle long ago.Legally you can rent out movies you own, so long as you have the physical media, aren't copying that media, and aren't renting them for public viewing.

        • by doconnor (134648)

          While that is true, I understand most big rental companies get their DVDs at a fraction of the cost, in exchange for giving the movie companies a cut of each rental.

          • Re:Margins (Score:4, Insightful)

            by 99BottlesOfBeerInMyF (813746) on Wednesday January 19, 2011 @02:40PM (#34931180)

            While that is true, I understand most big rental companies get their DVDs at a fraction of the cost, in exchange for giving the movie companies a cut of each rental.

            This is often the case, but the maximum price for any given rental is set by the price in the consumer DVD/DVD resale market. Thus prices are pushed down dramatically. "What you don't want to give us a break, okay, we'll just buy a couple from Ebay on the cheap." With streaming, there is no maximum so media producers push a lot harder. Netflix's rental by mail business is all that gives them leverage to push back, because they can't be "banned" by any media company until they comply with absurd licensing fees.

      • Re:Margins (Score:5, Informative)

        by kdawgud (915237) on Wednesday January 19, 2011 @02:28PM (#34930990)
        First sale doctrine says they can do whatever they want with the DVDs once they buy them...
      • by jgtg32a (1173373)
        Nope, First sale doctrine
      • by Kjella (173770)

        Under US law, no [wikipedia.org]. In any other jurisdiction, check your local law.

    • Netflix has a market cap bigger than some studios. If they want the content, they'll just buy the studios or the copyright rights wholesale. Who is going to stop them? Blockbuster?

  • by Rooked_One (591287) on Wednesday January 19, 2011 @02:18PM (#34930836) Journal
    I tend to see that very popular movies (especially new releases) are not up for streaming.

    You have to know that Netflix realizes they are saturating the internet, and perhaps they are doing us a favor by biting the bullet when it comes to paying a little more to ship... Maybe... I'd say they are one heck of a non conformist company if this is the case... But i'm going to say its pure laziness until I hear otherwise.
  • by franknagy (56133) on Wednesday January 19, 2011 @02:19PM (#34930844) Homepage

    Some of us are stuck with "braodband" in the 1.5Mbps and movie streaming is
    just not an option. May the telcom industry go stuff itself!

    • by Politburo (640618)
      I'm on 768k and Netflix (via Wii) usually works fine without rebuffering. It prebuffers for a couple of minutes, which can be a little annoying, but still better than waiting 1-2 days for the disc (or longer if you're watching a TV series on multiple discs).
    • It's a pity that Netflix doesn't support more aggressive caching. They obviously trust the DRM of their various streaming platforms enough to keep the wicked, wicked, stream-rippers at bay, so one would assume that an equal level of protection could be afforded to larger chunks on disk(that, and the fact that anybody who cares about quality would just pirate from the DVD or blu-ray, not a compressed stream).

      Even a full DVD9(8.54GB) would take a touch under 13 hours at 1.5Mb/s. Assuming some amount of ISP
  • Don't live in the US, and don't know how Netflix operates. But the way I see it...

    A lot of people won't blink at an extra $1 per DVD to hire movies in a way that is convenient to them. Not everyone has high speed unlimited broadband. If peoplewant physical media and postage they can pay for it. A $0.95 fee per DVD probably won't phase anyone, where as $700M per year might be too much for a company to absorb.

    However, I do wonder how many DVDs are lost or damaged and what the loss from that is...that might ma

    • by Dthief (1700318)
      If the increase the price people will just go to other services.....e.g. blockbuster who has (probably) similar amount to stream and easier access to discs because of their brick and mortar stores/infrastructure. I use and enjoy netflix's service, but if they increase the price again I'll start looking at what else there is.
      • by Junta (36770)

        I don't know about your area, but in this area, blockbuster has thoroughly gone extinct in terms of brick and mortar presence. Basically, netfilx is the only offering currently doing both streaming and nationwide disc access. Now you could do one company for streaming, and redbox for another.

        I also seem to recall some idea for Blockbuster to do Redbox like kiosks, but streaming video and letting people walk away with them on customer provided flash memory instead of on discs.

    • by h4rr4r (612664)

      $1 per DVD?
      I pay $20 per month for 3 at a time and go through probably 15 movies a month. No way would I pay another $1 per DVD. There is nearly no environmental factor, those mail trucks run with netflix or not.

  • Volume Comparison (Score:5, Insightful)

    by Alanbly (1433229) <alanbly@gmail.com> on Wednesday January 19, 2011 @02:19PM (#34930858) Homepage
    Yes, on a per-movie basis streaming is far cheaper but what's the difference in movies streamed per account versus movies rented via mail. I'd wager the average Netflix customer who doesn't stream consumes far fewer movies per month than the average streaming customer.
    • by jedidiah (1196)

      I figure it will only be a matter of time before the studios make it cheaper to send things by Snail Mail.

      It's just in their nature to be greedy beyond sustainable levels and to squeeze their customer facing distributors (like movie theatres).

