Analysis of Netflix's DVD Allocation System

dvd_rent_test writes "Netflix uses the number of movies you have previously rented to determine your priority in getting movies. The more movies you rented during your last billing cycle, the less chance you have of receiving a movie versus an individual who has rented fewer movies. This is why new users have great success getting their movies and older or heavy users have a difficult time getting some movies."

Comments

Easy solution

[Anonymous Coward]

Cancel one account, sign up for a new one.

What will the MPAA say?

[xchino]

I mean, after all, waiting for movies has got to be increasing piracy ratings. It should only be fair that %93 of Netflix's profits go back into the MPAA to make up for lost sales caused by people waiting on movies.

Re:What will the MPAA say?

[JoeCotellese]

It's not so far fetched. I wanted to watch the Buffy season 1 DVD. Disc 1 was in my queue for 6 months! and status never changed from very long wait! I got fed up and downloaded the episodes.

So I wondered..

[Anonymous Coed]

I was wondering about this. I have been a member for almost two years, and I am very efficient about sending the movies back quickly (thus maximizing the total number of movies I can see.) I have been wondering for a long time why I never seem to get any of the "Short Wait" movies, much less the "Long Wait" ones. Well anyway, I'm thinking about cancelling Netflix anyway. The post office has lost (or stolen) a number of movies I've sent back anyway. I'll probably just get a PVR instead.

Re:So I wondered..

[angle_slam]

The post office has lost (or stolen) a number of movies I've sent back anyway.

What does Netflix do when the USPS loses a DVD? I know that they lost one of mine and I used the Netflix page to mark it as missing, with no effect on my account. But it also says that if you have an abnormal amount of lost DVDs, they will notice. Did they do anything to you?

Re:So I wondered..

[zgwortz962]

Actually, I seriously doubt the Post Office has actually lost or stolen these movies. I've been using Netflix for a year and a half now, and have NEVER had a movie lost on it's way to me, but have had 5 lost on the way back, including two that were mailed back on the same day. If it were the Post Office losing these, I'd suspect losses in both directions. It's my suspicion that most, if not all of the "lost" movies are more likely lost at Netflix itself, either not processed correctly when received, or whole bags of incoming that get messed up in some fashion. IMHO.

Re:So I wondered..

[TheGax]

There was some sort of post office "sting" if you will going on in 2001. At least here in Florida. It seems that postal workers were indeed stealing Netflix movies. But this has since been resolved from what Neflix's postal liason told me in an email. The case was also before a Federal grand jury at the time (November 2001).

As for how easy is it to tell an "inbound" from an "outbound" Netflix movie; very easy. Inbound to the subscriber are almost entirely red on the outside and are addressed to the subscriber. Outbound movies going back to Netflix have their address on them and are white on one side.

And since they have opened new service centers (relevant to me, first in Georgia and then in Ft. Lauderdale) the shipping times have been great.

Re:So I wondered..

[dumbArtMajor]

We just cancelled our subscription because people in our building would steal them, watch them, and return them. So we switched the mailing address to one of our workplaces and again, people in the mailroom would steal them, watch them, and return them.

If NetFlix would do something as simple as sending them in a nondescript brown wrapper (insert p0rn joke here) instead of the garish attention-getting bright red, it might make a lot of difference, theftwise.

But their business model is based on maximizing the profit by stretching the time between rentals. Since you have to wait a few days before you can declare something lost, it's time that you could have watched, returned, and been in the process of getting your next movie. So NetFlix gets paid whether you recieve your movie or not. Screw 'em.

Re:So I wondered..

[neurojab]

and you can tell by looking at the address... one would suspect a postal worker would be able to read those.

Re:So I wondered..

[smoondog]

Actually, I got a NetFlix DVD delivered to me once, and I'm not a member. (It was intended for someone who lived a surpisingly far distance away.) Anyways, since I wasn't familiar with NetFlix (at the time), I didn't think was important (I thought it was an AOL like mailing) so it sat on my shelf for a while. Honestly, I don't remember if we ever got to the correct place, in hind sight we probably should have seen what movie it was....

-Sean

That explains some things

[DeltaBlaster]

I thought it was just a coincidence that I (with a newer account, not many rentals) got the same movies my mother(very old account, lots and lots of rentals) couldn't get. Kinda stinks really... good thing im in the dorms at college so I get to change my address/CC/account every 6 months :)

interesting

[Transient0]

It's a paid service, you would think that they would want to cater to their most active customers to keep from losing them. On the other hand, you might think that since you pay a flat fee that those who didn't make good use of their account in previous months but paid the full fee anyway deserve a little extra priority.

Hmmm... I'm not sure that anyone really has a reason to complain to loudly about this. No-one is being ripped off. Still, I'm not sure I understand their logic in implementing this way. In the end I'm not sure it is in their interest to give preference to either group: the frequent users or those who pay and don't play.

Re:interesting

[SpeedBump0619]

I'm not sure it is in their interest to give preference to either group

Think again. As long as people don't really notice then they can keep a higher subscription rate with this system.

The active people, those who like and use the system often, are less likely to give it up over longer wait times. Those people probably have more movies they want to watch, so they can pick those with the lower wait times.

The inactive folks, those who rarely use the system, must be provided low wait times in order to keep them subscribed. The Surest way to make them leave is to tell them they have a long wait for the one thing they wanted.

This system seems designed to maintain the highest subscription rate, which is exactly what I would expect.

Re:interesting

[TheNumberSix]

It's a paid service, you would think that they would want to cater to their most active customers to keep from losing them.

I disagree. Since customers can only differentiate themselves based on their plan level, the "best" customer from Netflix's point of view is probably the one with the eight rentals out at a time plan, who has nothing in the queue.

The worst customer is probably one with the eight out at a time plan with a queue of over 100 popular films.

Re:interesting

[DroppedPacket]

Also, if you have a "Long Wait" movie at the top of your queue, you can expect that a new movie doesn't go out to you as quickly as if you have a "Now" movie in that position

That hasn't been my experience. I live 1 day turnaround from the local center in San Jose. I drop my movies in the box, they get them early the next day (I've gotten e-mail about their recieving it before 7AM local time) and they ship out the same day with a new one.

