Red Envelope Madness!

Tuesday, January 18, 2005

"Unlimited" rentals

When you sign up for an unlimited service or product, you expect to get exactly that. Is Netflix deceptively or falsely advertising a promise of "unlimited rentals" while knowingly and deliberately placing limits? I have reason to believe not. After researching and writing this blog for the past 10 months, I have not seen data or evidence of any systematic slowdown of service that cannot be explained by other factors, by understanding the nature of the online DVD business, the USPS, the laws of supply and demand, and the nature of information available on the Web. I do not rely on the unverifiable, anecdotal complaints by individuals on newsgroups or blogs, when it is not backed up by data.

Although there is plenty of information on my blog about how Netflix operates, here is a brief overview of the process: when you return a movie, Netflix scans it in as soon as they receive it. If your local distribution center has the next movie in your queue, you get a message that it is "shipping today". If they don't have it, the system will search for the disc at the next closest DC until it finds one in stock.

After the length of time it takes for all DCs around the country to scan in their discs, report this data to Netflix headquarters in San Jose, CA and process your request, your disc is prioritized according to factors such as these: is the disc number one in your queue? How long has it been in the number one position? How many other people have it in their number one slot? Is your number two disc available? How many "number ones" have you received lately?

It is conceivable that they occasionally receive more discs than they can possibly scan in one day, due to machine problems, unexpected fluctuations in usage, or staffing shortages. Tuesday is their busiest day, because most people return their discs on Monday, after the weekend. Seasonal or regional fluctuations in the number of subscribers cause each DC to experience delays as they adjust.

Netflix is not responsible for delays caused by the US Postal Service. The distance of the DC will determine shipping times. There's also employee or mail negligence or theft. If you experience this, you should report the loss to your Postmaster.

Netflix has more than 30,000 titles and more than 16 million DVDs total. On average, Netflix ships more than 3 million DVDs per week. When you're dealing with that volume, it is inevitable that some customers will be unhappy. Customer "churn", that is the number of customers who join, versus the number who leave, is less than 5% most of the time.

They estimate that 85% of us receive our discs the next day. That means 300,000 people are getting their discs two, three, or four days later.

I believe it is an unavoidable result of Netflix being a Web-based business, and the viral nature of the Web, such that one complaint can reach 100,000 people in one day, that problems seem much larger and more widespread, than they really are. Netflix is providing such a good service to so many people, that the vociferous minority is not as big as it seems.

If you continue to believe that you are being singled out for extraordinarily bad service, or that Netflix is deceptive in their practices, you should file a complaint with the Federal Trade Commission or your State's Attorney General. However, if you keep it all in perspective--the nature of the business, the factors outside anyone's control, and the nature of information on the Web--you will conclude that Netflix is not deliberately placing limits on your rentals, and is the best, most reliable, and most economical online DVD delivery service.

16 Comments:

  • At 1/18/2005 1:40 PM, Anonymous Anonymous said…

    While I want to believe this, and in parts do, I have to wonder. I’ve had two accounts running side by side. One is a year old, one is two months old. Both get a fair amount of use on the three out program. I’ve noticed a colossal drop in service since Jan 1 and am considering dropping them both until people get tired of Netflix in second quarter. The two month old account gets considerably better service. This all documented with a spreadsheet which includes shipping dates/times, availability status, and notes anything usual (that is, locations that ship from a different distribution center). Granted, the two month old account also gets what I’d call bad service, but the year old one gets worse service. I was willing to call all this snake oil until I put two identical accounts side by side.

     
  • At 1/19/2005 12:28 AM, Anonymous Anonymous said…

    Like you, I have always been skeptical of the 'Netflix is out to get me' stories. However, I do believe they give priority to their more profitable customers. This shows up in two ways - (a) probability of receiving title in high demand, and (b)probability of immediate shipment on their busiest days. Some people consider even this to be "throttling", but I don't. I suspect Netflix employees work about the same number of hours each day even though the number of discs per day is not even; so either some discs get delayed on the busy days or else they would be twiddling their thumbs on the light days.

    EVERY BUSINESS OPERATES THIS WAY. When a flight gets cancelled, who do you think gets the highest standby priority on the next flight - the 100K businessman who paid full fare, or the guy who got a deal from Priceline?

     
  • At 1/19/2005 2:10 PM, Blogger manuel said…

    Please realize that a large percentage of postal employees are veterans who take pride in their work. Being a U.S. Army veteran and having worked 5 years as a federal employee I can sympathize with stereotypical complaints made about postal workers. Your persistent derogatory comments aimed at the postal office hurt a great number of federal employees and their families.

