Pimp Your Finances

Thanks to a new web app called FeedFlix, there’s been a lot of discussion about the economics of Netflix. 

Netflix suggestion fail

Proponents say the cost of Netflix is more than outweighed by the savings it generates.  Doubters say that given their lifestyle, they would pay more if they subscribed.

I started wondering: is Netflix good for me?

Cost of Netflix

First, I used FeedFlix to figure out how much I’ve paid for my subscription.  FeedFlix is a free web app that analyzes your Netflix account and summarizes your history.  It tells you how long you’ve been a member, how many movies you’ve watched, and what the average cost per movie has been.

I’ve been a member for 2 years, so the subscription cost is $324 (I started on the one movie at a time plan, then switched to two).

To figure out if I’m saving money, I need to estimate how much I would’ve spent on movies otherwise.  There are four areas of potential savings: money spent on cable, going out to movies, renting movies, or buying movies.

Cable

I haven’t changed cable plans since I subscribed to Netflix, so the savings here is $0.  If you have premium channels or don’t watch much TV, you should consider trying Netflix as you may be able to replace all or part of your cable plan.

Going out to movies

My wife and I used to go out to the movies about once a month.  Over two years, that would be 24 movies, at a cost of $8.50 per ticket per movie.  However, even with Netflix, we still went out to 2 movies.  The first was Spiderman 3.  I hated it, and was jealous that the wife fell asleep during it.  The second was the Dark Knight, and I loved it.

Total savings from not going out to movies: 24 movies (would have seen) – 2 movies (saw anyway) * $17 for tickets = a savings of $374.

Renting movies

We never rented movies, so the savings is $0.  When we went to the video store, we would wander around for about 30 minutes trying to find something.  And even if we did, we’d forget to take it back and have to pay late fees.

Of course, if you rent movies, you could completely replace that with Netflix.  They offer a better selection, especially when it comes to older, independent, or foreign films.  Plus it’s nice to never have to go to the store or pay late fees.

Buying movies

We never rented movies, but we definitely bought them.  As recent college graduates, it was fashionable to have a large movie collection, regardless of how often we watched them.  It’s a safe bet to assume we used to buy 2 movies a month (one new, one used). 

Even with Netflix, we still bought some movies.  I don’t know the exact number, but I’ll overestimate and say we’ve bought 6 new and 6 used DVDs in the past two years.

For the sake of estimates, I’ll low ball and say that used movies cost $5.35 after tax, while new ones cost $16.05.

Total savings from not buying movies: (24 used movies – 6 bought anyway) * $5.35 each + (24 new movies – 6 bought anyway) * $16.05 each = $385.

Summary

So far, I’ve spent $324 on my Netflix subscription, but by very conservative estimates, I’ve saved $759.  That’s a net savings of at least $435.

For me, Netflix is a great way to save money.  Not only am I spending less, but I don’t have to sacrifice my lifestyle.  If anything, I’m watching more movies than I would have otherwise.

These are the type of changes you should try to make in your life, because they are sustainable.  You are getting the same enjoyment (if not more), while spending less.  It’s a win-win situation.