(cross-posed at
TeddyStern.com)
Netflix may provide a sweet deal. It offers an extensive DVD collection. It doesn't impose late fees or due dates. It provides subscription plans, instead of the usual pay-per-rental. Heck, it even
contributes to the Democratic Party, if you care about that sort of thing. Nonetheless, Netflix also claims to provide "unlimited rentals." According to its website, "members rent as many DVDs as they want." Well, it turns out this ain't the case.
More on the flip.
I've used Netflix for more than a year now. Over the last few months, I've noticed a bizarre trend. Movies that once took a day to arrive from the local shipping center are now taking five times as long. That's five days to travel 40 miles. At first, I chalked this up to postal services delays. But,
The Associated Press reports that Netflix is penalizing many of its members for renting too frequently. The article explains:
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.
The company's automated system identifies these frequent renters and delays their shipments to maximize profit margins. In a stroke of Orwellian genius, Netflix has dubbed the practice "The Fairness Algorithm." Critics call it throttling. The article explains:
The little-known practice...means Netflix customers who pay the same price for the same service are often treated differently, depending on their rental patterns.
To be fair, most online rental services throttle frequent renters. However, some have implemented alternative solutions to avoid throttling. Zip.ca, Canada's largest online rental company, offers "capped" plans, which charge shipping fees for rentals over a designated cap. Netflix would rather claim "unlimited rentals" while effectively limiting the number of DVDs its customers can receive per month. Given the option, many of these customers would be happy to pay the extra 78 cents in shipping.
However, Netflix CEO Reed Hastings claims that "few customers have complained about about this 'fairness algorithm.'" Make that a few + 1. You can let him know what you think by calling 888-NETFLIX or clicking here.