Investing With Options header image ≡ Menu

Just Released: Get Your FREE Iron Condor Trading Toolkit

Click Here to Download

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:


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