Fantastic turnaround. And they love me this month because I have 3 disks I keep forgetting to send back.

The only time I saw a hesitation on sending was once when I had a long wait at the top of my list. I think they had an anticipation of return in the rental model that didn't happen that day.

But then again, I got a bonus rental (4 out at once) when they didn't have a copy of a movie locally and sent it from a different location to me. Great service.

This is a manufactured problem

[ArmorFiend]

DVD burners are cheap now. They ought to just license the ability to burn-on-demand from the MPAA. That way they never run out of Titanic or whatever. Perhaps the MPAA would need to fund "UN inspections" to ensure that the excess DVDs are destroyed.

I notice blockbuster charges ~$3.90 for all DVDs now, "because the cost of replacement for damaged DVDs is so much higher than VHS". Sha, right, why blockbuster's don't all have DVD burners in the back room is purely a testament to bad/non-existant negotiations between Blockbuster and the movie companies.

Re:This is a manufactured problem

[exhilaration]

You can't copy double-layered commercial DVD's. They can only be manufactured.

The DVD burners currently available can't copy a full-length movie. You have to rip the original movie, and increase the compression (slightly lower the quality) to fit it onto a single disc. You can also slice the movie in half, and use two discs.

Re:This is a manufactured problem

[operagost]

That's the same rationale the record companies have for charging more for CDs, even though they cost far less to make than cassettes. Unfortunately for Blockbuster, the lie is a bit more visible as new DVDs already sell for LESS or the same than VHS copies of the same movies- and this is with bonus materials! They're raising their prices because they've managed to displace the little guys in most areas and their profits are lower because of the recession. Yes, they're that stupid.

Re:This is a manufactured problem

[darkwiz]

Classic business flaw:

"If we increase service, we'll increase demand at least proportionally..."

However, this assertion is typically just flat wrong. Any business person worth their salt whose goal is to maximize profit will use the route that is most likely to give them the highest margin. If service dropped below a threshold, yes - people wouldn't use the service anymore. However, as long as the service is "good enough" people will continue to use it.

In other words, if they increased service, they wouldn't necessarily increase subscriptions enough to offset the cost. I'm sure there are plenty of people at both Blockbuster and Netflix who have thought of this idea (even with VHS when it would have been more possible and cheap). They probably came to the conclusion that it just wasn't worth it.

Re:This is a manufactured problem

[trix_e]

yeah, I'm sure the MPAA thinks this is a *fantastic* idea.

Provide easy access to commercial-grade dupe equipment to thousands of teens around the US making minimum wage working in a store full of source material.

Hmmmm... I wonder why they haven't done this yet?

Re:This is a manufactured problem

[PCM2]

Actually, Netflix does now have some sort of deal with the studios that allows them to manufacture their own discs. Sort of like how the BMG Music Club does it for audio CDs, I suspect.

Check it out: Look carefully at the Netflix discs you get in the mail from now on. Every now and again, you'll get one that has just the title of the film printed in a weird font (kind of Art Deco) and no graphics. Actually, the text isn't printed ... the entire surface of the disc is printed a sort of purplish grey color, and the "printed" part is actually the parts that are missing, so you can see the silver of the disc itself through the letters. On these discs, there's just the movie title, the studio logo ... and the Netflix logo.

So, they ARE trying to do something about the cost of maintaining inventory...

how many tricks do they have up their sleeves?

[martums]

I had to stop using NetFlix a couple months ago because my USPS carrier wouldn't consistently put them in my apartment's mailbox (leaving them outside risking theft--those big red & white envelopes just scream FREE DVD!).

When I went to kill my membership, they offered me the same membership for less money, what was 3 DVD's for $20 a month, was now two or three bucks less. And the savings could be had on all there other plans, if agreed to use their services for a year or so.

Seems like they've got some pretty "creative" ways of handling their customers. I'm content buying DVDs off of eBay.

Anybody else think they're a little "funny"?

Re:how many tricks do they have up their sleeves?

[vondo]

Seems like they've got some pretty "creative" ways of handling their customers. I'm content buying DVDs off of eBay.

Anybody else think they're a little "funny"?

This is standard operating procedure for almost any subscription service. Newspapers, magazines, cable companies, mobile phone companies, all do this.

It all comes down to the cost of acquiring a new customer vs. keeping an old one. But, of course, it would be suicide to offer such a discount to everyone without their asking.

Re:My analysis

[HowlinMad]

No one cares.

Thats not quite true. Someone took the time to study this. They posted it here... so someone cares, just not you.

Can't We Just Blame Microsoft or Something?

[Snowspinner]

In the screenshot above Netscape was used to display account "A" while Internet Explorer was used to simultaneously show account "B".

And, of course, the account B was the new one that was having an easier rental time. So it must be that Netflix gives better rental times to people who use Internet Explorer! Microsoft owns everything!

Re:make sense

[PerlGuru]

This person obviously put a large bit of effort into this. Their graphs are great. I was thinking about giving Netflix a try but I'm thinking probably not now. Afterall that's what the digital cable is for and my wife already says we don't watch enough to make it worth it ;-)

Well done...

[TopShelf]

All in all, a nice job of reverse engineering Netflix's allocation scheme. A useful followup would be to contact Netflix and get their take on this.

Allocation strategies always involve prioritizing one type of customer over another - in Netflix's case, this current strategy would seem to make sense while they are trying to grow the business and rake in new customers. Assuming that there aren't significant supply chain issues that are getting in the way of prompt availability for all customers, like a larger number of people than expected not returning DVD's in a timely fashion, Netflix will need to revisit this at some point before they screw their loyal customers one too many times.

It's your browser

[msblack]

In the screenshot above Netscape was used to display account "A" while Internet Explorer was used to simultaneously show account "B".

This is another example of the Microsoft's strategy for world domination. NetFlix gives preference to customers using IE over Netscape/Mozilla.

Creates a potential problem

[j0hnfr0g]

Could this result in people continuously generating new accounts? This would be a potential nightmare for Netflix.

