to its heaviest users in order to maintain its profits:

Quote :

"SAN FRANCISCO - 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 per month to Villanueva's home in Warren, Mich. — 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." Los Gatos, Calif.-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 his thesis. 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, Mich., 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 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 per 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. Because everyone pays a flat fee, Netflix makes more money from customers who only watch four or five DVDs per month. Customers who quickly return their movies in order 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 — 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 have also prompted incensed customers to share their outrage in online forums such as 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." In its terms of use, Netflix says most subscribers check out two to 11 DVDs per month. Management has previously acknowledged to analysts that it risks losing money on a relatively small percentage of frequent renters. The risk has increased since Netflix reduced the price of its most popular subscription plan by $4 per 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 down 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.""

http://www.msnbc.msn.com/id/11262292/

2/10/2006 6:23:31 PM

I've definitely noticed it, and it's kind of shitty, but honestly if I can still rent any dvd, including new releases, for on average of $1 a pop, I don't give a shit.

2/10/2006 7:26:16 PM

i wonder what percentage of those users are pirating the dvds

2/10/2006 7:29:35 PM

$ALLHUNDRED%

2/10/2006 7:34:05 PM

i mean, are we talking 10-20%? 40-60%?

2/10/2006 7:34:59 PM

Seriously, of the people who are netflixing more than 20 dvds / month, I would bet at least 70% are just burning and returning.

2/10/2006 7:38:04 PM

Quote :

"Seriously, of the people who are netflixing more than 20 dvds / month, I would bet at least 70% are just burning and returning."

I know I sure as hell would.

2/10/2006 8:47:51 PM

Yea I thought I had a pretty heavy churn rate, and with that dudes same plan, I probably rent about 12-15 a month. Damn I can't imagine having a life and using THAT many fucking rentals a month. Jesus.

2/10/2006 8:49:47 PM

i noticed it with blockbuster after i sent 9 back in a week

2/10/2006 8:58:58 PM

Any good alternatives to netflix

2/10/2006 9:00:40 PM

We do the Blockbuster movie pass, which isn't by mail of course, but there aren't any restrictions. Maybe the Blockbuster online thing would be better about it than Netflix. The movie pass is $25 which I think is $5 more than its online service, but not sure. We rent enough movies that they're about $1 rental each, maybe less.

2/10/2006 9:26:42 PM

I just cant imagine there being that Many good Movies out thereto watch 13+ a month

2/10/2006 9:57:54 PM

who gives a shit, companies have to make money...fuck the jackasses that want want 22+ movies a month, get a live

13+ movies a month should be plenty for anyone payint 17 dollars, that is still cheap as hell with delivery to your door

2/10/2006 10:05:23 PM

Quote :

"I just cant imagine there being that Many good Movies out thereto watch 13+ a month"

Are you kidding? I've had my Netflix queue at over 300 titles at times. There are more good movies out there than most people can probably manage to ever see.

2/10/2006 10:38:03 PM

^^Watching that many movies doesn't mean you have no life. That's like 2 hrs a day, not even that. A lot of people spend that much time posting on TWW (or longer).

It's a huge, huge pasttime for my husband and me. We love watching movies, and usually watch one right before bed.

^^^There are a ton of movies we have yet to cover, most of which are either classic favorites or terrible movies we wouldn't watch unless we had some morbid curiosity. With so many new movies coming out each week, for a movie-lover it would take a long time to cover the older ones.

2/10/2006 11:00:03 PM

i read this report and it deters me from signing up with netflix

i feel like this sort of practice is only the beginning of more and more restrictions down the road

2/10/2006 11:41:18 PM

also its not so much movies as tv series

2/11/2006 12:05:11 AM

yawn

my roommate is a manager at Blockbuster

so i get movies and games all of the time

2/11/2006 7:59:59 AM

Eh I am not detered by this at all. But as for the comments about not enough movies to watch, you have to consider they have all sorts of television series to watch. I have already seen all of Lost, working on Battlestar Galactica, Stargate SG-1, and several other tv series.

2/11/2006 9:37:55 AM

they do it, but it's not bad if you just use it for 2 straight months to get all the DVDs you want, and cancel

watch those up for 2 months, wait 'til more new releases come out, and re-join for 2 more months

cancel after 2 months, watch/wait again....

