Which Netflix Plan is the Best Netflix Plan?

Netflix currently runs the online DVD rental business with more than 13 million active subscribers.  With Blockbuster struggling to avoid bankruptcy, Netflix continues to develop new streaming technology that allows the company to produce higher than expected earnings each and every quarter.  One thing that hasn’t changed in a while though, is the cost to be a Netflix member.

The economics of Netflix is quite simple.  The more DVD’s you’re able to rent at a time, the more money it’s going to cost you.  Each additional DVD costs between $3 – $7 and the most complicated thing about Netflix is just which plan is best for you. That said, I want to know which plan presents the best value regardless of how often you watch DVD’s.

First, we need a price list of current Netflix plans.

• 1 DVD out at a time – $8.99
• 2 DVD’s out at a time – $13.99
• 3 DVD’s out at a time – $16.99
• 4 DVD’s out at a time – $23.99
• 5 DVD’s out at a time – $29.99
• 6 DVD’s out at a time – $35.99
• 7 DVD’s out at a time – $41.99
• 8 DVD’s out at a time – $47.99

So now that we know how much these plans cost, what’s the next step?  Well let’s play out a scenario that maximizes the value of each plan.  For example, let’s say Johnny Drama watches a movie every night he can and decides to return the DVD’s together (very important).  This means that if three Netflix movies arrive on a Tuesday, Johnny watches a movie that night, Wednesday and Thursday and has all DVD’s in the mail Friday morning.  Assuming two business days, including Saturdays, mailing time for each set of DVD’s, (if Johnny lives relatively close to a sorting facility) just how many movies could Mr. Drama watch in a 31-day month with each of the above plans?

One Netflix DVD At A Time (Packaged Return)

Plan DVD's	Cost of Plan	Number of DVD's That Can Be Rented	Cost Per DVD
1	$8.99	9	$1.00
2	$13.99	14	$1.00
3	$16.99	17	$1.00
4	$23.99	20	$1.20
5	$29.99	23	$1.30
6	$35.99	24	$1.50
7	$41.99	24	$1.75
8	$47.99	24	$2.00

So in the above scenario, the best value plans are one, two and three DVD’s at a time. Any more than that and you end up paying more than $1 per DVD rental. Now, let’s play out the exact same scenario except for the fact that Johnny returns DVD’s right after he watches them. So if again he has the 3 DVD plan, he’ll receive all of his movies on Tuesday, watch one Tuesday nigh, return it Wednesday morning, watch one Wednesday night, return it Thursday morning, etc.; Same plan, but returns DVD’s individually. What does the value of the plan become?

One Netflix DVD At A Time (Separate Return)

Plan DVD's	Cost of Plan	Amount of DVD's That Can Be Rented	Cost Per DVD
1	$8.99	9	$1.00
2	$13.99	18	$0.78
3	$16.99	27	$0.63
4	$23.99	31	$0.77
5	$29.99	31	$0.97
6	$35.99	31	$1.16
7	$41.99	31	$1.35
8	$47.99	31	$1.55

Looks like the 3 DVD plan comes out on top this time and the 2 DVD and 4 DVD roughly tie for second place. Two scenarios down and the 3 DVD plan comes out on top both times. So far, this plan is looking like the one to beat.

Kicking things up a notch, let’s say Johnny Drama just can’t get enough of movies and decides he can watch two movies each and every night.  Having four hours of free time on his hands probably means Johnny doesn’t have much of a personal live but to each his own.  Going back to the very first set of rules, let’s assume Johnny watches the movies as soon as possible and returns them when all DVD’s have been watched.  Will the 3 DVD plan come out on top for a third time?

Two Netflix DVD’s At A Time (Packaged Return)

Plan DVD's	Cost of Plan	Number of DVD's That Can Be Rented	Cost Per DVD
1	$8.99	9	$1.00
2	$13.99	18	$0.78
3	$16.99	21	$0.81
4	$23.99	28	$0.86
5	$29.99	30	$1.00
6	$35.99	36	$1.00
7	$41.99	35	$1.20
8	$47.99	40	$1.20

At $0.78 per DVD, the 2 DVD plan comes out on top this time with the 3 DVD plan a very close second place. If you look back at previous performance, the 2 DVD plan has been the cheapest or second cheapest option each time. So going into the last scenario, it would appear the 2 DVD and 3 DVD plans are the best bang for your buck. Finally Johnny Drama will watch 2 DVD’s per night and return them as fast as possible (meaning individually).

Two Netflix DVD’s At A Time (Separate Return)

Plan DVD's	Cost of Plan	Number of DVD's That Can Be Rented	Cost Per DVD
1	$8.99	9	$1.00
2	$13.99	18	$0.78
3	$16.99	27	$0.63
4	$23.99	36	$0.67
5	$29.99	45	$0.67
6	$35.99	54	$0.67
7	$41.99	54	$0.78
8	$47.99	54	$0.88

So what does all of this mathematical madness mean?  Well looking at all of these plans on a consistent movie watching basis, the 3 DVD plan is the best value.  It ranks first in three scenarios and a very close second in the other so if you’re an avid movie watcher and on the fence about which plan to choose, the $16.99 a month, 3 DVD plan is certainly the one for you.

With that said we can also make some other inferences about what you see above.   First, if you’re not able to watch a DVD at least once a night, then the only plan for you is one DVD at a time.  Any other plan will simply cost you more than the value you will receive so keep that in mind.  Second, any plan greater than 3 DVD’s at a time is not worth it unless you can watch at least three movies a day.  Anyone that has the time to watch three movies a day consistently probably shouldn’t be spending $30 a month on home movie rentals. (Or can afford to spend A LOT more than $30).  Finally, no matter which plan you choose, try to pinpoint your rhythm of DVD renting early on so you can change your Netflix plan to suit your needs.

I hope you enjoyed our little demo and are more educated on which plan you need to select after signing up for a Netflix two week free-trial.