(insert sig here)

I remember

[SomeOtherGuy]

I was one of the "first 1000" to sign up with Netflix. If I remember right they had the "Lifetime membership for $9.99 a month" type thing going on. I loved the service -- until they started charging my credit card "$14.95" a month because they were a little optimistic during the whole:

1. Send out unlimited DVD's for 10 bucks a month and let the user keep 4 at any time -- for any length of time (pick up all shipping costs).
2. ???
3. Profit

I was burned that the price kept going up -- and I don't take nicely to automated withdrawls from my accounts going up anytime the source decides to reinvent their business logic. I should either have to sign up again at the higher price, or sign a document authorizing the higher price.

Re:I remember

[deblau]

I was burned that the price kept going up -- and I don't take nicely to automated withdrawls from my accounts going up anytime the source decides to reinvent their business logic. I should either have to sign up again at the higher price, or sign a document authorizing the higher price.

Just call up your credit card company and ask for a chargeback. Tell them you didn't authorize that amount of debit. Merchants hate that. It costs them money, and if it happens enough they can get investigated for fraud. If more people did it, Netflix would think twice before trying crap like that again.

This actually seems fair....

[SplendidIsolatn]

Look, there are only a certain amount of DVDs to go around. In the article, it states that the priority is based solely on the LAST billing cycle. So, if you have a bad month getting the movies you want, you'll have a good month the next time, then bad, then good.

It's not a perfect system, but given limited resources, it's the fairest thing they can do and still keep prices reasonble.

Re:This actually seems fair....

[zillyorg]

So, if you have a bad month getting the movies you want, you'll have a good month the next time, then bad, then good.

Not so. I will still get (and watch) the same number of movies in a bad month, but the movies sent to me will be those lower down in my queue.

So a bad month gives me just as many movies, but I don't get the benefit of either seeing the movies I really want or getting a higher priority the next month.

This would only be fair if I were to cut back on the number of rentals when they reduce my priority. Doesn't sound like a service I am willing to stick with and pay for in the long run.

Similar Experience

[JoeCotellese]

I had a similar experience with Netflix. A bunch of current releases were listed as long wait or very long wait. I complained to Netflix and amazingly that day the status changed from long wait to short or available now. Coincidence? I thought so originally but this report sort of sheds new light on things.

Re:make sense

[sigep_ohio]

You don't get screwed over, you just can't get high demand movies as readily as someone new customers.

Besides if you want to watch movies that bad, go out and buy them. Most movies are available at below cost the first days after release.

Re:make sense

[mark_lybarger]

accoring to the data, a try is the best way to go. it is a monthly 20$ for netflix right?

at anyrate, there's another service that uses a pay per movie, and you get it for a week or so. don't have the name off hand, but i've used it and wasn't too bad. they had the same setup where they sent you the return envelop, you just had to have it back in the mail within the 10 days. plenty of time to rip the vob's...

Re:make sense

[jhigh]

RTFA...it has nothing to do with your trial period. Your rental availability is based on the account activity of the last billing period. For example, if you only rented one movie last month, then this month you would have good rental availability. If you rented a lot last month, then this month you would have crappy rental availability.

I think it has more to do with the fact that people who are renting a lot are obviously watching more movies. Therefore, the chances that they'll find another movie that they like if the one they REALLY want is not available are pretty good. However, if you only rent sporadically, then the chances that you are going to get frustrated and terminate your service if the movies you want aren't available are pretty good.

My first reaction to this article was that Netflix was way off the mark. However, if you really look at it it makes sense. They are keeping the people who are most at risk for cancelling the happiest. Those people who rent a lot of movies no matter what are less of a cancel-risk, so Netflix isn't as vigilant about making sure they get their first choices right away.

Business Models.

[gurps_npc]

There are two ways to look at this buiseness model:

1) They are "punishing" the people that make the most use of their service, rewarding those that make the least use. Considering they charge the same amount of money either way, it sounds like a good idea to me.

2) They are catering to two entirely different clientel: Set A) that watch a ton of movies, Set B) That watch only a few movies. Set A pays the same as set B but gets more quantity at the cost of less quality.

Either way, it sounds like a GOOD, FAIR, business plan to me.

Re:Business Models.

[Atomizer]

It seems more fair to me to just have it be first come first serve. If you click the link first, you get in line for the movie first. If you reorder your list, you just stepped out of line, no cuts.

Re:Business Models.

[anonymous loser]

I did some further analysis on the author's data, and found that he made a couple of assumptions which I don't think are true.

I made a graph of the average availability score vs. the $/rental for each period, and got a nice,clean inversely proportional graph. That is, the higher you pay per rental (e.g. his mom was paying $10/movie during one period), the better your availability score. Where some of the data didn't *quite* fit (but was pretty close) was where the author (A) had rented fewer movies on his account during the first period due to signing up his wife, and his availability score got better. Well, it did get better, but not in line with a month-to-month average. If you extrapolate that he was probably renting at a similar high rate in the previous periods (a valid assumption, as he says as much in the article), and instead use a rolling average 2-3 previous rental periods, you get a perfect fit for all the data.

So, here are my conclusions:

#1, the availability is not ENTIRELY dependent upon how many movies you rented the previous rental period. It is actually a "rolling average" number of rentals over 2-3 previous rental periods.

#2, the author assumed it was based entirely on the number of rentals/period, but this is not true. Subjects who had upgraded accounts had noticably higher availability, but perhaps it was hard for the author to see this since he used the wrong figure of merit. The real figure of merit for Netflix is $/rental. After all, this is how they determine if they are losing money buy renting movies out to you.

The test subjects that were paying less than $2/movie were sucking it up with super bad availability scores, whereas the folks that had very low rentals and thus paid $10/rental, got much better availability. The actual curve fits an inverse proportional graph quite nicely, with the "sweet spot" being around $4-$5/movie. Even 6 rentals/period (with a standard $20 membership) still had very reasonable availability, but was on the high end of the asymptote.

Get 'em at the Library

[Saint Stephen]

I just recently cancelled all my cable movie channels and got two library cards (this town and the next town over). I check one or two DVDs out from the library every other day. Sure, they are crappy old movies, but it sounds like that's the bulk of what you get on Netflix and on most of the cable channels anyway. Your taxes already pay for it. Be an old fogey and use the library! It's civic!

Re:Get 'em at the Library

[Phroggy]

Hell yes, libraries kick ass.

