The cost structure is very different from the DVD rental-by-mail business, where the costs—warehouses, wages, shipping, replacement discs—are variable. The major benefit of establishing a popular subscription service with a fixed-cost base is that once you exceed a certain number of subscribers, every new dollar of subscription revenue is pure profit. The hard parts of pulling off this strategy are (a) acquiring a large number of subscribers, and (b) building a catalog of must-see movies and TV series.
