netflix slows down frequent renters... - TennisForum.com
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post #1 of 26 (permalink) Old Feb 11th, 2006, 05:54 PM Thread Starter
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netflix slows down frequent renters...

http://www.cnn.com/2006/US/02/10/net....ap/index.html

Netflix sends frequent renters to the back of line
Policy designed to reduce number of films rented for monthly fee

Friday, February 10, 2006; Posted: 11:15 p.m. EST (04:15 GMT)

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."

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post #2 of 26 (permalink) Old Feb 11th, 2006, 09:45 PM
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That's illegal. If Netflix has a problem with it, they should rethink their plans and their marketing. They advertise a certain way, and they should have to deliver on their promises.


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post #3 of 26 (permalink) Old Feb 11th, 2006, 09:46 PM
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"Netflix says most subscribers check out two to 11 DVDs a month."

And they expected most people would do that. Those who only get 2 a month really should rethink their subscriptions.


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post #4 of 26 (permalink) Old Feb 11th, 2006, 10:02 PM
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They even slow you down when you're on the trial basis that's why I'll continue to screw them
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post #5 of 26 (permalink) Old Feb 11th, 2006, 10:16 PM Thread Starter
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i just started using netflix a little while ago, and i usually return my movies within a day or two, pretty soon i'll miraculously no longer be in the 1-day delivery zone
what they're doing sucks, just because "unlimited doesn't mean you're going to get 10 million movies a month" doesn't mean it's right to penalize people for actually making the most of their subscription and taking advantage of the "flaw" that's in their business model by lying about the availability of movies etc. at least now that they've been sued, they had to admit they're doing it, but it still sucks.

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post #6 of 26 (permalink) Old Feb 11th, 2006, 10:40 PM
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Talking

Thank god i BUY my dvds...not rent...
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post #7 of 26 (permalink) Old Feb 12th, 2006, 12:18 AM
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Quote:
Originally Posted by FRAZIER~FORCE
Thank god i BUY my dvds...not rent...
How nice for you, moneybags.


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post #8 of 26 (permalink) Old Feb 12th, 2006, 01:08 AM
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I'm a NetFlix subscriber also and I noticed the lie right away. Wifie said I was just imagining things. But now I now I'm sane. Wmen I showed her this, she just grunted. That'll teach her to doubt me.

Anyway, we have five in the family and rent to that requirement. And it only truly works if they honor the terms of the 1-day turnaround. Oh well, what are you gonna do? I still believe it's better than Blockbuster and everyone else... so far.

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post #9 of 26 (permalink) Old Feb 12th, 2006, 02:08 AM
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Thanks for the info ppl

I was thikning about getting a subsciption. I guess, I'll sticl to using free promotional offers

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post #10 of 26 (permalink) Old Feb 12th, 2006, 03:11 AM
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This is soooo disappointing because I just sent back a video and it took them 5/6 days before they acknowledged they got it... .and then I kept getting shitty responses from customer services and now I know why.

Netflix use to be so great......and I use to work the system like no other...They just need to cap the max or up the subscription fees...They are still head and shoulder above anyone one else but that is very deceptive practices...I actually need to get my free upgrade.

there is a way around it...though just report that you returned the video...even if you know that you just sent it back that day and then they will ship your next movie in the que.
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post #11 of 26 (permalink) Old Feb 12th, 2006, 03:13 AM
Kart & I against the WtaWorld!
 
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I also need to the distribution center is less than 50 miles from my house and in the town where the major postal distribution center is located so everything we mail goes to that city first before it goes anywhere else...which means there's less than a day turnaround for any DVD I send back.
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post #12 of 26 (permalink) Old Feb 12th, 2006, 03:14 AM
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Me and Netflix go way way way back...I was a member when they only had one center in California....there was four day turnaround each way then...

Last edited by Rocketta; Feb 12th, 2006 at 08:24 AM.
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post #13 of 26 (permalink) Old Feb 12th, 2006, 07:56 AM
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lol rocky

i used to be a member of netflix and quit them because i SWORE that they were doing this. now that i know that they are indeed doing this, i rejoined but this time i will not rush myself to see a movie i will enjoy it and watch it in my own time. also thanks for tip rocky.

when i left them last time, i told them a movie was lost. i figure if you claim a lost movie one a year or so you are all good

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post #14 of 26 (permalink) Old Feb 12th, 2006, 07:59 AM
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cheaky bastards

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post #15 of 26 (permalink) Old Feb 12th, 2006, 08:04 AM
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shitty shitty stuff....i would be soo turned off....why is everyone always interested in profits....how bout quality service that will increase customer loyalty and it will eventually lead to better margins in profits

I'm not young enough to know everything.
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