The share market is down, Google’s stock aren’t performing like they once did, and the same goes for many other tech companies.

But one in particular seems to be doing alright – Netflix (NFLX).

Since Dec 08, most stock indices have fallen 20% (look at S&P and NASDAQ in above graph). However, if you look at performance of Netflix’s stock price, it stays straight on top – in fact, it grew 50%.

How did they do it? Is it just the best time for their sales to grown? 

Let’s first talk about who and what Netflix does. Back in 1998, founder and CEO, Reed Hasting had an overdue “Apollo 13″ cassette (yes, I said cassette!!). He owed the video rental store $40 for late payment as he had also misplaced the cassette. As he walked to the gym, Reed realised that a gym has a much better model. You pay $x a month, but the gym doesn’t care how much or how less you use their facilities.

He then took that model online for the video rental business and called it Netflix. Based on your subscription with Netflix (usually a flat monthly fee), you create a rental queue. Netflix will mail you the first DVD along with a prepaid envelope. When you’re done with the DVD, you mail it back in the prepaid envelope and they send you the next movie from your queue. Some subscription models allow up to multiple DVDs at time and some with a limit of exchanges per month.

Given this time of economic downturn, most people prefer to have a budget monthly expense with no more or less to pay. A fixed price of US$8.99 per month to have 1 DVD at a time with no exchange limit is a great way to save costs. Saves taking the whole family out to the movies – not to forget those ridiculously priced popcorn and coke.

So, over time subscribers have dramatically grown, and hence their stock climbs further.

Question is – how long will it take for major video rentals stores to move to the same model? 

In Australia, Telstra’s Big Pond Movies seem to have a similar model in place – ranging from AUD9.95 to AUD29.95 per month. 

Not bad Telstra, but I wonder how many subscribers you’ve got – and whether your stock price can jump 50%?