I can access the card catalog system for my county-wide library system online (via telnet or the web), peruse their selection at my leisure (including DVDs and videos from every public library in the county, not just the one 2 blocks from my house - and including items that are currently checked out and not sitting on the shelf), and place a hold on it. If it's available, it will probably be delivered to my local library within 2-3 days; if it's something very popular like a new release on DVD it could take a couple months. I can check the status of a hold, and it'll tell me my position in the queue (I'm in 59th place out of 148 current holds for My Big Fat Greek Wedding on DVD, which I requested about a month and a half ago). When an item is ready, I just walk in, hand them my library card, they hand me my movies, and I get to keep them for 3 or 7 days (depending on the policy of the library the item belongs to, which varies somewhat, and how popular the item is - new releases are generally 3 days). If I return it late, the fine is between $0.10 to $0.25 per day (again depending on the library it belongs to), which they're not picky about if I haven't got any change with me.

The disadvantage of using the library compared to Blockbuster or Hollywood Video is, unless the movie I want is available and sitting on the shelf (not very likely), I can't watch it today. The advantage is that it's free, and the late fees are trivial.

The only disadvantages of using the library compared to NetFlix that I can think of are, instead of delivering to my mailbox, I have to walk two blocks (or the library will mail it to me for a $2.00 charge if I want), and I can only keep it for 3-7 days before returning it (I can afford the overdue fines, but I don't like to deprive others who are waiting). The advantage, again, is that it's free (aside from fines mentioned above).

Does your local library kick this much ass? Maybe not, but give it a try, you might be surprised.

discrimination?

[mstra]

...and older or heavy users have a difficult time getting some movies

I, for one, thing it is *appalling* that NetFlix would discriminate against the elderly and the fat-assed.

m.

It's Their Business Model

[Nutcase]

Netflix had a big spread in Wired several months back... the business model of the company is such that they are only profitable on accounts which rent 5 or less movies a month. This jives with the linear availability chart at the end of the linked article. When the account had 5 or less rentals in the previous billing cycle, availability of movies in the current cycle is 0-1. But once you pass 5, it decreases.

In other words, as long as your account is 5 or less and you are profitable for them, you will get movies quickly. If you are renting more than 5, it seems they slow you down in an effort to limit you to the 5 through delay tactics.. rather than just saying "up to 5"

Kinda sneaky to pitch unlimited rentals and then use false availability numbers to limit your customers to a preset amount.

I think I will just stick with the local video store. I can rent 4 or 5 movies there for 20 bucks a month without the waiting time OR lies about availability.

Re:It's Their Business Model

[angle_slam]

In other words, as long as your account is 5 or less and you are profitable for them, you will get movies quickly. If you are renting more than 5, it seems they slow you down in an effort to limit you to the 5 through delay tactics.. rather than just saying "up to 5"

They don't really "slow you down," as you are still able to rent other movies. It's just that some movies become less available than others.

You make it seem like, if it says a movie is a Very Long Wait, you won't get any movie. But, if you keep your rental queue filled (mine has 33 movies; I have been as high as 70. Only 3 are unavailable now), you will always get a movie in your queue, perhaps just not the exact one you wanted.

To me, it's not that big a deal, because Netflix's biggest advantage over local video stores is selection. If they don't have one particular movie, pick another one.

Algorithm needs to be normalized

[zach_smith]

The thing that kills me is that Netflix apparently doesn't take into account the number of movies you can check out at a time (it costs more $/month to get more movies at one time). So as this clever analysis points out, if you pay more to get 5 movies at a time, then you are more likely to never get popular movies.

It seems that a better algorithm would normalize the number of movies rented in each billing cycle by the number paid to be rented at one time.

I noticed this as well.

[TheNumberSix]

I think the article is pretty good, however in my own playing around with my rental queue, I am convinced that queue length is somehow a factor.

When I joined Netflix, I got my shipments in two days from the Santa Ana facility, and I almost always got the top three on my list. Now it seems like they take three days at least. (Get shipping email on Monday, DVD arrives on Thursday.)

Now that I've been a member for six months or so, the top of my list has aggegated together about six movies that are all "Very Long Wait" and to be quite honest, I've never seen them anything other than that. I don't think I will ever get them.

FWIW, I do beleive the article is essentially correct and various service levels with Netflix decrease over time.

It also would not surprise me in the least if they analyze your viewing habits to determine if you are likely to stop using the Netflix service. It would probably be called the Geek Regression.

And just for kicks, the list of movies I will never see from Netflix: Solaris (Original 1970's version), Trees Lounge, Raging Bull, 24 Disc 1, Sopranos Disc 1. Has anyone gotten these?

For people in the UK

[MyGirlFriendsBroken]

I know this may be slightly off topic but there is a company in the UK which runs a similar service to NetFlix, called dvdsontap.com I;ve used them for about 6 moths and they have been very good, including not giving me any hastle when a dvd they said the had send did not turn up.

Alos as far as I am aware the dvd queues are the same for all users, so you may wait a bit for new relases but most other stuff comes as soon as it gets to the head of your rental queue.

You buy DVDs, be careful..

[hey]

... it can hurt your sex life !!!

HTF is this fair....

[gregm]

I mean.... you crap all over your good, old established customers in order to attract new ones... seems to me the old customers should get the preferential treatment and the new ones should get to sit and spin for awhile. Whatever happened to loyalty?

Re:HTF is this fair....

[SplendidIsolatn]

RTFA -- they don't crap over old, established customers -- they crap over people who had a high amount of rentals in the last month. It doesn't matter if you've been with them 2 months or 12 months. So yes, by their rule, your first month will have a quick turnaround in rental time, but after that, it is based on the last month.

What would you rather them do--make all new people wait the longest? Great business plan.

I don't have a problem with a company showing customer's loyalty, but you can't expect them to have a DVDfairy hanging out in their office crapping out DVDs on demand--there's a limited number, and this looks like the most reasonable way of distributing them fairly. You get a good month, then you get a not-so good month.

Re:make sense

[techstar25]

Ah, people are missing the other side of the coin here.
Look at this example:
Lets say in January, Joe rents 10 movies, but Mary only rents 1. During the next month more movies will be available to Mary because she rented less.
So in February Mary rents 10 (because more were available) but Joe only gets 1 (because less were available).
Now over the two month period both paid $19.95 per month, and both AVERAGED 5.5 rentals per month. So it comes out fair for both parties. When you look at it this way it seems totally fair and justified. Although a little strange I'll admit.

