Netflix (nasdaq: NFLX) is the largest online DVD rental service, offering flat rate rental-by-mail and online streaming to customers in the United States. Established in 1997 and headquartered in Los Gatos, California, it has amassed a collection of 100,000 titles and approximately 8.2 million subscribers. The company has more than 55 million discs and ships 1.9 million of them to customers each day, on average. Netflix previously claimed to spend about $300 million a year on postage. On February 25 2007, Netflix announced the billionth DVD delivery. It topped the ForeSee Results' Top 100 Online Retail Satisfaction Index with an American Customer Satisfaction Index score of 86, well over the industry average of 75.

Services

The company provides a monthly flat-fee service for the rental of DVD movies. A subscriber creates an ordered list, called a rental queue, of DVDs to rent. The DVDs are delivered individually via the United States Postal Service from an array of regional warehouses. Currently, there are more than 50 shipping points located throughout the United States. The subscriber can keep the rented DVD as long as desired, but there is a limit on the number of DVDs (determined by subscription level) that each subscriber can have on loan simultaneously. To rent a new DVD, the subscriber must mail a previous one back to Netflix in a prepaid mailing envelope. Upon receipt of the disc, Netflix ships the next available disc in the subscriber's rental queue.

As of July 24, 2007, Netflix's most popular plan cost US $16.99 (plus tax) per month, allowing a subscriber to rent up to three DVDs at a time, with unlimited exchanges. Other monthly plans range from US $4.99, for one disc at a time and a limit of two per month, to US $47.99 for eight with unlimited exchanges. For the three-out and eight-out plans, each rental slot costs the subscriber approximately US $6 a month. Netflix also sells gift subscriptions for various renting intervals, although the recipient must register using a major credit or debit card.

In addition to its movie rental service, Netflix also sells used DVDs to its subscribers. The purchase is delivered via the same system and billed using the same payment method as the subscriber's rentals.

Watch Instantly

Netflix has a "Watch Instantly" feature available to all eligible subscribers. The feature enables subscribers, at no additional cost, to stream near-DVD quality movies and recorded television shows instantly, depending on the subscriber's internet connectivity. Initially, the feature offered subscribers one hour of media for approximately every dollar they spent on their subscription. (A $16.99 plan, for example, entitled the subscriber to 17 hours of streaming media.) In January 2008, however, Netflix lifted this restriction. Virtually all subscribers now are entitled to unlimited hours of streaming media at no additional cost. Only subscribers with a plan of $4.99/one DVD per month aren't provided unlimited access to the streaming service. (They are allowed two hours). The new terms of the service are a response to the introduction of Apple's new video rental services.