The price break calculations are rather simple; you don't need an MBA to figure them. If I have $1 in cost per unit, then I can sell 1 unit at $10 and make $9 or I can sell 2 units at $5.50 each and make $9. I have a hard time paying $20 a unit, even for a brand new copy of Terminator 2. However, I've been buying up used DVD's at Blockbuster on their 2 for $20 or 3 for $25 deals for years.
Unfortunately for "Big Media" there is an elephant in the room that they don't want to discuss(or they try to shoot with a BB gun). The average consumer is no longer required to pay for crappy service, crappy movies, or crappy music, delivered in a crappy format dictated by the seller. I, like many others, have a home theater that rivals the local cinema, minus the idiots on their cell phones and the overpriced snacks (and I can have a beer). I also have a personal media player that allows me to carry scads of entertainment in my pocket. No more stacks of CDs strapped to the visor of my car or making jam CDs so I can listen to the songs I want to hear.
Finally, after making the investment in the hardware, all of this is available for free or nearly so, with a small amount of technical knowledge. So, it's either change your model or lose your business. I have no doubt that the executives at Netflix are fully aware that their customers are burning and returning. A simple sort of their computerized statistics would tell them that. Of course, they don't care. They have no brick and mortar investment like Blockbuster and have gone so far as to stream their product online so that they don't even need to pay postage or have a warehouse full of plastic discs. iTunes doesn't seem to be having a problem making money but I don't even know if there's still a record store in the local mall.
Change or die. Right now, without getting up, I can download the new U2 album or the Eagle Eye movie , burn it to a disc, store it on my Zune or stream it to my audio/video system. I am willing to pay somebody a couple of bucks to do that easily and legally but not much more (neither are worth much more, IMO). You better make it very easy because a lot of people don't care whether it's legal or not if it's cheap, easy, and they have little chance of getting caught.