Netflix and Throttling
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We have been Netflix renters for a few years now and have been generally happy with their service and catalogue. But as more and more people are finding out now, they have been reducing the number of DVDs we get per month. We are what they would call “power renters,” returning a movie the day after we get it. (We don’t watch much television.) Earlier, we used to average about 15-18 movies per month making the $20 monthly fee worthwhile. Now the monthly average is about 9. Moreover, we have to wait longer for the popular movies because they put us in the back of the queue.
After mulling about it for a few months, we have had it and have decided to go back to Greencine. We did a trial membership with them sometime last year but canceled after discovering that it was taking longer to get the popular movies. This is because their inventory is lower than that of Netflix and Blockbuster. But at least the turnaround time was faster. This is only true for people living in California because their sole distribution center is in San Francisco. (Netflix and Blockbuster have multiple regional distribution centers.) Greencine is a favorite especially among Anime fans. Neither of us are into Anime but at least 50% of the movies we watch are non-English titles and Greencine doesn’t disappoint there. Having a great collection of Erotica doesn’t hurt either. Happy Valentine’s day!
Why wait for DVD at all? MovieBeam will let you (legally) download first-run high-def movies on demand before they are available on DVD.
DVD rentals are so yesterday!
On the second thought, it may be a while till Disney allows you to download Erotica. So better hold on to that Greencine subscription.
Actually, Greencine allows you to watch movies on demand too (including erotica):
http://www.greencine.com/static/vod_main.jsp
I am not sure if they are hi-def or not.
Greencine, at least for now, promises not to do the “throttling”:
http://snipurl.com/mk66
Slashdot has a lively discussion on this. Touching a lot of nerves, I guess:
http://snipurl.com/mk6k
Depending on how often one watches a movie at home, Netflix(or Greencine) and MovieBeam work for different groups of people. Movie rental from Netflix(or Greencine) is like getting a book from the library. One will try to read through the book ASAP. Also, the monthly fee will provide you as many movies as you want. Movie on-demand, such as MovieDeam is like buying a book. You pay as you watch.
For a non-power-renter, MovieBeam has its attraction; however, to offset the initial fee on equipment might make someone hestitate going with MovieBeam.
For power-renters, Netflix(or Greencine) provides the access to unlimited numbers of movies one can watch in a month with a pre-set price — unlimited entertainment within a budget for most households.
Well, it’s more like buying a hard-bound special edition book as soon as it hits the shelves in the bookstore as opposed to waiting for the library to acquire a paper-back version and then borrowing it.
Divide your plan amount ($20) by the number of DVDs you take (16), you your monthly cost per DVD is $1.25. Throttling typically starts when you go below $2 per DVD per month.
Similar to customers having movie lists, movies have a customer list created by which order they are shipped. Just like it takes a while for movies in the bottom of your queue to reach you, it takes a while for you to rise to the top of a movie’s list. If you rotate too frequently, then for many/all the movies in your queue, you will be way down the list because you haven’t been there long enough.
It’s just how the business works.
Also look at it from Netflix’s point of view. Customers who don’t see too many movies a month are likely to drop out, which is direct loss of revenue. So it’s important that they get serviced well. Those who rotate frequently are unlikely to drop out and the cost of shipment begins to exceed the revenue from the subscription.
Netflix isn’t run by the Sisters of Charity.
If you want better service it’s reasonable that you move to a higher plan.
Yes, but all this shit isn’t spelt out in the agreement. Even though they’ve admitted it elsewhere. When you sign up, you’re just told you’ll get the movie shipped to you as soon as the previous one is received..that’s all. You get to know all this crap only when you become a power user.
Looking at it from yet another point of view, the most loyal customers get treated the shittiest?
I am aware that this is “how the business works.” But just like they have their right to do their business well, I have mine to choose what’s right for me. I do have a choice and I decided to switch for my own benefit. If this was a monopoly, maybe I would have been content with their algorithm. But it is not and I am not.
As kinnum points out, the controversy is not exactly because of the throttling itself but because they failed to mention this in their terms of use. And the false advertising of “unlimited” rentals. The class action lawsuit against them is for this reason.
All this publicity will eventually be their downfall unless they do something about it. I am quite sure that the number of power renters is a small percentage of their customers. These are the loyal customers who love watching movies and will stick with them. I don’t have a problem being down on the list for popular movies as much as I have for not getting other movies on my queue in a timely manner as advertised.
Netflix will be happy that you and other unprofitable customers (kushtomers in Malayalam) move to greencine, green pastures or where ever.
You will be even more unprofitable for greeneyed companies because their cost structures are higher. Eventually YOU will put them out of business making Netflix the only monopoly around. Then they will increase their rates, which brings you back to square one.
Life will always find its ultimate equilibrium. Unfortunately, the pow wow renters will force the increase of charges for even the average user and it will be Netflix that will be laughing all the way to…
Here’s another scenario.
Once all the kushtomers move to the Greens; Netflix, cushioned by the higher profits, will drop rentals. Now the Greens will react in order to compete.
The greens now be faced with
1. Kushtomers bleeding them by renting lots of movies
2. Lower rentals
3. Higher internal cost structures
4. Low scale
5. Little or no cash reserves to see them through the price war
This will accelerate their demise or get taken over by Netflix. You will ultimately return to Netflix, who will live happily ever after.
You do have the “right to choose” but ultimately you WILL pay what you SHOULD pay.
[...] The discussion about Netflix got me to write about the Long Tail. The Long Tail is a theory created by Chris Anderson (stub), the editor of Wired Magazine. The seminal article can be read here. You can also read his blog which was a run up to the completion of his book with the same name. [...]
