There's been some discussion about how much it costs Netflix to operate. Specifically, what is the cost per disc, and at what number of discs per month, per customer, does Netflix fail to profit? This is part of the ongoing debate about Netflix's strategy for allocating titles among users when there aren't enough to go around.
This Motley Fool commentary includes some figures from Wedbush analyst Michael Pachter: "Pachter estimates that it costs Netflix $1.80 to store, mail, and receive DVDs. So at the $17.95 price point and a gross margin percentage of 34% (data provided by Capital IQ), customers can rent 6.6 disks per month. At the $9.95 price point, to maintain the gross margin percentage, customers can rent 3.7 disks per month."
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