Netflix Odyssey Speculates About Throttling

Raven over at A Netflix Odyssey has written an interesting story about Netflix and the theory that they are throttling high-volume renters.

First, Netflix has stated that the drop in prices has both increased the rate at which they are gaining new customers and decreased the rate at which they are losing customers. So overall demand for movies is up.

Second, Netflix has previously stated that high-volume renters get lower priority than low-volume renters when Netflix doesn't have enough stock to meet demand. All those normally-low-volume renters got first-pick over the Christmas holidays and Netflix ran out of stock before they could fill all the requests. Your requests got held for the next day.

I agree with Raven and think that if you rent a lot of movies each month, you have a higher percentage chance of a movie not being available, or being shipped from a distribution center further from your house.

Comments

[skebenin]

I read the article and I completely agree. It's just common sense that low rental customers will get serviced before high rental customers. I'd be upset if that weren't the case. I keep hearing the theories, and the authors never seem to consider (or intentionally dismiss) the more reasonable explanations.

I'd even go a step further. Distribution centers are probably staffed to provide a desired service level, based upon expected and reasonable demand (NOT everyone getting 30 disks a month). This is probably even more true now after the price cuts as NetFlix looks to reduce costs.

High rental customers and low rental customers will balance out to some extent, but if too many customers want too many disks, then demand exceeds the service level staffing, and some customers aren't going to get their disks right away. And who should wait but the customers that have already gotten their fair share of disks for the month?

Is this throttling? No, it's luck of the draw. If you live in an area with lots of low rental customers, you may very well be able to get 30 disks a month (and some people do). Or if it's the middle of summer and a lot of customers are busy doing other things and not watching and returning their movies, you may get 30 disks that month. It isn't throttling, it's just business.

[manuel]

I've shared my Netflix experience with the Chicago Tribune:

http://news.google.com/news?hl=en&ned=us&q=netflix

[REN]

Even if this was the only form of throttling taking place, does that make it 100% OK? Does Netflix make it clear anywhere to its users that this will happen to them? Does Netflix give new users high priority for the first couple months to hook them?

[REN]

As far as the price drop theory, I have been experiencing the "next-day" delay as long as I can remember. I have been a frequent renter this whole time, but it goes to show you that even then Netflix was either intentionally throttling me with almost every movie I rented or has a supply problem (which might be calculated to their advantage).

I almost always rent older movies. That can be argued for and against what I am experiecing, the movies are less popular therefore NF doesn't have as many copies available, or not that many people rent them so they should have copies available.

I've also noticed, and I may be off on this, a few trends. I used to only get delays on my second round of movies for a week. For instance, I would get movies sent out Monday, but if I sent them back, the next movies in my queue would be delayed. Also, the delaying always happens to groups of movies. I will have two movies waiting to ship and either both ship or both are delayed.

An explanation for this could be that NF's warehouse workers just didn't have time to fill my order before the daily mail went out.

[AMR]

I have to agree. I am an extremely heavy user on the 5-out plan and things were going stellar until right after Christmas, then my movies went from instant shipping to shipping soon. I recently had a 10 day turn around when my max was previous short term max was four. The only real solution to this is to cancel your account then sign up when everyone else is, and you won't be treated as a second class user. They seem to treat re-signups better for a while initially.

Here's my HUGE problem with Netflix shipping movies out to "low rental" customers and THROTTLING "high rental" customers. A low renter would be considered someone who rents 12 or less movies a month, probably closer to 9. A high rental customer is someone who rents 12 or more, up to 20+ a month. So the low rental customers are given higher priority than their high rental customers. OK...here's MY problem with that whole BS theory. I USED to rent as many movies as I could and WAS receiving about 20 a month. THEN the THROTTLING began. NOW I am lucky if I get 12 a month. Between them holding my returns and delaying my shipments, I am only getting about 9 movies a month. So, doesn't that mean I'm a LOW RENTAL CUSTOMER now???
Oh, but since it wasn't MY choice I'm not. I was FORCED into becoming a LOW RENTAL customer by Netflix. Now,I wouldn't even mind being FORCED to be a low rental customer if I got some of the perks. But still, it routinely takes 4+ days for them to receive my returns and more often than it should it's taking 5+ days for me to receive movies. Thus netflix is keeping my rentals LIMITED, even though I am on an UNLIMITED rental program. I am actually quite surprised how QUICKLY some people are to defend Netflix. You think Netflix is your FRIEND??? Some of you people act as if Netflix gave you one of their kidneys.

