After many attempt to find out why there are so many delays and problems with shipping from Netflix I finally have in writing, an admission that they delay and prioritize shipping to user who rent too much. Here is a direct quote from the email received yesterday.

"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."

That's been in the TOS for quite a while.

I'm very surprised that they admitted that to you.

Not long ago I asked them why they were shipping the next day and they told me that they had a quota of shipping requirements for one day and when that was met they shipped any remaining movies the next day.

I dunno if thats good or bad, but it is probably good...

Sounds ok.

I can see their point in doing this, but

I was not so much bothered by the fact they did it as I was by the fact that they lied about doing it for so long. Face it, the fewer movies they ship, the more money they make, and they have admitted that they do lose money on a customer after 10 per month. It is hard to do what is right for the customer when your business model guarantees that the more efficient you are the lower your profit.

My guess is that 10 is the cut off where you get the slow service.

Well, this makes business sense. Is this really in the TOS?

I see what you are referring to at the Netflix website. My point was the misrepresentation up to this point by their CS people that this did not happen and the assertion, by the person who finally sent me the last email, that "virtually 100% of their DVDs were shipped out the same day".

Clearly, as they get more customers, they are exercising their clause allowing them to delay shipping when they reach their "quota".

I was not aware of the section you are referring to. Thanks for pointing it out. Too bad their own people are not as well read as you are. I wonder when they added this to their service policy; they denied doing this for a long time.

Well, just imagine if users kept all their movies out indefinitely; that would take a major bite out of their profits, from either not having the same # of copies to ship, or having to reproduce more, with sleeves and such. The silly part is that if you're willing to endure lower profits short term and emphasize great service to as many as possible, you'll make up for it by greater goodwill (amazing how that's accounted for as 'intangibles,' but it's true) and therefore greater # of subscribers/volume. It's just like when bowling alleys offer $1/game bowling or less one day a week, they get far more business then, and that's extra profit 'off the top,' since they aren't doing more maintenance at the time they offer it (not oiling lanes, stripping them, etc.). I realize that analogy assumes ancilliary income (snack bar, bar, vending machines) is always present unlike Netflix who only has the online rentals for primary income. Still, a low-profit venture can always make up for it IF they garner goodwill and sufficient volume. An example of this was when 7Eleven in TX used to have Big Gulps for .59: a manager told me it cost them .20/soda (including straw, cup, lid), but because of sheer volume, they successfully ran it for year after year because of the incredible volume of thirsty customers. Additionally, those same customers then bought other snacks, meaning they profited more just by getting them in the store with a good deal.

Netflix could do better and hopefully will. Otherwise, they might find their online service suffers, due to the Walmarts, grocery stores, other B&M video places offering $1/day rentals on all releases. Since the avg. customer I've seen largely gets those, once all those places get their selection up (and continue with increasing the selection), Netflix might find they get less, because people will get wise to them shorting them deliberately, as is been shown to happen already.

As for their Terms of Service, I read it all when I signed up and never saw that, so that must have been added after I signed up. Of course, Chas's email and Matt's email are indicative of the trouble I'm having with them. Sure, a few titles I've asked for were low-circulation stock (3), but I've found a few recently they just obviously decided to 'delay,' because I've seen them and put them back in the mail the same day now since summer started. So, I'm now seeing them try to 'slam on the brakes' in an obvious way. I was getting 5-6 titles/wk, but the last 3 weeks I've had as low as 3, and starting to avg. closer to 4 from their deliberate delays. I emailed them about it and am curious to see what response they give (I know, I'm not counting on anything special). If they happen to admit to any more of this, I'll post it here for posterity and for more proof of 'nonposted' policy.

i was only on a trial got 9 movies in one week then they started sendin out movies one by one, so i sent them this question - First is, i sent back 3 dvd's but then you only sent 2 out, all of my movies said availble now, what happened there? Next is one of my movies was shipped 6/29 and it says it wont get here til 7/02, why so long?

here is the response from netflix


Here is how we process and ship our DVDs:

We receive rental returns Monday through Friday, except holidays. We process nearly 100% of returns the same day we receive them. When we check-in a return, an e-mail is automatically and promptly sent to you to let you know that we have received your DVD.