     
  • At 1/19/2005 3:59 PM, Blogger The Anti-Chrys said…

    I'm within 15 miles of their S. California distribution center and once enjoyed a consistent 3-day turnaround that Netflix provided. Then something happened. I noticed significant delays in my shipments starting in early December. I don't know if this is a deliberate action to throttle certain customers or because of a change in Netflix operations. At first, I attributed delays to holiday postal traffic. We are done with the holidays and it did not return to the old standard. There's a new 5-6 day turnaround standard that replaced the 3-4 days last year.

    Prior to December 2004, 90% of my shipments were cycled in 3 business days from returning a movie in my mailbox to receiving new movie in my mailbox. There was an occassional 4 day but not often. Now it is NEVER 3 days and rarely 4. 90% of the time it is 5 days. I've tracked and documnented this. There is an extra day of transit on each end and sometimes a day of "Shipping Tomorrow" once received.

    Recent example: Just last week, I returned 5 movies on Tuesday. Normally they would have arrived on Wednesday, get checked in, and 5 more would have shipped Wednesday and arrived Thursday. Instead, they arrived Thursday. They shipped 4 of 5 on Thursday which arrived Saturday. They delayed the 5th movie 1 extra day shipping it on Friday. It arrived Tuesday.

    Why is this happening? Who knows. Something changed between my mailbox, through Netflix, and back to my mailbox. There are no apparent changes to my normal mail delivery. Only the employees and management of Netflix can answer this question with any certainty. As consumers we only see the result of their actions and changes. Netflix is suspiciously quiet about this subject which only leaves us to speculate. The once sent out email's asking how long it was taking to receive you movie. I don't get those anymore.

    I don't know or really don't have time to care if there is a "conspiracy". I just know service has deteriorated significantly in the last two months over what it was the previous year. It raised a flag that sent me looking for alternatives. This is not speculation. It is real and verifiable. I'm tracking it currently while I compare them with competitors. I'm currently testing Walmart in parallel. They are slighty faster (1 day less) and a few bucks cheaper.

     
  • At 1/19/2005 4:02 PM, Anonymous Anonymous said…

    First, I will state that "shipping the next day" has nothing to do with the POSTAL SERVICE it is an internal problem. Second, when every DVD that is to be sent except those shipped on Thursday or Friday get the "shipping the next day" status what are the odds of that happening. A lot of these are shipped from my local processing center the next day. Also, a heavy user is one who gets 5 or more DVDs a week. The number that NETFLIX seems to strive for is no more than 20 a month. The fact that hackingnetflix.com which seems to be pro NETFLIX has to report on this problem tells you that people are beginning to become aware of this problem. Delaying shipments saves NETFLIX a large amount of money a month.

     
  • At 1/19/2005 9:31 PM, Anonymous Anonymous said…

    I was a Netflix customer for nearly two years. Last week, however, I cancelled my membership due to the "throttling." I know how drastically the service has gone down in the last few months (since the price reduction), and I don't need a scientific study to let me know when I'm being screwed. I will, perhaps, give them another chance in the spring to see if they have stopped with the delay tactics.

     
  • At 1/19/2005 11:48 PM, Blogger Raven said…

    Well written, B.

     
  • At 1/20/2005 5:15 PM, Blogger The Anti-Chrys said…

    Throttling and preferential treatment exists at Netfix. I posted my comments on this yesterday. I just proved it again. They received a movie today (Thursday) but have it set to ship tomorrow (Friday). I just signed up for a new account. All movies ship today. Now let's see which movies arrive first.

     
  • At 1/21/2005 10:09 AM, Anonymous Anonymous said…

    Funny I should run across this the day after I complained to Netflix just such activity. I've been a Netflix customer now for two years total. My most current subscription length is going on about a year. I had been enjoying almost a movie a day under the 3 DVD membership level for the better part of 1-2 months. Not any longer, I've experianced my second week of what I suspect is throttling. (20 dvd rentals in a month @ $17.99 is probably not Netflix's idea of a good business practice)
    I religiously check the website for my DVD's arrival and departure and have noticed what was once a single day turnaround at the Netflix warehouse is now a two day turn around. I have heard of a algorithm that netflix uses to prioritize their processing of DVD's based on length of membership. It's nice to know that loyalty has it's rewards...hahaha

     
  • At 1/21/2005 7:22 PM, Blogger The Anti-Chrys said…

    This comment has been removed by a blog administrator.

