Netflix, tsk tsk

[Xazy]

Just read an article in netflix that well irks me a drop.

article
Netflix sends frequent renters to the back of line
Policy designed to reduce number of films rented for monthly fee
SAN FRANCISCO, California (AP) -- Manuel Villanueva realizes he has been getting a pretty good deal since he signed up for Netflix Inc.'s online DVD rental service 2-1/2 years ago, but he still feels shortchanged.
That's because the $17.99 monthly fee that he pays to rent up to three DVDs at a time would amount to an even bigger bargain if the company didn't penalize him for returning his movies so quickly.
Netflix typically sends about 13 movies a month to Villanueva's home in Warren, Michigan -- down from the 18 to 22 DVDs he once received before the company's automated system identified him as a heavy renter and began delaying his shipments to protect its profits.
The same Netflix formula also shoves Villanueva to the back of the line for the most-wanted DVDs, so the service can send those popular flicks to new subscribers and infrequent renters.
The little-known practice, called "throttling" by critics, means Netflix customers who pay the same price for the same service are often treated differently, depending on their rental patterns.
"I wouldn't have a problem with it if they didn't advertise 'unlimited rentals,' " Villanueva said. "The fact is that they go out of their way to make sure you don't go over whatever secret limit they have set up for your account."
Changing the rules
Los Gatos, California-based Netflix didn't publicly acknowledge it differentiates among customers until revising its "terms of use" in January 2005 -- four months after a San Francisco subscriber filed a class-action lawsuit alleging that the company had deceptively promised one-day delivery of most DVDs.
"In determining priority for shipping and inventory allocation, we give priority to those members who receive the fewest DVDs through our service," Netflix's revised policy now reads. The statement specifically warns that heavy renters are more likely to encounter shipping delays and less likely to immediately be sent their top choices.
Few customers have complained about this "fairness algorithm," according to Netflix CEO Reed Hastings.
"We have unbelievably high customer satisfaction ratings," Hastings said during a recent interview. "Most of our customers feel like Netflix is an incredible value."
The service's rapid growth supports him. Netflix added nearly 1.6 million customers last year, giving it 4.2 million subscribers through December. During the final three months of 2005, just 4 percent of its customers canceled the service, the lowest rate in the company's six-year history.
After collecting consumer opinions about the Web's 40 largest retailers last year, Ann Arbor, Michigan, research firm ForeSeeResults rated Netflix as "the cream of the crop in customer satisfaction."
Once considered a passing fancy, Netflix has changed the way many households rent movies and has spawned several copycats, including a mail service from Blockbuster Inc.
Netflix's most popular rental plan lets subscribers check out up to three DVDs at a time for $17.99 a month. After watching a movie, customers return the DVD in a postage-paid envelope. Netflix then sends out the next available DVD on the customer's online wish list.
Customers catch on
Because everyone pays a flat fee, Netflix makes more money from customers who watch only four or five DVDs a month. Customers who quickly return their movies to get more erode the company's profit margin, because each DVD sent out and returned costs 78 cents in postage alone.
Although Netflix consistently promoted its service as the DVD equivalent of an all-you-can eat smorgasbord, some heavy renters began to suspect they were being treated differently two or three years ago.
To prove the point, one customer even set up a Web site -- www.dvd-rent-test.dreamhost.com -- to show that the service listed different wait times for DVDs requested by subscribers living in the same household.
Netflix's throttling techniques also have prompted incensed customers to share their outrage in online forums such as www.hackingnetflix.com.
"Netflix isn't well within its rights to throttle users," complained a customer identified as "annoyed" in a posting on the site. "They say unlimited rentals. They are liars."
Hastings said the company has no specified limit on rentals, but "`unlimited' doesn't mean you should expect to get 10,000 a month."
Netflix says most subscribers check out two to 11 DVDs a month.
Growing risk
Management has acknowledged to analysts that it risks losing money on a relatively small percentage of frequent renters. And that risk has increased since Netflix reduced the price of its most popular subscription plan by $4 a month in 2004 and the U.S. Postal Service recently raised first-class mailing costs by 2 cents.
Netflix's approach has paid off, so far. The company has been profitable in each of the past three years, a trend its management expects to continue in 2006 with projected earnings of at least $29 million on revenue of $960 million. Netflix's stock price has more than tripled since its 2002 initial public offering.
A September 2004 lawsuit cast a spotlight on the throttling issue. The complaint, filed by Frank Chavez on behalf of all Netflix subscribers before Jan. 15, 2005, said the company had developed a sophisticated formula to slow DVD deliveries to frequent renters and ensure quicker shipments of the most popular movies to its infrequent -- and most profitable -- renters to keep them happy.
Netflix denied the allegations, but eventually revised its terms of use to acknowledge its different treatment of frequent renters.
Without acknowledging wrongdoing, the company agreed to provide a one-month rental upgrade and pay Chavez's attorneys $2.5 million. But the settlement sparked protests that prompted the two sides to reconsider. A hearing on a revised settlement proposal is scheduled for Feb. 22 in San Francisco Superior Court.
Netflix subscribers such as Nathaniel Irons didn't believe the company was purposely delaying some DVD shipments until he read the revised terms of use.
Irons, 28, of Seattle, has no plans to cancel his service because he figures he is still getting a good value from the eight movies he typically receives each month.
"My own personal experience has not been bad," he said, "but (the throttling) is certainly annoying when it happens."