[rw]

From Netflix: "However, when a movie isn't available from your local shipping center, we reserve a copy from another shipping center and ship it to you the following day."

When Netflix receives a returned disc, I assume that it is logged back into their system, and their system chooses a new title, selects a shipping location, and queues a shipping label for printing at that location. This process should work regardless of whether or not the distribution center chosen is "local." A shipping label to be printed at a "non-local" distribution center should be queued for printing with shipping labels that are local to that distribution center for same day shipping. There is no reason other than deliberate throttling to explain the next day shipping of titles. I have 18 titles returned in the last 30 days and 20 titles returned in the last 31-90 days. Is it any surprise that my last 3 discs have been delayed.

I don't buy the Netflix employees being too busy to ship orders that day explanation. Usually before 1130am PST, my returns are logged, new titles pulled and listed as shipping the following day. When my new discs are shipped the next day, they are shown to be expected in two days, which 99% of the time means delivery the day following shipping. The discs must be shipping from within the PST zone and not far enough south or east to require an additional day in the mail. The shipping labels are not being printed in centers that because of time differences, their workdays are further along. If the Netflix staff was unable to meet the additional workload from "non-local" customers, then the delays would not be automatic and would not occur with more than half a work day remaining.

Obviously, it is in Netflix's best interest to rein in the high volume renters due to increased postage costs. Netflix really needs to implement a rewards program to incent customers to return two discs in a single envelope. Even something as simple as clipped unused shipping labels returned for free subscriptions to second and third tier magazines could shave some of their postage costs. The greater the premiums available, the greater the response to the program will be.

As long as Netflix purposely delays servicing my account, I make no effort to cut its costs. I could have returned two movies in a single envelope today, but why should I? If Blockbuster could match Netflix's library of foreign titles, then I would just switch between the two constantly and hope that their prioritization system would reward me as a frequent "new customer."

[REN]

I considered the idea of mailing back multiple discs in one envelope. If Netflix has prepaid for the postage (i'm thinking of a postage meter type system) then that wouldn't save them any money. I don't know how it works, but Netflix might have an account with USPS and just get billed every month based on their usage. In this case Netflix would save money, assuming 2 discs in one envelope doesn't increase the cost of shipping or make it harder to get through the machines.

[REN]

I mentioned that distribution center labor may have a role in the delays. I don't get discs that are initially listed as "shipping next day". I see the movies in my queue as "shipping today" until some time in the afternoon when all of a sudden they are delayed.

If Netflix has checked my movie in, wouldn't they have a system that tells them if the movie I want next is in stock? The system could be sophisticated enough to check the availability of the movie based on whether it is currently in stock and on demand from other renters who want it at the same time I do.

My movies don't get delayed until the last minute. It is like some other renter snatches it out from under me, or the workers just never get to fulfilling my order.

In the first case, maybe the higher priority renter gets the movie that both of us have in the first spot of our queue, but why should I have to wait until the next day to get it? Netflix could just go further down my queue and send me a movie that is actually available that very day. I realize some people might not appreciate this behavior, but it might be a nice option to have.

[rw]

I can't remember the last time that I had a disc listed as "shipping today" that did not ship on that day. Any disc that is delayed is always listed as "shipping tomorrow" well before noon.