     
  • At 1/21/2005 7:30 PM, Blogger The Anti-Chrys said…

    In my previous post, I mentioned I signed up for another account and 3 movies were scheduled to ship on Thursday. The 3 movies from the new account are here (Friday) in 1 day, just like it used to be. Is this a random act? I think not. New accounts are definitely taking a priority path or the god of DVD rental is kinder to new customers.

    Today (Friday) by 7 AM Netflix ack'd receiving 7 movies. No replacements are going out today. All are scheduled for Monday! If they go out Monday, there's 50/50 chance they won't be here Tuesday. Another random act? I think not. One could even take this further and say they don't want me to receive a bunch of movies Saturday because there's a greater chance that I would watch them over the weekend and return them by Monday morning! We won't speculate however. I'll have to collect some more data before I go public with that remark. Oh.. I guess it's already out.

    Verifiable. Got the data. Continuing to gather the data.

     
  • At 1/24/2005 6:43 PM, Blogger malcolm said…

    GC in OCC,
    did you need to use a different credit card /username or any of that, or did you just rejoin with the same details as before?

    BTW, I got this from public relations:

    "In determining priority for shipping and inventory allocation, we give priority to those members who receive the fewest DVDs through our service. As a result, those members who receive the most movies may experience next-day shipping and receive movies lower in their Queue more often than our other members. By prioritizing in this way, we help assure a balanced experience for all our members. Those that rent a lot of movies get a great value and those with lighter viewing habits are able to count on our service to meet their limited needs"

    Malcolm

     
  • At 1/24/2005 7:44 PM, Blogger The Anti-Chrys said…

    Malcolm said…

    Did you need to use a different credit card /username or any of that, or did you just rejoin with the same details as before?

    I joined under my wife's name so all the information was different.

    It's incredible that Netflix would actually send you a message with that content documenting how they treat certain customers that pay for a service and have it throttled back because the actually use the service! What a crock. They are going to create a exodus of customers as the word gets around on the internet.

    Netflix continues their delays (actually, they are increasing the delays even further) on my account even more. Now after delaying a shipment 2 work days and no longer shipping on Saturday like Walmart, the put the delivery date of 1/2 the movies in 2 days and the other 1/2 in 4 days! Maybe this is because I'm complaining to their Customer service on a regular basis. If I thought the Federal Trade Commission would actually act on a complaint, I would file one. All they do is collect papers. Nothing ever gets done. In the end, it's best to vote with your wallet. They're history at my house at the end of my current billing cycle. Walmart wins my business.

     
  • At 1/24/2005 9:01 PM, Blogger malcolm said…

    Thanks for the info.

    BTW, have you tried CafeDVD.com? they just wrote back to me, I was asking about my other pet peeve, broken disks (3 in 6 weeks, and of course Nerflix never offer to give you a free rental), as well as turnaround times for NYC (they are in San Francisco). They wrote:

    "Turnaround for 3-dvd membership in NYC average around 10-12 dvds per
    month, and for the 4-dvd plan around 14-18 dvds per month. We have a
    good reputation for the quality of dvds and our more protective
    packaging, and receive very few complaints with regard to damage or
    playback problems."

    Now, this is AVERAGE turnaround, so my guess if they're on the level, and don't throttle (don't you love it when a new verb comes into the language?) cineastes like us should get 16 to 18 disks on a 3 DVD plan. what they didn't mention, but which is on their website, is that they will release your next disks WHEN YOU REPORT TO THEM THAT THE LAST ONES ARE IN THE MAIL, saving much time, and establishing a business relationship based on trust. i like that, and it gives me confidence that they won't bait and switch. I just checked the first half of my 70 DVD queue with Netflix, and they have all but one of my choices ('Tinker, Tailor soldier Spy'). My tastes run from 70's new wave Hollywood through much contemporary indie, some highbrow European and a bit of blockbuster. I'm going to give them a try, i might keep Netflix, or try to re-join. For once, i wish i was married :)

    regards

    malcolm

     
  • At 1/26/2005 1:20 AM, Blogger The Anti-Chrys said…

    Thanks for the lead Malcom..

    I ran across another one you might be intrested in checking out. http://www.grreencine.com

     
  • At 1/27/2005 3:19 PM, Blogger The Anti-Chrys said…

    This is probably last comment on Netflix.. I've collected enough data and proven that throttling exists.

    4 movies in today, two ship today, two tomorrow. The throttling is real and documented. There is no defense. They simply do not live up to their agreement to give you 8 movies at a time. If you return them in a group, they start delaying shipments in addition to somehow adding an additional shipping day.

     

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