'Throttling' angers Netflix customers

February 27, 2006 (WLS) -- Unlimited movie rentals at one monthly price can be a great deal for any movie buff. But one northwest suburban man says the movie rental company Netflix hasn't been standing behind its advertising.

Netflix is the largest online provider for movie rentals. It is currently settling a class action lawsuit with millions of customers with similar claims.

Seth Rosner uses Netflix to rent at least three movies a week. Because he's a high volume renter, Rosner claims Netflix is not giving him his first choice of popular movie titles fast enough.

"I have actually had 40-Year-Old Virgin in my list since it was released December 15," said Rosner. "I still haven't gotten the movie. It's still number one on my queue."

A "queue" is the priority list of movies that a Netflix customer wants. Under a flat fee, Netflix will mail customers as many movies as they want each month, with no late fees. You get more movies each time you mail back the ones you have watched.

"It's not unlimited. They are limiting it by sending them to you slower. They are limiting it by not sending the movies in the order that you request them," Rosner said.

Rosner is not the only unhappy customer. Last year, attorneys filed a class action lawsuit against Netflix accusing the company of failing to provide "unlimited" DVD rentals and "one-day delivery" of DVDs.

"We do give preference to the lower volume renter," said Steve Swasey, Netflix director of corporate communications. "It's simply a resource allocation. We don't have to do it too often. We prefer not to have to do it at all. The realities are of business that sometimes we have to make tough decisions."

The lawsuit claimed Netflix was not disclosing that policy well enough. Netflix now has what it calls a "more clearer" explanation on its web site.

Chicago attorney Jay Edelson is involved with the lawsuit settlement on behalf of customers.

"The suit was filed based on a practice called 'throttling'. What that means: it was claimed that Netflix was intentionally slowing down the return of DVDs, the distribution of DVDs," Edelson said.

Under a proposed settlement, Netflix would offer customers an upgrade to a monthly membership and former customers can rejoin for one free month.

But for Seth Rosner, it's not about getting free movies. He would rather get the movies he wants to see.

"These movies are unavailable to customers like me and that's not fair," Rosner said.

The service's rapid growth supports his thesis. Netflix added nearly 1.6 million customers last year, giving it 4.2 million subscribers through December. During the final three months of 2005, just 4 percent of its customers canceled the service, the lowest rate in the company's six-year history.

After collecting consumer opinions about the Web's 40 largest retailers last year, Ann Arbor, Mich., research firm ForeSeeResults rated Netflix as "the cream of the crop in customer satisfaction."

Once considered a passing fancy, Netflix has changed the way many households rent movies and spawned several copycats, including a mail service from Blockbuster Inc.

Netflix's most popular rental plan lets subscribers check out up to three DVDs at a time for $17.99 per month. After watching a movie, customers return the DVD in a postage-paid envelope. Netflix then sends out the next available DVD on the customer's online wish list.

Because everyone pays a flat fee, Netflix makes more money from customers who only watch four or five DVDs per month. Customers who quickly return their movies in order to get more erode the company's profit margin because each DVD sent out and returned costs 78 cents in postage alone.

A final court date to approve the pending Netflix settlement is the third week of March in a California superior court.

If you want information to see if you qualify for the settlement go to the Netflix web site. If you are considering joining any unlimited movie rental service, make sure you read the company's policies.

(The Associated Press contributed to this report. Copyright 2006. All rights reserved.)

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