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so I'm reading this article about Netflix that rents DVD's via mail.

Netflix charges customers $19.95 per month for a subscription that allows them to choose movies online and have them shipped out via first-class mail. Subscribers return the DVDs using enclosed mailers. There are no late fees. Customers can rent as many movies as they want during a month but can only have three movies out at a given time.

Apparently they went IPO last month and raised 82.5 million US.

How do you make money, I mean shipping the DVD's back and forth has gotta cost a fair bit of dough. What am I missing?
 

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I'm sure they have a nice volume discount
Yes, I'm sure they do but if someone gets a movie every week, that's at least eight shipments a month (four times there and back). Plus all the admin and handling. hmmm

reminds me of the old expression, "we lose a penny on each sale but we'll make it up on volume!"
 

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Chances are a good deal of customers don't rent more than like 3 a month so don't use the full $20 worth each month.
 
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