Re:IE vs. Nustcrape - not a troll

[Lxy]

Mozilla browser == not available
IE browser == in stock, shipping ASAP

You've just unlocked the real secret to Netflix :-)

Does Queue size affect availability

[powerbarr]

I wonder if the size of one's queue affects availability. If you have a great number of movies in your queue, you probably would not care as much if a specific movie was not available versus someone with just a few movies listed in their queue. This may also explain why a new user would have greater access to movies since their queue would not have grown so much.

Re:make sense

[billnapier]

Not only are they keeping the people most likey to cancel happy, they are also keeping the people with highest profit margin happy (less rentals means less shipping cost to netflix). So if could be viewed as simply good business practices to keep the customers you make the most money off of happy.

Re:This is normal

[viking099]

The thing is, it's the repeat customers that make the most money for most companies. A happy customer who returns to a business for their needs does not need to be enticed or advertised to.
There are some reports that I faintly remember from school that showed how many businesses get like 60-80% of their income from repeat customers.

New customers are more expensive than return customers, especially from a processing standpoint, as well.

Not True in My Experience

[SirChive]

I've been a Netflix subscriber for over a year. I'm on the 5 at a time plan because we have four people in my family adding movies to the rental queue.

For the most part we get everything that we ask for amazingly fast. It's very rare that anything hangs up on the queue with a long wait. Even highly popular and newly released items arrive quickly. And since we are in the Bay Area not far from Netflix central the turnaround time is often just two or three days.

I'm very happy with Netflix. In a good month we'll easily get 20 or more DVDs for an average rental price of under $1.50 delivered right to our door.

Worse...

[Richy_T]

If you're watching movies, you won't be listening to music. If you're not listening to music, you won't be buying it. Therefore RIAA deserves a slice too.

Rich

getting movies quickly

[sethaw]

If you want to avoid the waiting lists I've always found that to rent a movie in high demand it helps it you rent it on the day it comes out. You can almost always get the movie no matter what it is if you have a movie returned on the day (or day before) it is officially released. You have to always keep track of whats coming out, and try to manage to get a movie returned on the correct day, but it saves alot of frustration.

Re:make sense

[ih8apple]

You're partially right...but it has everything to do with the trial period...

During the trial period, you have an empty history. Therefore, you get every movie you want (almost) immediately. After you do this and start thinking the service is so awesome in terms of title availability, you continue and, as long as you are trying to use the service to get movies you want (as opposed to being a dormant subscriber who pays but never gets anything), you get screwed because you'll continue to get punished for wanting to take maximum advantage of the money you're spending.

Re:make sense

[tenman]

You have to tie a CC or Bank Account to your accounts... how often do you change those? They would know it was you trying to come in again, unless you opened a new banking account. Same thing AOL's been doing for years...

Re:How many 'really' subscribe to Netflix?

[Nongeek]

I don't know how well it's doing as a business, but there are many advantages to renting from Netflix rather than the big chain stores. They let you keep movies as long as you want. They have a far larger inventory than any brick and mortar store. Blockbuster is great if you're looking for domestic new releases, or you need to rent something in a hurry, but they blow half-digested-popcorn-chunks if you're looking for foreign or old (and by old I mean, older than a couple of years) movies.

Plus they actually have NC-17 stuff. Most Hollywood and Blockbusters won't rent those, or carry only censored versions. Personally, I prefer to be treated like an adult.

Re:make sense

[gr0nd]

The only problem with this is if you wish to watch a series of DVDs. I tried to watch the entire 3 seasons of the Sopranos. I finished them a month ago, but never got Season 2, #1. It was first listed as 'short wait', three weeks later, it went to 'very long wait.' I'm still waiting, and its still 'very long'. The same seems to be true with '24'. Disc 1 has always been 'very long wait', but 2-6 are available 'now'. I wish they'd fix that.

Follow up from the author

[dvd_rent_test]

I had no problems getting *a* movie. So when I was a heavy renter I still received a movie very quickly, usually the same day it was received by Netflix. And the service center is so close to where I live that I get excellent turn around time.

The problem I have is that the allocation scheme is not documented and not uniform. More the undocumented part. When I was researching this on USENET people indicated that Netflix customer reps told them the allocation method was completey random . I have not contacted Netflix myself. It is far from that.

Netflix loses money on postage

[hexx]

According to this wired article (see the end of the 6th paragraph):

"It's so convenient that the average Netflix customer watches five movies a month. Some subscribers rent twenty or more. (Which is a problem: Netflix loses money on postage for households that rent more than five a month.)"

So, if this is true (and hopefully Wired has become more trustworth as a "news source" in recent years...), then obviously they want to discourage people from renting more than 5 per month.

The method above seems like a pretty good way to do it!

Re:Netflix loses money on postage

[dvd_rent_test]

I don't think so. If you have a decent sized queue and at least a few movies with "Now" availability you will still get a movie and it will still cost them postage. I do not get fewer movies because of this, just fewer hard-to-get movies.

I think it has more to do with keeping the light users who pay as much as the heavy users happy so they don't cancel and go to Blockbuster. And of course to keep the new users very happy.

I tried not to editorilize too much in my report I feel more comfortable guessing here.

Re:make sense

[ankit]

Heard of one time use CC numbers?

Re:make sense

[Bonker]

Ever see one of those 'All you can Eat' Rib places? They work just like this. That first plate of ribs you order is out real quick. The ribs you get are meaty and juicy. The second plate is usually kinda fatty and takes a lot longer to get out of the kitchen.

You can fight back, though. Tell the waiter you want the meaty ribs, dammit! He'll bring them to you because he wants to get a tip.

Mmmm... ribs...

What were we talking about again?

A wait can be a good thing

[EvilStein]

.. half the movies my girlfriend picked out have "Very long wait" which means that it's just that much longer that I won't have to suffer through watching "Divine Secrets of the Ya Ya Sisterhood."