I am someone that uses their service, but after this I am now double checking for any other service. I think that new DVD's should go to FIFO (first asked first to get). I always thought that it was as much as I can see a month. now I am just disappointed in the company.

[Cynthetiq]

It was only a matter of time for them to implement an algorithm llike this. My thought is that if you are getting a fair share, you're getting a fair share, what is that fair share? I dunno, but I think that 13 movies for $17.99 is quite the bargain. Yes, it's not 22 for $17.99 but I guarantee you that the tracking backend system that pays out the royalties for the movies as they are rented out show that it's not possible for them to sustain an all you can eat model without having it be at a higher price point. They wanted to have the price point higher but competitors forced them to keep it lower.

I'd rather they keep the price higher and give people more movies faster... let it be the US Postal service be the bottleneck.

[Coppertop]

This was discussed in another thread, I believe.

Yup - http://www.tfproject.org/tfp/showthr...30#post2002130

[meembo]

I'm sure they have done this for a while. I've long had the three and five movie plans, and when the frequency of my rentals go up, the speed of the returns definitely go down, at least for the last year.

I can't say the practice limits my movie-watching. I get more movies than I have time for.

[shesus]

I've never had any problems with Netflix. Of course, we were slow users for awhile until I got hooked on TNG. Now we go through about 4-5 discs every week. I haven't noticed a slowdown yet, but then I'm not all that concerned about it. If it becomes weeks between delivery then I may be concerned. But I see how they would be losing money. I guess I'd rather continue spending the same amount and get them less frequently than pay more. And as long as it works out cheaper than walking to Blockbuster and spending $4+ for a rental I'll be happy.

[oberon]

I used to be subscribed back in 2003 and cancelled it because they were throttling me.

But now I realize it's a hell of a deal. Most movie rental shops and cable networks charge a lot more for movies. If I find Netflix is throttling me this time, I'll just upgrade my package to keep the movies coming at the pace I watch them. Like shesus.. as long as they end up cheaper than rental stores I'll be happy.

[Cynthetiq]

Originally Posted by Coppertop

This was discussed in another thread, I believe.

Yup - http://www.tfproject.org/tfp/showthr...30#post2002130

more like mentioned... no one below the post has discussed it at all...

[Val_1]

I don't have a problem with their policies. Perhaps they should be more upfront, but I get quicker returns (thusly more movies) than I expected I would when I first joined. And I still don't classify as a heavey user by their standards.

[cyrnel]

Their algorithm needs to balance the cost of heavy users against the cost of negative press. Remember "No Late Fees." I'm sure they're thinking about it. Then again, this opens an opportunity for those with deep pockets to eat NF's lunch.

I cancelled about a year after they started. I was moving and just didn't have time to watch. At that time it was $19 for four movies, and I was a short drive from their San Jose office. Next day turnaround. Later they bumped the price and dropped the allowance, and Hollywood kept sending me 99cent rental coupons. Never signed up again.

It's interesting to watch the business (and competition) develop. I liked it when it worked. (Except for the broken Ronin discs they kept sending. A warehouse forklift operator must have cut that apex too close. )

[Sgoilear]

As long as their more up front on the policy now it's all good. I was never impacted myself because I rarely have time to watch more then 2 movies a week. Using the algorithim without letting people know was shady but understandable to protect their profits and its no where near as bad as some of the other video rental companies out there.

[Ustwo]

Oh noses, someone can't burn as many DVD's this month!

[Gabbyness]

Yeah, at first I reacted violently, as in, "What they say unlimited that's BS omg!" But, honestly, you can't expect a company to flush its profits down the tube because some people have to rent 452 movies a week.

And over to Oberon - When you say you were being throttled, how noticeable was it? How quickly did you get movies pre- and post-throttle? I'd like to hear more.

