11 February, 2006

Netflix: The Saga Continues

What have I gotten myself into? Apparently the exact week I decided to join Netflix makes the news with their new-ish shipping policy.

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 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.

Aha! I understand what they're doing, because every business has a profit margin they have to protect. It IS America, after all. But I do have a serious issue with the company advertising "unlimited" rentals, when they definitely have a system in place that limits certain people.

I'm still in the two-week trial, but my queue has 37 movies in it--the entire Babylon 5 and War and Remembrance. I'm betting that a queue that long identifies me as a "heavy renter". Maybe not, but I still think some things are suspicious. They sent my first two DVDs out of sequence, thus creating a day's "delay" in viewing time. They also have not recorded my first returned movie, even though it's been two days. Without showing the movie as 'received' in their distribution center, they are able to withhold my next movie shipment.

According to the linked article, each movie shipped costs $.78 in postage. By my calculations (okay, the calculations done by my calculator), if Netflix sends me more than 19 movies a month they've lost money. That's just on postage, and doesn't take into account salaries, product and other overhead. I'd imagine that they probably lose money on me if they send me more than 10 DVDs a month. That assumes, of course, that they are operating on a standard retail profit margin of fifty-percent.

Believe me, I understand. But what chafes is the unlimited they advertise. Why not just admit they have to cap all rentals? The marketing pro in me knows the panacaea of the word "unlimited" and the full impact it can have when someone is making a shopping decision. But the customer in me doesn't like to be lied to.

The linked article says the throttling practice is made clear in the Terms Of Use. I've read it, and it is made perfectly clear, in the same way that my mother made the reasons for my various groundings perfectly clear. It's a long paragraph about service usage that basically says "suck it up, people." Not the most customer-friendly of tactics in my opinion.

What do I think should be done? Well, personally I think that any of the uses of the word Unlimited on the Netflix website or any Netflix mailers should be asterisked, with a direct reference to the Terms Of Use page. Because, frankly, saying that something is unlimited and then imposing an algorithmic limit is truthiness at its best.

For more information on the nature of the algorithm used by Netflix, you can visit the Hacking Netflix website.

Update: Programmer Rod Hilton looks at the possible types of scheduling algorithms and has a few additional thoughts.


At 4:38 PM, February 11, 2006, Anonymous Rod Hilton said...

Thanks for the link and the comment on my blog (and hey, nice Wordpress theme! ;)

I wanted to make a slight correction. It's my understanding that you don't become a heavy renter based on your queue size, but based on how many movies you successfully rent per month (I believe the number is nine).

So if you get your movie, watch it that night, and send it back, if this allows you to rent 9 movies in a month, you get pegged as a heavy-renter. I had hundreds of movies in my queue when I used Netflix, but they generally sat on my coffee table for days before I watched them - I'm sure I never got flagged in the system.

I do agree with you on the issue of the "Unlimited" advertising. Generally when companies like Netflix start, they do a lot of math or simulations before deciding on prices. They realize that there will be some heavy renters, but most people will not use the system fully, and those will average out. For example, Google started Gmail knowing that not everyone would use their gig of e-mail space.

For the company to realize their calculations were incorrect and impose limits on what they advertise as "unlimited" isn't only unethical, it's illegal.

At 5:03 PM, February 11, 2006, Blogger Sharon Cobb said...

I dunno. They may be throttling, but I get 12 movie a month delivered to my door for just over a buck each. No one can beat that price with the same quality of movies and variety.
I've been a satisfied customer on and off for years. And that's the other good thing...if I am broke one month, I cancel with no problems, and then jsut click "restart my membership" with no hassles as well.
Netflix has made renting quality movies so easy that I don't even use a video store anymore.

At 6:00 PM, February 11, 2006, Blogger Kat Coble said...

Sharon, I'm largely with you.

I love being able to ramble out to the mailbox and have a B5 disk waiting for me. It's like when I was a little kid and I'd get something from the back of the comics.

Really, my only issue is with the use of the word "unlimited". Why say it's unlimited when there's a limit?

It's my understanding that you don't become a heavy renter based on your queue size, but based on how many movies you successfully rent per month (I believe the number is nine).

Rod, I hope this is true. I don't see myself able to watch more than 9 disks in a month. Though, the way I watch movies I'd watch all 9 discs in one 7 day time span and then the rest of the month, nothing. That's the only reason I'm bummed about the turnaround time issue--because I watch videos in clusters.

Oh, and thanks for stopping by!

At 10:53 PM, February 12, 2006, Blogger Aunt Lydia said...

I'm not sure queue size matters - we've got 82 in our Blockbuster queue. I took our current three to Disney with us because they were still in my carry on from the last trip. I realized that since we weren't taking a computer (!) we wouldn't have anything to watch them on. Not that we were hurting for entertainment down there, but it would have been nice in the airport. We also bought 2-CD set down there and realized we didn't have anything to play them on. But I digress.


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