Video: Netflix CEO Reed Hastings On The Economics Of Movie Streaming

A couple years ago, Netflix began supplementing its DVD mail rental business with movie streams over the Web. for a few thousand select titles. Today, millions of Netflix customers stream their movies instead of waiting for them to come in the mail (or, more often, do both). ComScore Video Metrix estimates Netflix’s online viewership a bit lower at 645,000 unique viewers in March. They watched 6.9 million video streams and the average time spent watching per viewer is an amazing 128 minutes for the month, which is right up there with YouTube in terms of time spent (having full-length feature films helps keep people around longer).

You pay Netflix a subscription, and you can watch your monthly allotment of movies any way you want. Netflix doesn’t care where you watch your movies, whether it is on your TV, xBox 360, Windows Media Center, or other devices.

Streams still make up a small portion of the overall movies watched by Netflix customers, but it is growing as the company expands its streaming catalog, broadband improves, and computers become more like TVs (and vice versa). I ran into Netflix CEO Reed Hastings at the AllThingsD conference this week, and asked him in the video above how his streaming service is going and how its economics compare to that of mailing out DVDs. As you can imagine, it costs much less to stream a movie over the Internet than it does to mail it as a DVD. But Netflix ends up paying twice anyway because it already owns the movies on DVD. It has to pay the studios an additional streaming fee. The studios like that. “If the studios have their way, we’ll pay them two or three times,” quips Hastings. But he is resigned to paying wtice for movies he’s already bought. The way he looks at it, Netflix is paying the studios instead of the Post Office.