Bottle to throttle, baby.

[Stompy]

I haven't experienced any throttling and... well, I'm a heavy burner.

Say I get 3 DVDs on a monday... I can have them all ripped and back to the post office the same day. They still get them either the next day or the day after, and send my next 3 the next day or the day after. That's anywhere from 6-9 DVDs a week.

Sometimes it takes 2-3 days to get the next batch, but either way, there isn't ever a significant decrease of movies I get.

Even if they did, I just see it as a balance. I burn their movies, they throttle me. It's still only a $17 a month buffet where no one really loses any $.

[crazybobmarley]

I had the 5 at once plan for almost 2 years. I can't say for sure I've experienced the throttling, but I definitely have noticed waiting longer for new titles. I'm not exactly sure how the save feature works (adding titles to your que that aren't yet released on dvd), but for example, I added the movie Serenity to my list before it was out in theatres. It was released late december and I had to wait till the end of february to recieve it. I experienced the same thing with episode 3, but that may be a good thing depending on your point of view.

I'd imagine first add to your list, first serve but I guess not. Otherwise I've never had a problem with the service, I quite often move 10 dvds a week and that's perfectly acceptable to me. At the same time calling their service 'unlimited' really is a bit of a lie then. My cable company does the same thing, they call it unlimited service but one month I was restricted for uploading to much.

Either way I can't see it reason enough to get rid of it, even if you're not 'backing up' the media it's still the best deal on renting movies anywhere, and I don't have to actually go out and get it, unless you count walking to the mailbox.

I think the point here is people feel they've been lied to, unlimited is a myth in just about any business agreement.

[Stompy]

Now that I think about it, it's a queue priority type check in the system (at least, it appears to be. Can't be 100% positive from the user-end).

Say you go apeshit and queue up 200 movies... if you add a new release, the system figures, "You have all these other movies you can watch in the meantime," while it compares to someone else who has, say, two movies in queue with the same new release at the top.

They get a higher priority over you in that case.

So a simple fix/workaround: clear your queue, add the new release. You'll find that it ships out a day or two later.

I don't necessarily think it's a throttling issue though.

[oberon]

Originally Posted by Gabbyness

And over to Oberon - When you say you were being throttled, how noticeable was it? How quickly did you get movies pre- and post-throttle? I'd like to hear more.

Very noticeable. For the first few months or so I'd get a new DVD in 2 days. Then it went up to 4 days and never backed down. I was a cheap ass in those days so I wasn't happy about it. I do still believe Netflix should be honest and tell us exactly how many we can expect to get in specific time frames, just so there aren't any surprises.

[mrklixx]

One thing to keep an eye on is the return envelopes. They are "supposed" to send you return envelopes with the "nearest netflix facility" address address on it. We have a netflix distribution center in our city, but at least half or more of our dvds have the wrong "nearest facility" address on them, everywhere from New York to California. Now whether this is "accidental", as a result of general laziness, bad quality control, etc, or "accidently on purpose" as part of their throttling effort, I do not know. But I usually wait until I get one for our local center and stick 2 dvds in it.

[JumpinJesus]

Shesus and I haven't experienced this...yet.

We're watching Star Trek: TNG and will easily go through a DVD in a day. We're now in the 3rd season and the time between us placing a finished DVD in the mail and us receiving the next disc is usually 3-4 days. For example, if we mail out a DVD on Monday, we usually have the next DVD by Thursday.

Of course, We haven't queued a new release in months so we may find it to be a different story when we do.

Either way, I still think it's a great deal.

[Spanky Johnson]

I'd be happy if I could get 3 movies per week. I suppose it could be more a function of where I live than throttling, but my typical pattern is to watch 3 movies over the weekend, return them Monday, and expect to get another 3 in time for the next weekend. In the beginning it worked that way, but lately I'll usually get at least one movie in time and sometimes two, but almost never all three. I wouldn't think that 3 movies per week would qualify me as a heavy user, but since I used to be able to do this regularly, unless the mail service has gotten dramatically worse where I live, I suspect I'm being throttled.

[smooth]

I think stompy's hitting it right on the nose.

This is an issue that burners (rather than watchers) are going to feel the brunt of.
and it only seems fair to me that everyone get a chance to watch the new releases, not that a few people should get every single new release as soon as it hits the shelf along with all their other wanteds.

My take on the issue is faux indigination.
If you want netflix to be "honest" about their business dealings, perhaps start with your own. Either don't whine when you get stuck waiting to burn the next flick to end up on your doorstep or let them know that you're a frequent burner and both can act accordingly.