Streaming may be the future for Netflix, but one thing’s for certain at this point: it’s far more expensive than DVD-by-mail.
For every DVD subscriber Netflix loses, it takes four to five streaming subscriptions to earn a similar profit, Janney Capital Markets analyst Tony Wible told AdAge.
This is because of the much lower margins on streaming, which depends on expensive deals with content providers that need to be renewed every three years or so.
Whereas with DVDs, Netflix can rent one DVD out for as long as it continues to work, and it can manage demand through customers’ queues.
Netflix releases earnings today, so we’ll see how the first stage of its drastic push toward streaming worked out. Tune in to SAI at 4 PM eastern for the latest numbers as soon as they hit.