The DVD service has overhead costs that the streaming service doesn't: the envelopes, postage, the DVDs themselves, replacement expenses when the DVD is too scratched to keep sending, etc. Those things all require manpower, too, since it involves handling physical media. Contrast that with streaming, where your major expenses are: 1. Datacenters 2. Bandwidth 3. Licensing costs Those items--particularly 1 and 2--are easier to estimate and you can scale them based on your number of subscribers, so capital investment keeps pace with revenue increases. The licensing costs are where Netflix is liable to get fucked in the foreseeable future, which may be why they're going to focus on streaming, so they can dominate that market and have a better bargaining position with the studios. Problem is, Netflix is just a middleman, so what's to stop the studios from colluding to create their own streaming service, or multiple competing services, and leaving Netflix out in the cold? The loss of Starz is not that big a deal by itself, but if it spurs other companies to abandon Netflix then Netflix is going to be in for a world of hurt.