The economics of Netflix

Lately I’ve signed up for Netflix.com. You pay $20 a month and you get mail order DVDs, free shipping, and you can keep them as long as you want. The limit is three to a customer. Once you return what you have, you can order some more. This is a big business and Wal-Mart is entering the market.

I am finding that Netflix changes what I watch. Service is prompt but there is a lag between ordering and viewing. The only late fee is the rather abstract opportunity cost of not being able to order more films. So I can order a DVD and not watch it for a week or even a month. I can engage in a kind of artistic deficit spending. I find myself ordering more movies that I feel I “ought to watch,” but won’t necessarily enjoy. After all, the consequences of my decision lie further in the future. I find myself especially altruistic toward my wife, and what she wants to watch. I am more willing to order long movies. I could never bring myself to rent The Shawshank Redemption, which is compelling yet sappy and well over two hours long, but now I have seen it.

Netflix reminds me just the tiniest bit of democratic voting. I order films to feel good now about my ordering, and not necessarily to watch them. Overall Netflix has improved my movie viewing and induced me to experiment more. Fortunately it is a supplement to other ways of choosing movies. When it comes to what I really want to see, nothing beats getting in the car and driving there, pushing through the yellow light to make sure I don’t miss the previews.