As a prize, I got "I'm gonna git you, sucka!" nice and early. ;)

Re:make sense

[John Harrison]

You are kind of missing the point. The system doesn't make it so you can't rent as many movies, it just makes it less likely that you are able to rent a popular movie. So Joe could still watch 10 movies, just not 10 that are in high demand. So he might get UHF or Kentucky Fried Movie while having to wait for his beloved About a Boy.

Re:trade secret

[anonymous loser]

You can't sue somebody for giving away trade secrets if those secrets were deduced using reverse engineering. There is no IP protection for trade secrets unless the secret is stolen, or given out in violation of a NDA (which is equivalent to stealing it).

Besides the fact that despite the analysis he could still be WRONG. It is only conjecture based on the set of evidence that's been compiled.

Re:How many 'really' subscribe to Netflix?

[angle_slam]

Not only that but Blockbuster sometimes doesn't carry the widescreen versions of movies. See this.

Matches My Experience

[lal]

I was a Netflix subscriber for a few months. My experience matches the study - there was a slow buildup of "long waits" in my queue. Eventually, when all the movies I wanted to see were "long waits", I cancelled.

In general, I find that I'm getting a lot more aggressive with cancelling subscriptions or services, especially if these services involve new technology. Cancellation is the only message that is received - all others fall on deaf ears. Sprint PCS, for example, has an customer service voice recognition system that will route you to a service agent if you say "I want to cancel". Any other message is handled by an automated, worthless system. I was able to negotiate a much better rate with them by using those four magic words.

Re:make sense

[sigep_ohio]

That would be a horrible crime against Joe if he was forced to watch 'UHF' as a replacement for 'About A Boy'. Thats like getting ground chuck when what you wanted was filet minon. Poor, poor Joe.

Full disclosure

[Galvatron]

I think we all agree that this makes good business sense from NetFlix's perspective. People who rent the least are probably in most danger of cancelling. They make the most profit on low volume accounts. People who only rent really hard to get movies will have a low volume and will therefore see their priority rise.

However, what's upsetting about this is that it's not made public by NetFlix. They advertise "unlimited rentals," but penalize you for renting a lot. They encourage you to keep a large buffer of movies so that if your first choice isn't avaliable, you'll get a second, third, fourth, or lower choice, but they don't tell you that this will decrease your priority. That second point, in particular, is rather infuriating, because they're telling you to do something that is directly against your best interest if you want that first choice movie at some point!

If NetFlix can't make money from people who rent 20 movies a month, they need to set an upper limit, or charge a per movie cost. If the business model of a mail order rental place is inherently unsustainable, then they need to admit that, liquidate their company, and cash out. Being deceptive about the priority in which movies are rented is simply unacceptable.

Re:Cost Control Measures...

[angle_slam]

If you view a bunch of movies one month, they slow you down the next by limiting the availability on the movies in your queue.

That's not how Netflix works. As long as you have 1 movie in your queue with an availability of Now, they will send it. The article talks about specific movies being unavailable, not movies in general. You'll still get a movie, just not the one on the top of your list.

Solution to problem:

[gte910h]

Netflix already has a couple account options:
1. $20 a month for 3 movies out at a time, unlimited rentals

2. $30 a month for 5 movies out at a time, unlimited rentals

3. $40 a month for 8 movies at a time, unlimited rentals

4. $14 a month for 4 rentals a month

So if you want extra special "I always get the movies first on my list" account, get 2 $20 a month accounts and let one lie fallow (i.e. don't use it) every other month. You'll always get the exact movies you want, and you'll also be able to keep 6 out at a time. Depending on how many you watch in a month, you possibly could get by with two $14 a month accounts.

source: http://netflix.custhelp.com/cgi-bin/netflix.cfg/ph p/enduser/std_adp.php?p_faqid=141

Netflix are spammers

[wowbagger]

Netflix are spammers, they abuse their most frequent customers by not shipping them DVDs, and I can go down to Blockbuster and rent DVDs RIGHT NOW.

Remind me again, why would I do business with Netflix?

Re:make sense

[Genyin]

So the solution is two accounts, alternating between each on a monthly basis?

in which case you are paying twice as much, of course. They wouldn't mind.

Re:make sense

[joshsisk]

They don't track it by that, it's by email. I have let my netflix account lapse twice now, and restarted twice. One time I started with a different email address and made a new login, and it didn't "know" about any of my old rentals. The other time I used my old email and login and it did know about them.

Exactly

[Van Halen]

Netflix is actually doing quite a lot to take care of their low-usage customers. I imagine this is a pretty big payoff for them, since they likely make quite a bit more profit on those customers.

My wife and I used to rent 10+ movies a month on the standard 3-out plan. But then we got busier and started watching less and less. Lately we've been lucky to watch 2 or 3 movies in a month, and a few recent months have only seen one. We switched to the 2-out plan sometime last year to save money. I later realized that this plan is not normally offered - our account got flagged and we were offered the plan based on our rental history. Netflix kept a customer and we stayed happy by paying less.

My sister-in-law's story is even more phenomenal. Her financial situation dictated that she cancel completely, which she did. Netflix came begging to get her back, and ultimately agreed to keep her on for a mere $7/month! (I thought it was $7 for 6 months, but this sounds more likely) She's a damn good haggler, so I don't know if this would be common at all; I imagine if they did it too much, they would lose money.

I've always been impressed by the fact that we've been able to get just released movies very quickly. I suppose maybe that's one reason we haven't canceled despite not getting as much out of the service lately. When we do use it, it's always top notch, so Netflix still gets our money. I don't recall having major problems even when we were renting a lot more, but I suppose Netflix has grown considerably since then. I always assumed they kept the service good by expanding to meet customer demand. It'll be interesting to read more comments and see how other people's experiences relate to the study's results. I'd love to see the same thing conducted again with a larger sample size.

GREENCINE / BLOCKBUSTER

[Hagakure]

I see a lot of people saying they rent mostly obscure / non-hollywood type films from Netflix. If you're into anime/foreign/art/horror/exploitation/noir/etc films, check out http://www.greencine.com/ - a similar deal to Netflix but they cater to those who don't want to watch the latest Titanic or Castaway. They've got lots of movies you're probably wanting to rent and they donate to arts associations.

