Unlimited DVD rentals through Netflix aren't really unlimited after all; thanks to the company's "fairness algorithm" that slows down shipments to heavy users, so other and newer clients won't have to wait too long to receive back catalog picks, and especially newer releases. You pay $18 a month, but the more you rent, the slower they send the next items you've pre-selected online. One guy, in the above-linked story, was renting 18-22 DVDs a month, but they got wise to his ways and "throttled" him back to 13. With a bit of legal prodding, the company has decided to admit to the practice.

Netflix didn't publicly acknowledge it differentiates among customers until revising its "terms of use" in January 2005 — four months after a San Francisco subscriber filed a class-action lawsuit alleging that the company had deceptively promised one-day delivery of most DVDs. "In determining priority for shipping and inventory allocation, we give priority to those members who receive the fewest DVDs through our service," Netflix's revised policy now reads. The statement specifically warns that heavy renters are more likely to encounter shipping delays and less likely to immediately be sent their top choices. Few customers have complained about this "fairness algorithm," according to Netflix CEO Reed Hastings.

We're new Netflix customers, and like it a lot so far. But with rentals for the kids and adults in our house we could reach the threshold too, and I wouldn't like that. A deal is supposed to be a deal. The Netflix selection is as good, if not better than all but the most boutique video stores, and how many of those are within reach of most folks, anyway? Price-per-rental works out better than at stores if you go beyond about five rentals a month, and of course gets lower still with each additional rental. (That's what has their automated bean-counters throttling heavy users). With Netflix, there's no schlepping to and from the store, waiting in line, or late fees. You can rent up to three movies at a time, and the DVDs come in wafer thin envelopes with the return envelope and postage built in. Watch, seal, drop in mailbox, and another one is soon on its way. You select the films and track shipping status at their Web site.

I've often wondered if someone would steal the DVDs from our mailbox; so far, no. BUT - U.S. postal workers have developed sticky fingers for Netflix DVDs, as New York Magazine reports. The article includes this upbeat note, for which we can thank government employee unions and De Gub'mint itself:

Because civil-service rules make it nearly impossible to fire corrupt mail carriers, U.S. attorneys often agree to dismiss charges in exchange for their quitting.

Well, at least if someday a DVD reported sent to us by Netflix fails to show, I'll now know not to just assume it was pinched from our mailbox. All told, Netflix is a still quite a success story so far, and the customer satisfaction, including that of our household right now, is high. I'll be watching the turnaround time, though, especially as our rental frequency increases. Our DVDs are coming from no great distance: Tacoma to West Seattle, and we know it only takes a day once they put it in the mail. Blockbuster has already started a competing DVDs-by-mail service, and perhaps there will be other new entrants, too. Netflix might want to consider creating a more-premium account option for a few bucks more per month, guaranteeing quick turnaround for high-volume users. Or is it too risky, competitively, to more fully admit to the current limits of the "unlimited" rentals claim?

TECHNORATI TAGS: NETFLIX, DVD RENTALS, THROTTLING, POSTAL THEFT, CIVIL SERVICE, BLOCKBUSTER