2/11/2006 11:22:56 AM

it's really lame that anybody getting 20+ DVDs/month for $17.99 would complain about this. i mean seriously, they make 3 cents profit for every dollar made. that is a SLIM margin. i'd do the same thing.

2/11/2006 12:05:52 PM

Quote :

"it's really lame that anybody getting 20+ DVDs/month for $17.99 would complain about this. i mean seriously, they make 3 cents profit for every dollar made. that is a SLIM margin. i'd do the same thing."

thank you

Quote :

"atching that many movies doesn't mean you have no life. That's like 2 hrs a day, not even that. A lot of people spend that much time posting on TWW (or longer)."

I watch a ton of movies, i meant the people that have expectations of getting 22+ a month, and feel slighted if they don't need to get a life b/c those are unrealistic expectations

NetFlix needs to make money, if they do not turn a profit all that are members will lose out because that business model will be ruined...those of you that are happy getting 6-15 movies a month should be happy that they do this...

there are always people that try to take advantage of shit, this is like at a coffee shop where they offer free refills, a guy coming in with the same cup for 2 weeks streight....they would never make any money, what they really mean is hey, get a cup or two extra on us, not "exploit the system"

2/11/2006 12:31:47 PM

I rent about 10 movies a month from them and would much rather have them limit people renting more like 20 some then raise prices across the board. I mean they have to maintain overall profitability, and if they have a choice between inconveniencing a few dvd pirating customers, or charging everybody else a fee increase... what do you think they're going to do? Risk losing a few customers? Or risk losing a million?

2/11/2006 12:55:44 PM

My roomies and I probably rent one movie from blockbuster every 2 days, and we dont pirate dvds

2/11/2006 1:05:31 PM

yeah, netflix ought to be selling this as them trying to be fair to 4 million people rather than letting this get hyped up about being unfair to a couple hundred people

2/11/2006 1:07:45 PM

this is kind of off topic but i was wondering since I am new to netflix, when it says very long wait on your que, how long are we really talking?

2/11/2006 1:07:50 PM

^ pretty long...sometimes 3-4 days, but I've experienced 2 weeks for "Kill Bill" when it finally hit DVD

Of course, I was one of those getting ~20/month but not complaining about it

EDIT: escp. if it's a new release, you could see 1-2 week wait. However, if you're a first-time new customer, they treat you super special. "Long Wait" could only mean 1-2 days. But after your first month, it'll take 3-4, then get to about a week, then longer...

[Edited on February 11, 2006 at 1:25 PM. Reason : .]

2/11/2006 1:24:43 PM

i remember back when they just started and i always got pop ups for them

now there stock price is tripled and i'm like >.<

2/11/2006 1:42:47 PM

I think what Netflix is doing is entirely reasonable, but they should have been more upfront about it. The service is still dope as hell if you watch a lot of movies, but if they just gave out movies willy nilly to heavy users, A) they'd lose money and go out of business and people wouldn't get ANY kind of service, and B) people who aren't taxing the system would get screwed out of getting the movies they want because greedy users out there are keeping the discs tied up in the mail.

people need to chill out, and netflix needs to be more upfront about their practices.

2/11/2006 6:00:45 PM

When I subscribed, I noticed it took longer to get DVD's after I ordered 4-5. For the first few movies a month, I would receive them within a day. After that, the quickest would be three days. I was ordering TV shows like arrested development that had no wait.

Its not just affecting people ordering 10+ movies....

2/11/2006 11:43:06 PM

here's the question:

do you feel that you're getting $17 worth of DVDs per month?

2/12/2006 3:43:11 AM

as "reasonable" as I think it is for a business to want to make a profit, this kind of "service" really makes me not want to give them my "money"

2/12/2006 3:49:07 AM

it was kinda shady when it wasn't in the terms of service, but now that it's in the open I completely support it.
inconviencing the few abusers > punishing everyone with rate hikes

2/12/2006 4:15:59 AM

that's my stance.

It's ragged that they weren't up-front about that practice... certainly.

But, I have to revert to that old adage, "You get what you pay for."

If you want the ultimate, "Jesus Christ, I get all the movies/TV shows there ever were on a bullshit whim and I don't pay much for it!!" then you're dumb. If you look at this situation from Netflix' standpoint, you will understand that they really want to offer amazing service to all of their customers, but they sometimes have to sacrifice a little bit of service to 'some' customers in order to ensure a certain quality of service to 'all' of their customers.

