To everyone worried that Netflix is spending too much money on bandwidth for Netflix Instant, calm down: Turns out that they spend 20 times more on postage for their DVDs.
It costs the company $1 to mail each DVD, compared with 5 cents per streamed movie (on average), but that price difference is one of the few reasons that studios are excited about the rise of streaming content from the company: It means Netflix will have more money to spend on getting rights to shows. A feature in the Hollywood Reporter suggests that Netflix will spend around $700 million this year – and $1.2 billion next – to license content for its Instant service, as studios realize that they can ask for more as demand grows from customers for more, and more recent, content. An unnamed Time Warner source is quoted as saying, “Hollywood used to give library content to Netflix cheap. That has stopped,” while analysts suggest that companies like Disney are bundling low-interest content with high-demand shows and movies purely because they can. The landscape is definitely changing for Netflix – but at least they won’t be spending quite so much on postage.
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