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PaulieM
Feb 11th, 2006, 05:54 PM
http://www.cnn.com/2006/US/02/10/netflix.renters.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."

Scotso
Feb 11th, 2006, 09:45 PM
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.

Scotso
Feb 11th, 2006, 09:46 PM
"Netflix says most subscribers check out two to 11 DVDs a month."

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

Infiniti2001
Feb 11th, 2006, 10:02 PM
They even slow you down when you're on the trial basis :rolleyes:that's why I'll continue to screw them :lol:

PaulieM
Feb 11th, 2006, 10:16 PM
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:o
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.

CrossCourt~Rally
Feb 11th, 2006, 10:40 PM
Thank god i BUY my dvds...not rent... :p

Scotso
Feb 12th, 2006, 12:18 AM
Thank god i BUY my dvds...not rent... :p

How nice for you, moneybags.

RVD
Feb 12th, 2006, 01:08 AM
I'm a NetFlix subscriber also and I noticed the lie right away. Wifie said I was just imagining things. :lol: But now I now I'm sane. Wmen I showed her this, she just grunted. That'll teach her to doubt me. :p

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? :shrug: I still believe it's better than Blockbuster and everyone else... so far.

tenn_ace
Feb 12th, 2006, 02:08 AM
Thanks for the info ppl

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

Rocketta
Feb 12th, 2006, 03:11 AM
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. :fiery:

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. :lol:

Rocketta
Feb 12th, 2006, 03:13 AM
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. :rolleyes:

Rocketta
Feb 12th, 2006, 03:14 AM
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...

Wigglytuff
Feb 12th, 2006, 07:56 AM
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 :smash: 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 :)

Kunal
Feb 12th, 2006, 07:59 AM
cheaky bastards

Kunal
Feb 12th, 2006, 08:04 AM
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

Wigglytuff
Feb 12th, 2006, 06:42 PM
wow these people have terrible customer service on wonders how they stay in business..... here is my story....

so yesterday i rejoined and as charged. my que was back and that was that. this morning i get an email saying that because i had been a member in the past i had to sign a paper that would be sent in the mail. ok thats cool, but then why was i charged.

i was reminded today after speaking on the phone with netflix that i was charged and would not get a refund for time i was charged, nor receive service until after i signed and returned the paperwork. which upon reading signs away my right to speak with my cc company before netflix is appeased, as well as being unable to ask for a refund.

i was like no thankyou. thats ok. if i have to sign away any rights, i am leave, just reverse the charges and thats thats.

they are at the moment refusing to reverse the charges on the count that their policy states that no refunds are to be give to people who leave netflix before the month ends.... whaH???

its all good i am not going to stress it. citibank got my back. but i am still annoyed. what happens to customers who have this happen to them and dont have the sense to not sign away they rights? or dont bother to read the terms?

Wigglytuff
Feb 12th, 2006, 06:45 PM
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...
WOW!!!!!

harloo
Feb 12th, 2006, 08:02 PM
ROTF! I was a member of Netflix when they first started and the turnaround was one day. But at a certain point I noticed the slowdown, instead of getting my dvds in a day I would get them in 3 days. Then it got worser each month and it got so bad they would not credit me for the movies I returned, so I cancelled my subscription. :mad:

I only rented foreign films from them because they had a wonderful selection. I use bittorent now and I can find some foreign films but not many.:sad:

Infiniti2001
Feb 12th, 2006, 08:09 PM
I join using the free trial basis, cancel the shit before it expires and join again. I do that so often to get old Bollywood movies I can't get anywhere else :angel:

SelesFan70
Feb 12th, 2006, 08:14 PM
Why are people so gullible? If it sounds too good to be true, it is too good to be true!

There's nothing like going to the DVD/Video store and picking out my movie rental with my formerly deep-fried food stained hands. :angel:

Wigglytuff
Feb 12th, 2006, 08:49 PM
I join using the free trial basis, cancel the shit before it expires and join again. I do that so often to get old Bollywood movies I can't get anywhere else :angel:
how are you about to do that. i have tried that and it says that old memebers in the same household exist.

Wigglytuff
Feb 12th, 2006, 08:54 PM
Why are people so gullible? If it sounds too good to be true, it is too good to be true!

There's nothing like going to the DVD/Video store and picking out my movie rental with my formerly deep-fried food stained hands. :angel:

i dont that annoys me as much as the people who got mad when blockbuster ended late fees. they got mad because if you keep a movie for like 45 days they charge you. because they say that thats late fees.

in that one, i got annoyed at the people who got annoyed. because BB clearly stated that thats what would happen in promotion materials (you didnt have dig deep in the superfine print either its right there) and even after they charge you, you still have 60 days to return the movie and they while refund the charges. i did that at least twice.

the problem with the netflix thing is that they were not upfront about it. 17.99 for unlimited thats not unlimited, is cool for some but others would rather pay say $25 to be able to get 30 movies. or something of sort.

PaulieM
Feb 12th, 2006, 09:09 PM
exactly JP, like one of the sites mentioned in the article says, it wouldn't be so bad if they stated clearly and right up front that they do this, and if there was a way of knowing what your status was so that you wouldn't be depending on their sending your movies when they say they do. there's no doubt that even if you don't actually get unlimted rentals it's still a better deal than regular dvd rentals, but it's annoying that they aren't upfront about it, and as a result you can't avoid the frustration of not being able to avoid delays. it's never good for business to lie to the customer, and of course businesses do it all the time, but the more people find out about it, the more annoyed people will be. :shrug:

Dana Marcy
Feb 15th, 2006, 12:21 AM
No complaints here. :o I get my 3 a week and sometimes I get to them and sometimes I don't. I've had this Kevin Costner movie for 2 weeks. I better watch it soon. :lol: I was in the queue for Junebug for 3 weeks and finally got it last week. :)

controlfreak
Feb 15th, 2006, 12:27 AM
I am thinking of signing up with Amazon for my first dvd renting experience.

Rocketta
Feb 15th, 2006, 12:31 AM
I am thinking of signing up with Amazon for my first dvd renting experience.

hmmm, Amazon is starting a rental program???