DVD-by-mail rentals: do it for free Aug30 '08
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That extra DVD per month is free, but I'll probably upgrade eventually anyway.
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# (1 of 1): Mark Smithivas
1 day, 9 hours after the fact. (Sun 31 Aug 2008, 11:32 PM CST)
I see a couple issues with this. First, Netflix is already including ads in all its mailings to you. They are the ads for new movies printed on the inside of the mailing envelope.
More importantly, I think it would be risky to offer a free option, as I'd bet a significant number of customers (like me) who currently are locked into a paid plan would downgrade to the free plan, thus putting a dent in their bottom line. I don't think ad revenue would cover this shortfall.
Secondly, they'd have to double their inventory to carry two versions of every movie - the paid version with no ads and the free version embedded with ads. That alone would increase their carrying costs, increase their labor staff, warehouse capacity, etc. etc. So they'd be spending a ton of money to service a lower-yield customer.
This is probably part of the reason why they're delving into the instant watch market - because competitors can offer this type of viewing option at extremely low cost because there are no physical slabs of plastic for a worker to stuff into an envelope and ship across the country. It's all virtualized content that can be augmented easily with ads.