[skebenin]

Not that I think anyone is really in a mood to listen, but this is from the NetFlix FAQ:

-----
"Our goal is to ship you the DVDs listed highest in your Queue. We try to ship you DVDs from the distribution center closest to you so that you get movies quickly. Often, on the same day that we receive a DVD from you, we will ship the next available DVD from your Queue. In certain instances, your next available DVD will not ship until the next business day following our receipt of your returned movie. This can occur, for example, when your top choices are not available to you from your closest distribution center or the number of shipments to be processed by the distribution center on that day has been exceeded. When this happens, your DVD will ship on the next business day and may come from an alternate distribution center."

"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. "
------

Shipping today is not a promise, it's a prediction. The distribution center is expected to process a certain number of disks in a day. If they're falling behind, your status may very well change from 'shipping today' to 'shipping tomorrow'.

A DVD that isn't available locally is probably marked as 'shipping tomorrow' immediately for a reason. If NetFlix thinks there's a reasonable chance the disk will become available locally the next day, it's in your interest if they delay shipment. If they wait a day and ship it locally, you'll get the disk faster than if they had shipped it from the remote center immediately.

[manuel]

On 1/15/05 skebenin wrote:

"it's in your interest if they delay shipment"

How long have you been a habitual liar? Have you ever become confused by your own lies? I like your method: Drone on and on until you've thoroughly confused your reader then tell them something bad is good.

[Bob Z]

sunofabeeyatch! I've been feeling this pain for a bit now and thot it just might only be me...

I sent e-mail directly to the ceo complaining about the current level of service (response was minimal and dumb to the point that they thot I was cancelling my service, not just complaining) and it turns out this may all be on purpose?!??!?

I'm one of the reasons this company exists (I watch a lot of the movies, I've paid my dues to them for 4 years now, I've encouraged others to sign up, etc, etc). they need to get their sh!t together pretty dang quick or they _will_ lose me as a customer....

[REN]

" If NetFlix thinks there's a reasonable chance the disk will become available locally the next day, it's in your interest if they delay shipment"

This has been talked about, and the value of such a predictive system has been discussed, but I just don't think that is what is going on. What are the odds that a majority of my movies are delayed until the next day. And after that what are the odds that every movie that was delayed by a day then becomes available after the delay. If they were delaying because of availability I would expect the occasional 2 day delay.

It could be that after the first day of the delay that, if a movie doesn't arrive locally, they might have reserved a copy from another distribution center. That would increase the odds that most of the one day delays don't increase to two days. Given that scenario, I would expect longer than 1 day shipping times if I was receiving movies from alternate distribution centers.

If you want to use the "The distribution center is expected to process a certain number of disks in a day" argument, I would wonder about the volume of mail a distribution center receives and how long it actually takes to process it. It is a little more complicated than just stuffing an envelope, but not much more.

Again, I want to make it clear that I am not whining about anything. If Netflix were to implement any type of cap I would be affected by it. I definitely get my money's worth with the service.

[rw]

A few months back, I had a string of 17 discs in a row that were shipped the day after the previous disc was returned. During that stretch of delayed shipping, my return history was 13 discs in the previous 30 days and 38 discs in the previous 31-90 days. Netflix's delaying tactics probably dropped my number of returned discs by 4-5 per month.

I don't mind Netflix prioritizing their workload, but having every single disc for a month purposely delayed is a bit much.

[Brandy]

Netflix has held my dvds hostage all this week. All dvds set for shipping were held 2-3 days. Some that were held for two days were marked as shipped very late in the day (after 8pm). [The mail travel time makes me infer that they actually went out with the next day's mail.] I hope it is a very isolated incident. I've been a member for four years, and it's the first time I've been tempted to switch.

[skebenin]

And I thought nobody would be in the mood to listen. :D

------
"This can occur, for example, when your top choices are not available to you from your closest distribution center ... When this happens, your DVD will ship on the next business day and *may* come from an alternate distribution center."
------

I don't know what I can add to that. If it becomes available locally, they'll ship it locally.

Remember that not all delays are because the disk isn't available locally. I'd expect that, for a majority of 'shipping tomorrow', the disk is available locally but you didn't have enough priority to make into today's processing. For the majority of disks, I'd expect quick delivery even after 'shipping tomorrow', and there's no way you can tell which ones, if any, you got lucky on.