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. In certain instances, your top choice may not be available to you from your closest distribution center, which can sometimes cause a small delay. 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.

When we ship you another DVD we automatically and promptly send you an e-mail letting you know that it's on the way and telling you the estimated arrival date.

Hm. That was the last towing-the-party-line response I got from them. That's just a 'form email' (like a form letter). There's no new information there that's not already listed in questions/answers onsite.

I already posted elsewhere here that I suggested they either: develop a system to let users view current DVD stock from their closest distribution center and therefore order their queue accordingly; or send users an email when the closest distribution center will have to delay shipping for the 1st available title in the queue (for whatever reason) and would ask the user to select another DVD from the queue--indicating which of the next ones could go out immediately. I also sent that as a suggestion (but with more detail). Since this problem has gone on at least since March-April and it's clear they deliberately delay shipping for high-use users (I'm 3 at a time, but return them the same day) to maximize profit, I'm starting to doubt they'll ever do that. If they did, then they would have no 'plausible deniability' to fall back on, therefore lessening the control over the process they currently enjoy by such 'obscurity' in availability and shipping delays.

If that happened they would actually maximize their profits. They would still collect the monthy fee, they would have no mailing costs, and they would have much lower costs for plant and personel.

In point of fact, the head of Netflix has set the profit point at 10 rentals per month. When there are more than that per subscriber, they loose money on postage.

urg. Well, Chas, you are right about them still collecting the monthly fee and maxmizing profits. Unfortunately I must be past the 30 min. window to press 'edit' and correct my error. :P

The head of Netflix set that up? Do you have the link to the article (that I assume you're mentioning) or the post?

Well, isn't it sad that there's that kind of manipulation, eh? I have no problem with anyone making a profit, so long as it's hard-earned or fairly earned. Like you, I have trouble with the principle of Netflix advertising high availability when they then delay things. If the whole point is (from what they say) to provide #1 service, then it doesn't seem unreasonable to me to expect that level of service.

(add) One other thing: the quota idea seems very credible, as today at 1 pm CST, they had already listed one movie in my queue as 'shipping today' and another that was a common title as 'shipping Wednesday.' With as bad as Blockbuster online was for me, those guys were still shipping out until around 7 or 8PM CST during weekdays.

He said that over a year ago so I have no link left. Netflix treads a fine line with their business model. The slower they are, the more money they make so their highest profit comes with the worst customer service. I am glad they have recognized this and have some level of official "slow down" in place. At least then I know what they are doing and they admit it and it is not arbitrary. I have found that they always slow down my shipping on Monday when they are busiest and rarely toward the end of the week. I have measured the reduction in rentals and they are still a good buy.

Does how they slow down your shipping depend on the titles you request (i.e, do you ask for a lot of new releases)? The ones I said would have rightfully taken up to 4 days were ones that were Cuban or Spanish, that wouldn't have been popular enough to have around here (one came from FtLauderdale-FTL; another from FLU [I want to say Flushing, but don't know that] and another from Dallas). But the rest appeared to have no reason like that to slow their arrival, therefore must be that the others I'm currently waiting for are a part of the 'maximizing profits' angle. They do my 'slow downs' on any time of the week they choose, it seems.

No. They delay shipping for one day no matter what the title is. So far they have not implemented the "delay" of shipping from a distant center rather than the one closest to me. They have a cap of what they want to ship out each day and when they reach that cap, they bump over the high frequency users to the next day, even though the title is in stock and ready to go. It is very much like the USPS; we are third class mail and can get held over. First Class is processed the same day.

High-use users are 3rd class mail. That explains the delay!

I've got a title that's Brazilian, but nevertheless popular enough to be received one day after. They bumped that one to tomorrow, so I'll see if they get it out We. and they list it to get here Th.

Thanks for the explanations and sharing the info., Chas. It has all been quite eye-opening.