Netflix sends frequent renters to the back of the line

SAN FRANCISCO -- Frequent Netflix returners don't get more small-screen bang for their buck.

Called "throttling" by critics, the little-known practice means customers of the online DVD rental service who pay the same price for the same service are often treated differently, depending on their rental patterns.

Los Gatos, Calif.-based 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 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.

---

AN EXAMPLE

Netflix typically sends about 13 movies per month to Manuel Villanueva's home in Warren, Mich. -- down from the 18 to 22 DVDs he once received before the company's automated system identified him as a heavy renter and began delaying his shipments to protect its profits. The same Netflix formula also shoves Villanueva to the back of the line for the most-wanted DVDs, so the service can send those popular flicks to new subscribers and infrequent renters.