Diminishing returns pretty much ensures 2 day delays for local non-availability won't happen. The opportunity of getting a disk in two days (1 day delay, 1 day shipping) instead of three or four is obvious, but the opportunity cost for a 2 day delay is not as compelling (three days instead of three or four).

[NetflixSucks]

Netflix is pissing off some of its best customers at a time when they can ill afford to do so. I know when I'm being treated poorly (don't piss on me and tell me it's raining). They advertise "unlimited" and then do everything in their power to limit said promise. It's the old bait and switch. Netflix will eventually get slapped with a class action lawsuit -- Blockbuster and Hollywood's old late-fees policies drew such suits, and the courts will decide if treating the same class of customers differently and falsely advertising to get said customers is lawful or not. I suspect, in the very near future, this will happen and all this "throttling" business will be laid bare.

[Fred]

I switched from 3 to 5 for the holidays and it was the first time I saw a movie, Fantasia, come from a different location. I was listed as taking several days to ship. I think Netflix could offer an explanation why a movie takes longer than normal, just to sooth me.

[Artie]

Is it wrong to say that I don't really care if Netflix is throttling me?

Maybe it's not Netflix that's throttling us. Maybe it's GOD. He's trying to tell us something. He's trying to tell us that we need stop sitting around watching so many movies and get outta the house once in a while.

[NetflixSucks]

I don't believe in God.

I believe in honest companies that keep their promises, not deceitful advertisements.

First Come, First Serve. Simple as that. The number of movies I rent should not matter on an UNLIMITED rental plan. Who gets it first should wholly depend on who queued it first, and how far down the queue it is. If I was the first one to queue the movie, and put it on the top, I should get it first. (I know it's a lot more complicated than that, just making an example)

[REN]

You believe in honest companies?

...because going outside has so more inherent value than watching a movie. Nevermind that a person might take more away from a movie then standing around outside.

Did you hear what god told the Indosesian people? I bet they wish he had tried such a subtle approach with them.

I think the first-come first-serve thing would add complexity and wouldn't really help things. I don't mind some priority system being in place to help people who might not be able to rent as much due to their distance from the shipping center. If someone does take a movie intended for me, I think NF should just ship the next movie down in my queue.

[Matt]

I noticed that the quality of service really dropped when they lowered the prices. I'm hoping this is a temporary thing, but lately most of our videos have been mailed to us the day after they receive the old one. I've been suspicious of their business practices, and now I realize that I'm not the only one.

[CashForFlow]

Intentionally delaying shipments by a day or two at the same time that you're advertising an "unlimited" plan seems extremely deceptive and likely constitutes some type of fraud or false advertising.

I suggest that Netflix users fight back by calling a plaintiff's attorney to initiate a class action lawsuit.

[Stan]

I started Netflix two years ago. during when I was out doing a lot more I would send back a film after about ten days, meaning I was getting a total of six films a month on my three out plan.

In the winter months I would watch more and get a total of about ten films on my three out plan.

I was VERY happy and constantly recommended Netflix to coworkers, friends and family.

If I mailed dvd in on Tuesday I ALWAYS had a new dvd Friday.

Since October, and most noticably since mid November, Netflix service has gone complety down! Now when I return a film on Tuesday I will not get it Friday or Saturday bvut Monday! Even if I mail one monday sometimes they don't come on Saturday!

This is not about the Christmas holdiays but noticble for three onths. Soemthing is definetly rotten at Netflix. I hear a lot of friends commenting on how their service has gone bad as well.

My brother uses Blockbuster and his service has been doing nothing but improving. I asked him about selection and he said it was small at firs and now huge. I just checked a major new title, Return of the King Extened, and Blockbuster has it, but netflix doesn't! I also checked four obscure Italian films, Blockbuster had all four and Netflix had only two. So much for Netflix evaporated selection advantage as well.

I am going to give netflix another month, but I just signed up for Blockbuster. I feel like netflix screwed me as a loyal long term customer.

