How does Netflix make any money?

[stormkeeper_lovedoris]

I love Netflix. I don't get what their business model is though or how they make any money. They only get 5 bucks a month from me, and I don't see how that can even cover the costs of shipping me 2 DVDs a month (paying for both sending a DVD to me and my return of the DVD), let alone paying for the actual DVDs themselves, paying staff at their distribution centers, website upkeep, etc. How do they do it?

I realized one reason I love Netflix so much -- I associate having the time to watch DVDs with very happy times in my life. I tend to watch lots of DVDs around the holidays when I have some time off work, and I also watched several during my sabbatical. Movies = time off from work = happiness for me. Seriously, just thinking about having the time to sit down and watch a DVD makes me smile.

Comments

[zooey-glass04.livejournal.com]

Netflix make their money off people like me (I have Amazon home rental, but it's the same principle). I love getting the DVDS - I rent TV shows, mostly - but I suck bigtime at remembering to return the DVDs. So at least every other month, I forget to return my DVD and they still get my money, without any pesky providing a service. So they win, and I also win, since if I rented a DVD from the video shop, I'd rack up a lot more than £4.99 in late fees. I'm betting that the majority of people who use these services are much like me, and we subsidise the people like you who actually use the service to the full.

[stormkpr.livejournal.com]

*nods* Thanks for the explanation - makes a lot of sense now.