    • by Kjella (173770)

      Yes, but somebody wins when you cut costs. If you stream more movies, the customer gets more and is probably willing to pay more. Or you can create a limited streaming subscription for people that watch less than X hours with the same price but higher margins. Or lower the prices and make it up on volume. Or maybe it goes straight to Netflix's profits. Either way someone ends up better off (except the postal service).

  • War against Netflix (Score:5, Informative)

    by GPLDAN (732269) on Wednesday January 19, 2011 @02:22PM (#34930890)
    Content providers are at war with Netflix, and Netflix is differentiating Classes of Service depending on hardware used.

    How I do I know? Same way you could know if you did the research. I have a Wii, a PS3 and Apple TV. Hook them up to a FastE hub, or a FastE switch that supports SPAN. Attach wireshark on a laptop.

    Start the Netflix viewer on each device. Note that they each have different data centers that they reach out to. Always.

    Traceroute to these IP addresses. Note that the Apple one in particular is congested at the last hop.

    That is why the Netflix service sucks using the ATV2 unit.

    So you have Netflix giving different hardware manufacturers different experiences - AND - you have bandwidth providers (mainly cable) trying to kill Netflix outright by rate shaping the traffic.

    If I were Netflix, I wouldn't put those DVD burners on Ebay just yet...
    • by Cwix (1671282)

      That would explain why streaming from my PS3 is so shitty compared to my computer.

    • you have bandwidth providers (mainly cable) trying to kill Netflix outright by rate shaping the traffic.

      Oh, heck, my Roku can't even deal with Comcast's Powerboost. It sees the initial availability of high bandwidth to Netflix, tries to run at full quality, then once the buffer is exhausted finds it needs to re-buffer back to a lower quality.

      I'd really really like to be able to tell it to just run at 3-dots quality all the time. Heck, I'd probably take 2-dots most of the time if the content wasn't visual

    • Content providers are at war with Netflix, and Netflix is differentiating Classes of Service depending on hardware used.

      [...]

      Start the Netflix viewer on each device. Note that they each have different data centers that they reach out to. Always.

      That could be discrimination in class of service, it could be that they use platform-specific DRM systems on the user end, and that they support that with separate servers because its just easier to do that way.

    • by alispguru (72689) <bane.gst@com> on Wednesday January 19, 2011 @03:22PM (#34931764) Journal

      Apple TV uses a bad setting for DNS by default. See here [appleinsider.com] for a description of the problem and solutions.

      It's not Netflix's fault, surprisingly enough.

      • by GweeDo (127172)

        Apple TV doesn't use a "bad setting" by default. They use whatever you set it to or whatever your DHCP server tells it to use. If you have that set to OpenDNS or Google DNS or whatever you break Akamia. If you have it set to your ISP's DNS which most people will, you have no issue.

  • Now if only they'd get Season 7 of "The Office".

    I realize that's almost a complete non-sequiter. I just want to see Season 7, and I don't want to put up with Hulu's commercials.

    • by Surt (22457)

      Yeah, that's going to kill Hulu, I bet. The number of people who just aren't going to watch commercials with their content any more is going nowhere but up.

  • by sideslash (1865434) on Wednesday January 19, 2011 @02:22PM (#34930906)
    ...that so many "A" titles are unavailable for streaming from any source (not just Netflix). C'mon, people, it's the 21st century. Put everything up there; I'll gladly pay a buck or two to rent what I want, whenever I want; and I think most adults have the same attitude (not necessarily a lot of Slashdot readers, but anyway).
  • Too bad In Canada (Score:5, Informative)

    by future assassin (639396) on Wednesday January 19, 2011 @02:24PM (#34930930) Homepage

    SHAW and ROGERS are pushing hard to penalize people for using services like Netflix with their new caps and $1-2 per gig for going over. CRTC+SHAW+ROGERS+BELL= Consumer shafting FTW!

  • by Maxo-Texas (864189) on Wednesday January 19, 2011 @02:25PM (#34930942)

    pay for improvements to the backbone.

    Linux distros and other filesharing will disappear by comparison.

    This is the service that pays for the next internet upgrade.

    I know I've gone from 28kbps up / 380kpbs down to 120kpbs (sometimes 180kpbs) up / 800kpbs down on comcast in houston.

    The capacity is there.

    I regret not getting Netflix sooner but they seem to have exploded recently-- at least 20 new series and a hundred new movies seem to be added weekly. I'm now 450 hours behind on viewing and I haven't even added Lost yet.

    This is the "cable TV" killer. Cable TV will have to lower rates from $10 a month.

    And Columbo from the 1980's is just as entertaining. Watched a great Danny Kaye film last night.

    There is a huge oversupply of entertainment-- it's time for the prices to start coming down!

    • by dunezone (899268)

      ...and a hundred new movies seem to be added weekly.

      Don't get me wrong, I love watching bad movies. But of those 100 added every week maybe 2 or 3 are decent and everything else is terrible or B-Movie.