This is the kind of thing that's easy to miss until you're actually working in the world of corporate services, then you realize that there are a lot of things you have to consider in order to really provide quality services to as many customers as possible while still offering reasonable prices.

2/12/2006 4:33:54 AM

I constantly forget to mail my DVDs back the day after I've watched them.

I also forget to rearrange my queue. so sometimes, say i've finished a season of a show.. and i want the next season.. I get two movies instead that I was interested in two weeks ago when i added them to the list. and I end up having movies sit around for a week that I don't want to watch anymore.

And I've had DVDs get lost in the mail three times.

That said, Netflix is 100% worth the 17.99 I pay a month. I still average 10 DVDs a month. And you can't get shit like Angel (TV) or really cool old movies at shitty blockbuster, much less for < $2 month

2/12/2006 11:39:45 PM

i know someone in charlotte who reports them as lost or delayed or something...not sure what her tactic is, but she has like 20 some movies from netflix at her place at a time and they just keep coming.

[Edited on February 13, 2006 at 9:07 AM. Reason : .]

2/13/2006 9:07:29 AM

i've heard that you're supposed to cancel your account and reopen it every once in a while to shake things up, and reset the intentional delays. i've only cancelled/restarted once, but it did make a difference.

-ZiP!-

2/13/2006 9:13:43 AM

You guys are fucking idiots.

If some motherfucker sells me a product with the word "unlimited" then I expect "unlimited", not "a pretty darn good deal".

Being only able to rent X amount of DVD's per month does not constitute "unlimited." Especially when our usage would probably hit the wall on this system in 2 weeks.

2/13/2006 9:31:38 AM

well now that its in the terms of service you know not to subscribe.

2/13/2006 9:47:16 AM

Quote :

"If some motherfucker sells me a product with the word "unlimited" then I expect "unlimited", not "a pretty darn good deal". Being only able to rent X amount of DVD's per month does not constitute "unlimited.""

Hit the nail on the head. If they're not able to offer their service as advertised, without exception, then they shouldn't advertise it as such in the first place. When you offer an unlimited service, free refills, whatever the case may be, you know exactly what you're getting into. You know people are going to be expecting just that and nothing less, as they should.

2/13/2006 10:30:35 AM

Quote :

"i've heard that you're supposed to cancel your account and reopen it every once in a while to shake things up, and reset the intentional delays. i've only cancelled/restarted once, but it did make a difference."

thats a good idea, anyone else tried this?

Quote :

"If some motherfucker sells me a product with the word "unlimited" then I expect "unlimited", not "a pretty darn good deal". Being only able to rent X amount of DVD's per month does not constitute "unlimited.""

thats a good point, their advertising is a bit misleading...but then so is tons of companies'
its like the credit card offers, 7.99% FIXED INTEREST RATE. Then in fine print...(credit limit, and interest rate can change at any time)

2/13/2006 12:30:10 PM

What do they consider high?

I think we watch about 8 - 10 movies a month. I hope I don't get throttled.

But does the frequency change just because you are no longer a new subscriber? That would suck.

2/13/2006 12:36:47 PM

^ Nah, you should be straight. Only those who get 20+ a month are typically effected.

The only way to really get 20+/month is to receive, rip, and place back in mailbox on the same or next day.

2/13/2006 12:57:15 PM

^ i'm not so sure 20+ is the mark, I check out 13-15 per month and have noticed my delivery and wait times go up over the last couple months.

2/13/2006 5:12:39 PM

Gamefly sucks. It is kind worth it, but there are really are not enough good games out right now for me to justify my subscription.

2/13/2006 5:21:39 PM

Netflix just billed me 4 days after I cancelled my account. They already received my last 3 dvd's I had sent back too. Fuck them.

2/27/2006 2:21:18 AM

for people who rent more than 20 movies per month, you should think about blockbuster's movie pass.

2/27/2006 3:24:00 AM

Quote :

"i wonder what percentage of those users are pirating the dvds"

and lets just change "those users" to "the people complaining in this thread"

2/27/2006 9:23:04 AM

i haven't copied a single dvd, and i have noticed this delay a few times.

2/27/2006 3:32:42 PM

i've noticed them delaying me lately and i've only rented 10 movies this month

2/27/2006 3:45:22 PM