[ea]

I have to agree that Netflix has very recently gone to hell, at least with my Lansing distribution center. If I drop a mail in the street box by 3pm they usually had it checked in the next day 85% of the time. This is based on a year or so of experience. Now I have movies that three and four days out and not checked in on a consistent basis. I'd call them lost, but they magically appear. Netflix might not be throttling me, but they sure need to hire a new logistics manager regionally. I'm most likely quitting at the end of this month and switching to Blockbuster. Hopefully that will help those of you dedicated enough to stick around.

[Bill_Lumberg]

I too experience the same thing. For many months if I got the dvd's mailed from the post office before 5:00pm they would receive them the next day and ship out that day. There is no indication of them receiving them today.

The village was put in my queue on Jan 11 and it said would be shipped on Jan 15 and I didn't get it until the 18th. Yes the 17th was a holiday but why the week delay?

[david]

I have recently just had the same problem; have been with Netflix for 3 months, no problems, loved it, thought it was the best thing since sliced bread. Now, however, it has been over a WEEK since we returned our movies, and every day I go in to check the status of our next shipment, it says they will ship tomorrow. I sent off an email to customer support (if such a thing existed in Netflix) saying if my movies aren't shipped soon, I will cancel my account with them, cause I'm not paying them ~$20 a month for nothing. Well, today is the deadline I gave them, and I haven't heard back or anything, so BYE BYE NETFLIX! I am going with Blockbuster, which is cheaper, and I have a store right by my house so I can go in and rent a game or whatever if I have the compulsive need to do so. Forget Netflix.

[Scootemyth]

Gotta love when "instant gratification" is pulled away from the IG Generation! Hahaha :)

[Greg]

It's obvious they are throttling (and are about to lose my business).

1. As SOON as I went over 3 movies a week, ALL movies now come up as "Shipping tomorrow" rather than "Shipping today".

2. These are ALL old movies, not ones in which there is a high demand.

3. There is NOT a workload issue. If there were a intermittent rush of orders to fill, this would be an intermittent problem. If there were a continual rush of orders, then the delay to get movies would climb from one day to two days to three days as they got more and more behind.

This has nothing to do with inventory, just punishing heavy users to keep their mailing costs down.

[Kim Jong Il]

I am about to FREAK OUT! I always get my movies turned around in 2 days but I just sent in 3 movies on Tues and did not get an email today notifying me that they have received the discs. I noticed by 10am that I hadn't gotten the email, so I clicked check mail every 5 minutes all day and it never came. They have always received these discs in 1 day, so I don't understand how this could be. It must be that they think I will start renting more movies because I sent back 3 at a time instead of just 1. That is such a dumb policy. I can't believe they would do that, but its obvious they are.

It's obvious that as of today I am on Netflix's list of people to be throttled and they are about to lose me AS A CUSTOMER. They are trying to save money, and now I am sitting here and I have nothing to do but watch American Idol. I have no movies, and I have nothing good to watch, and I am getting screwed. (Well, I did hear today about the Tsunami, sucks for them).

No! I won't stand for these deliberate disruptions!

I am going to Blockbuster and I'm sure they will be very very happy to have me. But if they try to delay my discs by a day I'll drop them like a bad habit too.

[cpc]

I used to rent "a lot" of movies through NetFlix. I still would, but since they have limited the number of movies I can rent per month by delaying shipment until the next day my rental frequency has slowed down.

Maybe NetFlix was losing money with my high frequency account. They were, however, receiving quite a bit of free advertising from me and other high frequency renters. Sure, high frequency renters may cost more than the subscription rates, but if you are a high frequency renter, then you are likely very happy with the service. I was very happy and I recommended NetFlix whenever I could. What they may have lost in $ on my acocunt they gained tenfold by people I encouraged to sign up. They should have kept that in mind.

I'm not very happy with it anymore, but will continue because they deserve the chance. Until they stop limiting my rentals, however, they will no longer be receiving the free word-of-mouth advertising I (and others, hopefully) gave them.