    • No, it's not the "cable TV killer" because in most cases, that's who is providing the broadband pipe. And when it's not ... it's the phone company, which may also be selling you "cable" (See: Verizon FIOS) and/or "on-demand" content.

      This is why Comcast wants to double-dip and change you AND Netflix for your internet connection. Without government regulation it will never be cheaper to stream the same content available from the last-mile provider; the last-mile provider will prevent that from occurring.

      • I have been using Comcast for internet for 10 years (well Time Warner and then Comcast).

        However, I don't use Warner/Comcast cable TV and haven't for ages because their signal quality is bad. It's digital so they must just be pumping in crap or overcompressing. So I went to Dish and they kept inching up my rates. I finally cut them when I cut a $10 service to get the price down and next month they raised my rates by $10.

        I'm willing to pay about $40 for cable TV( and the loss leader ads are always 29.95).

    • by Belial6 (794905)
      I cancelled my DishNetwork service last May. It is the first time since I was ~6 years old that I have been without some form of 'cable'. The Hulu/Netflix combo has satisfied our TV watching pretty well. I only expected it to last a few months. So far, I don't see a need to go back.

      Ironically, shortly before that, I started doing business with Comcast. Netflix/Hulu did kill 'cable TV' for me, but because of some serious monopoly shinanagans by AT&T, it didn't kill paying a bill for Comcast servi
    • kpbs . . . kpbs . . . kpbs

      I fail to understand how the heck you're able to stream a movie on 800 kilopers bit second

  • by jaymz666 (34050) on Wednesday January 19, 2011 @02:25PM (#34930948)

    Since it uses 2 or so GB per HD movie streamed, your comcast caps will be pushed. The USPS hasn't called me up saying I have used too much mail.

  • by seebs (15766)

    2M DVDs per day, ~300 shipping days per year (assume they don't ship on Sundays or holidays), that's about $600M.

    But how on earth do we conclude that they spend "more" on shipping than they do on streaming? Do we have a number for how many movies they stream? I don't.

  • But if they act quick maybe they can run some fiber along their pipelines. Oh, wait...
  • 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.

    Does this figure reflect the $20million Comcast payoff?

  • When netflix ships a DVD, they pay $1 and nobody else pays. I don't pay to receive the DVD at my house.

    When you stream a DVD, not only does netflix have to pay for bandwidth (akin to the $1 / movie with physical shipping), but the receiver has to pay for bandwidth to receive it as well. I don't have to pay for my mailbox, however, you could say that I have to pay rent/mortgage.

    It's also cheaper b/c with streaming none of the bandwidth is dedicated to a specific user but is applied to all users. Whereas t

  • Never underestimate the cost of a station wagon full of tapes hurtling down the highway.

  • by Shoten (260439) on Wednesday January 19, 2011 @02:35PM (#34931092)

    Of course it's cheaper. Netflix is just the latest to reap the benefits of cheaper delivery via digital means. Just as email is cheaper than snail-mail, spam is cheaper (unfortunately) to send than promotional mailers, Craigslist is cheaper to post on than putting flyers up in a neighborhood...it's even cheaper to use virtual tape drives for backup, and digitally replicate the backups over WAN links than it is to send tapes via UPS, overall. The examples of this seem endless, and there are many reasons why it happens that way.

  • and bide their time in general to take advantage of what was inevitable: streaming media. Now that broadband is ubiquitous, it's the next evolution in watching movies. I just wish they had their ENTIRE library on line. It's going to be interesting to see if the demise of Netflix's meatspace delivery will bump up the values of Coinstar, owner of Redbox.
  • Netflix got a sweetheart deal on a lot of the content streaming. There's talk that the content providers want a far bigger cut the next go around.

    Netflix created a market for them that they didn't even realize was possible and now they're bitching about not getting a big enough cut. I like that Amazon is funding their own studio. Create better content and to hell with the studios.

  • At least for what I'm looking for. Every now and then I figure, "Hey! I'll watch X! I've got a couple hours, why not?" And of course, you can't stream X. Happens a couple times a week to me.

    Of course, then there's the case of the missing series in my instant queue. I had farscape on there, checked back in Dec...it had been moved to disk only. Crappy and annoying. Then it reappeared in my instant queue in January. No explanation.

    I love the entire idea of streaming movies, but they need to get things

  • by Marrow (195242) on Wednesday January 19, 2011 @02:47PM (#34931264)

    Streaming has a lot of downsides for me. Its really bad at fast-forward / rewind. It does not support subtitles. Extra DVD features are not present. So I like DVDs better. That said, they could get around some of these issues by caching the content at my house. If I put movies into my streaming queue, the content should begin downloading to my home right then, and not wait until I want to watch it. Sort of like a dvr with remote PUSH capability. Also if I an my neighbour add the same movie, then we should be able to help each others caching. And your netflix devices should just grab local cached data instead of streaming it from the internet. Doing it this way, the downloads could be done slowly, some could be done at night in off hours. And same-subnet boxes could scatter-gather the content to be even more efficient. The local cache would make the FF/RW perform much better. And extra features could be added as extra chapters that you can skip to.

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