Also, those living near Blockbuster (as much as I hate them, I'm a member) may want to take note of their unadvertised Blockbuster Rewards program (at least it seems that way).. $10/year and you get 1 free movie a month, rent 5 get one free and Monday-Wednesday rent a new, get an old. Since their 5-day rentals are now weekly, it is no problem to keep a mon-wed renting schedule, and if/when you do go on the weekend w/ friends or whatever you can snag one with your free rental..

Of course, the banner ads at the top of the page are all for Netflix as I type this..

Using this at an "all you can eat" restaraunt....

[Nitar]

Imagine if they did this at an all you can eat restaraunt. Treating it like the all you can rent Netflix.

Patron: *Reaches for the piping hot roast beef*

Restaraunt owner: "I'm sorry, last time you were here you ate over 2 pounds of meat. This is not profitable for us, so this time you may only eat rice or jello. Thank you..."

-Nitar

This system is great!

[dasmegabyte]

I think this system seems to make everybody at happy. Think about it: if you are very religious about sending movies back quickly, you're always getting something new. You've always got a position in the "One In" queue. So you have more chances to get that hard-to-find movie.

People like me, who hold a disk for a long time because they like to intone every scene into memory (or are just lazy), aren't going to get more than one or two chances per month to get that must-have film. To keep it fair, and to keep the probability that either me or my diligent friend will get the movie about equal odds, you've got to weight my chances.

Yeah, it's partly to increase the probability that people who are thinking of quitting will stay on, but even so it's the only way to make things statistically fair.

Re:make sense

[sigep_ohio]

At Circuit City, employees get an at cost discount. Well with DVD's, the new release sale prices are below the employee discount price. Since CC probably doesn't pay more or less than other retailers(online and offline), I would say that yes the sale prices are below cost.

I am of course only refering to the stores cost, not the movie studios cost to manufacture.

Note: I am an employee of CC

Re:make sense

[Anonymous Coward]

As a Netflix Member since it's inception, I have to disagree that they are screwing you over. I have rarely had a problem getting any movie I wanted and since they have expanded their operation this has been happening less and less, I tend to rent quite a few movies and most of them are new releases, I have yet to wait for any amount of time to get the movies I want. Netflix has said that their eventual goal is to have 24 hour turnaround time for movie rentals. You should all cut this great service a break. And those of you who have not used Netfilx, please don't comment like you know what you are talking about, and the Bait and Switch remark is a little unfounded. They give you exactly what they advertise, they never promise that the movie you want will always be available immediately.

Re:Interesting...

[dvd_rent_test]

If you send me your Netflix queue, 90 day history, and billing history as HTML I will run it through my scripts and see what comes up. My e-mail address is dvd_rent_test@hotmail.com. Just XXX out the last 4 digits of your credit card if you are concerned about it.

Paranoid about Netflx?

[MisterSquid]

Of course if the USPS were losing the movies one could expect losses in both directions. I asked a one-time ex-deputy Director of the FBI about such shenanigans (ooh, my mighty network) and he said that US Postal inspectors would LOVE to hear about such "losses" and to investigate such a matter.

Being a good and right consumer, I decided it wasn't worth the hassle and settled with cancelling my subscription. I was paranoid/concerned that Netflix was purposely "losing" (read "not processing") my returned DVDs in order to slow up my queue. I had been renting about 12-15 movies a month. Once my returned DVDs began getting "lost," my rental rate went down to 4-5 DVDs per month because I had to wait about a week before I could really report them as "lost".

Maybe one day I'll sign up again and ask the Feds to investigate the mysterious disappearance of DVDs in the US Mail.

Netflix? Nutflicks (ouch!) is more like it.

Re:Paranoid about Netflx?

[KshGoddess]

I have a friend who works in loss/fraud prevention who would love to hear your story. If you let them know that you're losing quite a number of your movies, there will be investigation.

He has some great stories about DVD loss, and fraud. My favorite was the hotel that had three or four netflix accounts so they could 'rent' movies to their customers (which, if you've read the FBI warning at the beginning of any DVD lately, you'd know that's not allowed). There are also stories of postal workers stealing the discs and selling them at pawn shops, stories of raids of postal workers' houses with several hundred discs without cases lying about...

For his reaction to this story when I told him about this article (and the slash coverage), read my journal.

Bait and Switch with a side of Spam?

[MDMurphy]

The idea that they might lure people into thinking that there low wait times when they first sign up and then swith later seems to fit with the "character" of the company.

I was a netflix customer early on, when you paid per movie and had just a week to watch them. Good service, and living in San Jose right near their headquarters ( the only shiping point at the time ) meant I could sometimes order a movie on the weekend and have it arrive Monday.

Then they paid spammers to increase their "market share". Not "opt-in" list guys, but the ones who sent to anyname@domain.com. I complained, they replied that they only dealt with opt-in spammers. I told them that I'd have remembered if I'd ever created an account with the email address "HowieIsAGayFuck@mydomain.com". They replied that out millions of spams sent, I was the only one who complained. No apology, never mentioned they'd stop dealing with the offending spam flingers.

So after 2 or 3 years with them I did the only thing in my power, I walked. I'd been getting DVDs every month, told all my friends, heck, even was in on a couple customer focus groups at their offices.

Me, I'm hoping blockbuster and Walmart with their new DVD by mail services squash them like a bug. The idea of a company doing well based on vile spam doesnt' sit well with me.

Unix Process scheduling

[rawshark]

Isn't the classic scheduling algorithm in Unix similiar to this, where processes which use the CPU a lot will be slowly penalized so that other processes will not be starved?

Maybe a solution will be to have a dutch auction for movies: the highest bidder for a given title-instance gets it.

Re:make sense

[zdislaw]

I think, based on my experience with them for the last year or so, that people here are greatly exaggerating the number of titles that are placed in "waiting" status. It happens from time to time for me (and I've got kids and never get to go to the theater) so I'm usually renting movies pretty much when they are released. Really, there is room for improvement (time in transit being #1 for me), but I'm feel like I'm treated fairly by Netflix.

And before someone accuses me of working for them simply because I like the fucking company...well...I don't. And you have to believe me because...well...I said so ;)

My shipping is pretty fast...

[mooman]

I've been a member for a rather long time (almost 3 years) but I don't watch movies very promptly (their records show that I've only watched and returned 11 films in the past 3 months). So I guess I fall into "we like thi$ cu$tomer" category.

