Tuesday, February 14, 2006

From Netflix to MovieBeam

When I first got the email from Netflix months ago, explaining the existence of the class-action lawsuit against it and my eligibility to join the class action, I deleted it. My first gut reaction was that Netflix had been doing okay by me, and someone was trying to read too much into the "unlimited rental" claim. I almost blogged about the avarice of the folks who were pursuing the matter.

Then I read this. It seems Netflix was caught "throttling" the flow of DVDs to some customers who had heavier-than-average rental patterns. Now Netflix, tho it originally denied the practice, has changed its user agreement to reflect that accounts could be throttled.

That is dishonest. I have signed up for the class action. It seems lawyers will get millions of dollars, and my wife and I will get a month of service at a higher level. What good having an extra DVD will do if Netflix decides to throttle our account is
beyond me, tho.

In the end, even with the throttling, Netflix is still a good deal compared to other rental options. Assuming an average rental price at a local store of three bucks, and generously rounding up the most popular Netflix service level to twenty-one bucks (to capture some sales tax, and also because it makes the math lots easier), the average Netflix user who watches and returns more than seven discs in a month will come out ahead. That's not too hard to do. Two discs a week.

I really hope the revised settlement will have Netflix explicitly state the number of discs at each service level that will trigger the throttling. They already do that for the ten-dollar level of service. It's only fair for the consumer to know what level of service they can expect, rather than being vaguely told that the vendor can make a determination of what constitutes "excessive account activity."

Of course, what would be even better than a class-action lawsuit would be for more credible competitors to enter the market. But with easy downloading of high-quality digital movies over souped-up satellite or broadband connections just around the corner, Netflix (or at least DVDs) may soon go the way of Woolworth's.



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