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How Netflix is Saving America

I'm sure all the NFLX shorts will love that headline.

So we all know how the consumer is such a vital part to the US economy-- something along the lines of 70% GDP. So, for example, if oil runs to $200/bbl, money from consumers will have to flow out of discretionary items into their gas tank... not a good thing.

So I'm going to pull out an envelope and a grease pen to go through a typical movie rental now vs. 5 years ago:

Today:

Household pays 8 bucks a month, and watches whatever they want.

5 Years Ago:

Every Friday, the household would have to drive out to the rental store, pay 5 bucks for the weekend, be charged a $2 late fee 20% of the time, and drive back to return it.

So let's run some conservative numbers with these scenarios:

  • Gas is $2.50/gal, and the car gets 20 miles to the gallon. Let's assume that the local BBI is 5 miles away and the household goes there on average 4 times per month, so 40 miles per month driven is $5. This assumes no batching with groceries and other shopping, so could be too aggressive.
  • 5 bucks per weekend for a rental is $20
  • They get nicked with a late fee of $2 about 20% of the time, so expected late fee per month is (4/5 * $2) or $1.6
  • Food costs assumed constant

Total costs 5 years ago for a household per month is about $26.60, or $319.20 per year. An NFLX subscription is $96 per year so we see a yearly savings per household of $223.20.

Current subscriber count for NFLX is about 20M, let's cut that by a third to get a conservative estimate of actual households-- 13.3M.

That means NFLX saved consumers about $3B.

How's that for disruptive technology?

by Steven Place

Steven Place is the founder and head trader at investingwithoptions.com/