Netflix will benefit if its subscribers transition to watching films delivered online through Netflix rather than on DVDs that Netflix sends. Netflix currently spends about 43 cents on postage per DVD mailed to subscribers, whereas the average film streamed online costs Netflix about 5 cents in bandwidth to deliver. This is based on an average video size of 2 GB and video delivery costs of about 2.6 cents per GB. Although we expect the average video size to increase over time due to high-definition video, the overall savings to Netflix will still be material if users opt to watch films online rather than on DVD.
We estimate that the Number of DVDs Mailed per Netflix Subscriber is 7 per month whereas the average Number of Videos Streamed per Subscriber is less than 1 per month. Within Netflix’s content on our site, here, you can see how the stock will be impacted if these two figures are reversed, and the number of DVDs mailed per subscriber goes to 1 per month.