Interesting discussion - the economics of all this is set to change with video on demand in all it’s myriad incarnations.
One incarnation. If you want to watch the latest Hollywood HD movies, Moviebeam is a newly launched (I believe this is actually a relaunch) service. I guess Hollywood is trying to learn from the mistakes of the music industry and getting a head start on delivering content legally and conveniently to the consumer. Lets see if this strategy works in the long run.
Welcome back tafkap, we missed you. I guess you are just catching up with all the posts though you haven’t caught up with the comments. Moviebeam has already been mentioned in this discussion. See above.
Good to be back - have been inundated at work.
Ah yes - missed that. Anyway seems like a pretty interesting service.
Maybe so. But until such that day arrives I will do my shopping around.
As I mentioned previously, I don’t think the percentage of power renters is that high for Netflix. Therefore, I don’t think that they are losing a lot of money in shipping more movies to these folks. It will be compensated by the larger percentage of people who watch 2-3 movies a month and still pay the same $20 monthly fee (for the 3 out plan). Again, I agree that they should try to keep the infrequent renters by shipping them the newer releases faster but I don’t agree that they should “throttle” the power renters by shipping them lesser number of movies. There are plenty of non-popular movies in my queue and they still delay by 2-3 days because of the throttling.
You’re defining Netflix’s idea of a loyal customer as the user who rents the most monthly movies but this isn’t so. Since everyone on the same plan pays the same amount per month, in Netflix’s eyes, power users are not more “loyal” than others. Since power users cost more, they are being throttled. If it was instead a business model of a typical rental store then a power user is a more loyal customer (economically speaking) because his incoming monthly revenues to the store is more than a less frequent customer.
Power users are more loyal since they’re less likely to leave, right? Doesn’t that make it easier for Netflix in a lot of ways?
My gripe isn’t with the economic model, but with the fact that they’re practising something that is contrary to the agreement you sign up to. That’s all. Now if people are ok with that, and are generally ok with shady business practices, this is just another case of “This Is How The World Works, Don’t Demonize It” (TIHTWWDDI, for easy use by myself from now on). What next. Let’s see, countries are off the list, businesses are off the list, fuck, next your best friend can rape you with a chandelier..but don’t complain.
My experience here in Portland is that the turnaround depends on what you order. If you order a ‘regular’ movie, the turnaround has more often than not been 2 days (post today, netflix posts tomorrow, u get it the day after). If you order a foreign or independent movie, one that’s not likely to be stocked in the nearest warehouse, it takes longer.
Kinnum, relax have a Charminar… and while u’re at it, read about how India kicked Pakistan’s butt in the ODI series.
People in the blogosphere have suggested various strategies of “beating” the throttling. One such strategy entails queuing 3-5 movies at a time. Even if they are all popular, apparently, Netfilx sends them to you. I haven’t tried this but maybe I should. I have until next week to cancel my Netflix (since they don’t give partial refunds, I have both Greencine and Netflix for at least a week).
Btw, kinnum, I wholeheartedly agree with what you said.
Socialism is dead, please don’t expect the mass to subsidise you.
Moviebeam has only a selection of 100 movies at a time and 10 new movies every week. In effect, their choice determines your choice.
Netflix has 50,000+ titles and if you can pay a little more you can most of them pretty fast.
I don’t disagree with you at all and see this until-recently-admitted throttling practice, as false advertizing. For power users, it is a bait-and-switch tactic. My only point is that there is no such thing as a loyal customer in the Netflix economic business model. You’re looking at loyalty from the customer’s perspective, not how Netflix sees the customer. Not defending Netflix here, just saying there are two ways to see the customer’s business to the company.
You do bring up an interesting thought though … at what point is a Netflix user’s low renting habits very likely to cause him/her to cancel his/her membership? Netflix will have the stats to determine the threshold and I wonder if there are other undisclosed deals that Netflix offers these people to entice them to stay on.
Huh? How is paying more going to solve the problem of throttling? I am on a 3-out plan for around $20 now but if I upgrade to a 5-out plan for more money, the cost (of renting from my perspective) per movie will still be the same. They will make sure I don’t exceed a pre-set limit of how many movies I can watch per month. That doesn’t solve anything. My goal, as a consumer, is to make it more worthwhile to rent from Netflix than from a local DVD store (let’s ignore the convenience factor for now).
Assuming that your movie watching doesn’t increase from 15 movies a month. If you move to a 5-out plan at $30, your per CD cost becomes $30/15 = $2. Throttling typically starts when you go below $2.
“My goal, as a consumer, is to make it more worthwhile to rent from Netflix than from a local DVD store. ”
All the local video stores in the US put together will not have anywhere close to 50,000 titles and don’t forget the late fees.
Check out this guy’s research and theory about Netflix’s throttling:
http://dvd-rent-test.dreamhost.com
Just to re-visit this post since I moved to Greencine. I am happy to report that Greencine has met my expectations and I am a satisfied movie buff. They take longer than Netflix in getting me the really popular movies (”The Squid and the Whale,” “Cinderella Man,” etc.) but they do send something from my queue. This is what I really wanted. It does seem like the “masses are subsidising me” for now. The same concept works for ideas like rebates.
The sooner Netflix realizes that eventually people will wise up to them and the bad press they get will lose them more customers, the better. As long as there are alternatives out there which provide better “value” for the customer, they are likely to lose customers. This has been true for any business since Henry Ford rolled out those Model Ts. Note that this value doesn’t have to be real… it could be perceived value. A customer might move to other online rental companies because they hear that there is no throttling even if they (the customers) don’t rent as many movies to cause the effect of throttling. It’s like being a fully loaded car or computer: You don’t use all the features now but they are there if you need them.