I had been experiencing this slowdown for over a year. I could only get 3-day delivery where I live so it was really a slowdown for me. I finally moved to blockbuster last week and cancelled netflix. Even if BB is not any better, at least I'll save money and get 2 instore rentals to boot.

[Ron McLendon]

I agree with the complaints of Netflix intentionally slowing down shipments because my service has gone to Hell in the past 6-8 weeks. Used to be I could get a one week turn-around. Now it's 10-11 days. Here's a real peach: I had ordered "Stagecoach" on Jan. 25. It was promised to ship "today". At the last minute, it was changed to "by tomorrow". Then it showed shipping on Jan.28, for a Feb. 1 arrival. Then the arrival date changed to Feb. 2. Today, (Feb. 3) I got an email from their automated system telling me they'd received it back in. How in name of creation is that possible? I NEVER GOT THE MOVIE! I had to put it back in my queue. Now it says it's shipping "today", but we'll see.

Blockbuster is starting to go to lunch on Netflix. Plus you get two in-store rentals a month.

[Billy A Kidd]

This is in response to postings about throttling and concepts of "fair share" of serice.

First of all, this is a paid subscription service. I can think of no other type service where people who are less frequent users get priority over more frequent users. Take a fitness gym for example. If a person who only makes it there twice a week goes and a piece of equipment is being used by an every day user, do they give priority to the less frequent user? Of course not. This isn't communism, this isn't a team. It's business, and it should be first come first serve.

What's happened is that people are starting to believe the spin that NF has put on all of this. It has nothing to do with fairness or making for a balanced experience by all its users. What it has to do with is Operating Costs, plain and simple. NF loses money the more shipments it makes per customer in a given month, so they are trying to limit the number of shipments that it makes. This is a really crummy business plan, and it's starting to bite them on the behind. They need to offer a fixed number of dvds out per month, with an extra charge per dvd over that limit. This would allow them to fix their profit into their prices. They would then have no need to lie to consumers about *unlimited* dvds per month in order to shield profits. They have decided however, to try and play both sides of the game to remain competitive, and it doesn't work that way. There's no doubt people would be happy to pay a bit more if it meant that the service they got was what they expected. The value just isn't there in their current system, and they're alienating faithful customers.

In addition, it's not just low use customers that get throttled. I've been a 3-out-at-a-time member from early 2004 on and I've never had more than 12 -14 dvds out in a given month. I've been throttled for the last 4 months or so, and I've been limited to 9 or so. This makes NF less attractive than my local dvd store, with late fees and all. But the real problem is that they are limiting my use, and lying to me. Unforgivable. This is definitely my last month. I look forward to Amazon getting a store together in the US. If they do, it should make things really interesting.

[Aggravated]

I can't wait for Amazon to get into the mix, too. I've been badly throttled by Netflix over the past few months. Out of all the disks I've rented recently, 90% of them have been shipped the next day. That is, they get a disk back from me on Monday and they ship my next rental on Tuesday. The worst is when they get a couple of disks back from me on Friday and don't send out new ones until the following Monday or Tuesday. Despite doing this, Netflix is still sending out solicitation emails to prospective (or previous) customers in which Netflix promises delivery in "about 1-business day." I see they're hedging a bit by including the "about"; however, dispite the fact that I've been a loyal customer for three years (with never more than 11 or 12 disks per month), Netflix is now making very sure that I do -NOT- get disks in "about 1-day day." They've turned on the throttle to guarantee that, virtually all of the time now, I get disks in 2 or 3 days...and sometimes longer. PHUH!

[Haddon]

I just cancelled my Netflix account due to the practice of throttling. Here's what I wrote Netflix, not that it will do any good:

I have been a long time user of Netflix, with this account, as well as another. I have just cancelled my membership because of your throttling practice. When you say UNLIMITED, you're lying. Someone should take you to court, and I can only assume that if you keep this up, someone will. Throttling LIMITS the customer, and in so doing, promoting yourself as providing UNLIMITED rentals, is false advertising. Thank God for the New York Times exposing this practice. -Haddon Kime

[thomas sabo charm club]

WOW!!