I've been a big fan of Netflix from the beginning. Talked them up to a ton of people. I love the system -- you can keep three movies out at a time (unless you've been a customer as long as I have, and then you can have four out) and keep them for as long as you want. When you're done, you send them back in a prepaid envelope. Big movie buffs can watch a different movie every night, for one $17.99 monthly fee.
Except, apparently, they can't. Netflix has admitted that it subjects heavy users of the service to a practice called "throttling." Apparently, if you rent no more than 4-5 movies a month, Netflix makes money. If you rent 15-20 movies a month, you're a drag on the bottom line. Netflix protects its margins by slowing the turnaround time, or putting heavy users to the back of the queue for popular new releases.
Netflix has marketed themselves through one key differentiator: "Unlimited rentals." Having their system deliberately slow response to heavy users sounds like a limitation to me, and not a very honest business practice.
A Wikipedia search turned up a paper written by a software engineer who claimed throttling was taking place as early as January 2003, and did some basic testing that supported his theory.
Interestingly, the pop-under ad that appeared when I clicked to this story on CNN.com? Netflix, of course.
Tuesday, February 14, 2006
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