I just checked and I have 59 movies in my rental queue, and every single one of them is listed as "Now" availability. Granted, most of them are uncommon foreign and indie films so I'm not in competition with all those folks trying to get the latest "Austin Powers" movie or something, but still, having 59 flicks all sitting there at my disposal is probably indicative of some favoritism.

But back to the subject of shipping times. Personally I'm amazed at how quickly turnaround times are for me. I frequently will drop a disc in the mail on a Saturday afternoon, see it register with Netflix on Monday, and have my next disc by Tuesday or Wednesday. I never checked to see which center mine go to but I'm in Vancouver, WA if anyone knows off the top of their head..

So I don't think it decreases with time (length of membership).. I think it's more to do with the original hypothesis of number of films rented. I'm probably paying $6-7 bucks for each of mine now, but given the fact that I have a toddler and my wife and I both work, we're willing to pay that for the convenience. (I only make it out to the theaters a couple times each year).

I just did a quick test and stuck Solaris(1972) in my queue. Availability = "now". That's sad. Want me to rent it and send it to ya? As a new service emerges: scalping Netflix films... ;)

If anyone from Netflix is listening!? Open Letter!

[treeandorange]

I've been a Netflix customer for quite some time and I've enjoyed the service immensely. But I wonder...

Why do you keep sending me "Free Trial" offers on the inside flap of each envelope? Why do you keep preaching to the choir?

Even if I had 100 friends, they'd be so sick of me handing them "Free Trial" coupons that they'd stop talking to me. Why not subsidize some of MY rental fee or the number of movies I can rent by offering your PREMIUM advertising space to companies like Best Buy or Circuit City. Or, let the advertisers offset the cost of purchasing a larger quantity of DVDs and remove LONG and SHORT waits altogether.

It seems so obvious to me that the envelop flap should be used for advertising - ANYTHING OTHER THAN A NETFLIX product. I would love to see a coupon for $2.00 off any DVD with the purchase of any other. How about $2.00 off a pizza? How about $2.00 off a movie ticket? Why not co-op the envelope space and sell to local area grocery stores or whatever? Use your imagination!

Use the back of the envelop flap for something that is going to benefit the CUSTOMER. Advertisers are constantly looking for new places to advertise. Here you go, a perfect space.

And when you're all done absorbing this idea, you can send me a check or a job offer. I'm a simple man.

Sincerely,
Andrew

may be right

[spazoid12]

but, I never have the problem of long wait times.

I've been a member since 2/2000 when it was 4-out for $15. They grandfathered me for many months but finally raised my price to $20, but still 4-out.

In this time I've rotated movies very quickly and only seen any kind of wait time just once or twice.

I did notice that following 9-11 the deliveries slowed to a crawl. Suddenly, the deliveries came the next day...and I noticed the return address very close to home. Now days, it's never more than 3 days turn-around to swap one movie for another.

But, here's the thing that might save me from the long waits. Possibly they use algorithms such as described, and possibly the algorithms don't affect me because of this... of our 4-out I only rotate 3 quickly. The other 1 is always something my wife wants to see, and she'll be busy and not get around to seeing it for a month or two. That one might throw off their trick.

Whatever... anything is better than Blockbuster...

So here's the key....

[jhines0042]

... many of us here are Hackers, right?

So here is the key.

Open two accounts. One for you, one for your friend down the street. Then take turns getting "big months" and "bad months" and you'll get all of the movies you want and you'll get to watch them with a friend.

Of course this costs you twice as much, so its not like you are stealing... you are just manipulating the system.

Empty envelopes

[A nonymous Coward]

I have been a member since August 2002. In that time, I have received three empty envelopes -- no sleeve or DVD. In each case, it was easy enough to figure out what movie it should have been. The last two were received unsealed at my local (podunk sized) post office. The postmaster says Netflix is well known among postmasters for sending out unsealed enveloped, the sleeves and DVDs fall out in bins, are collected, and periodically sent back to Netflix.

I don't believe the post office is stealing these. It would be so much simpler to steal the entire enveope rather than just the DVD and sleeve.

What really annoys me about this is that the shipping problems form has no choice for receiving an empty sleeve. If you report it missing and never arrived, they tell you to wait a few days and report it again. If you report it as scratced and unplayable, so they will send out a replacement immediately, they expect you to send the scratched DVD back.

Re:make sense

[nelsonal]

Loss leaders are a common part of retail marketing. Retailer's know that if they bring in shoppers with a few very inexpensive items, that we are likely to do all of our day's shopping there, at normal markups. So they occasionally sell things at or below their own costs. Go check the price of turkeys during the week before thanksgiving, and contrast that with the price of roses the week before Valentine's day. You only need the flowers on V day, chocholates aren't high enough margin to count, and most guys buying flowers aren't really gonna do much other shopping at the same time, but when you buy a turkey, your gonna need stuffing, potatoes, pie, cream, cranberries, and possibly wine, milk, bread, or a ton of other things, so they want to get you to their store with the low turkey prices.

Version 1.1 of the document released

[dvd_rent_test]

Based on some excellent feedback I updated the document. Changes are marked in yellow.

Data should be taken in context

[angle_slam]

I have no problems with the data provided by the author. It seems to be well thought out and well executed. However, it seems that non-Netflix subscribers are reading the data and concluding that a subscriber will never get the movies he wanted or never get popular movies.

The key part of the article is this quote:

I created a list of 45 movies in my queue that did not have an availability of "Now."

Note that he specifically selected movies that weren't available. That does not mean that all movies are unavailable. Nor does it mean that popular movies are unavailable. If you look at the list of the top rentals of the past week and compare the list to the movies he checked, you'll notice very few movies that are in both lists.

By focusing on unavailable movies, the author was able to hypothesize the criteria used by Netflix to determine who should get the next copy of a movie. However, some /.ers are extrapolating that data to mean that long time subscribers never get the movie they want to see, as if a person wanted to rent Harry Potter, but is stuck watching Manos, the Hands of Fate (the worst movie of all-time, according to IMDB). That is not the case, if your top movie is unavailable, the next movie in your queue, a movie you specifically picked as being one you want to watch, is sent to you.