Throttling Blockbuster - Netflix ! Myth or Reality

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Throttling is a famous terminology in DVD rental business. In 2003, Netflix stated that it loses money on customers paying less than $2.00 per rental.
To counter this loss Netflix created an inventory allocation and delivery system that curbs users from paying less than $2.00 per rental. Thus, frequent users will experience long shipping delays, especially for new releases. Few customers have complained about this "fairness algorithm," according to Netflix CEO Reed Hastings.
"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.

Some simple math here: it costs Netflix $.41 to ship a DVD each way. If you can rent 20 DVDs a month,
it will cost Netflix $.41 x 2 x 20 = $16.4.
Neflix charges only $17.99 a month.
How much money can it make? $17.99 - $16.4 = $1.59.
It's definitely not enough to cover the day to day operation. So it will be ideal for Netflix to ship fewer DVDs out as possible in order to reach greater profitability. At a consumer's point of view, it will be ideal for you to rent as many DVDs as possible
to minimize the cost of renting each DVD.

How Does Netflix Throttle?
1. Netflix will not ship out rentals the same day they receive them. Rentals appear in your queue as shipping tomorrow or the day after.
2. Netflix ships your rentals from across country instead of your local distribution center effectively doubling or tripling shipping times.
3. Netflix waits until the end of the day to ship out your rentals. This insures the post office will be unable to process your rentals until the next business day.

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It also provides many aspects of DVD rental business, Other than
comparitive study among rental companies they also empashis on new hot issues related with user experiece and satisfaction. You can read more articles at http://www.onlinerentdvds.com/reviews.html

• Added on: Jun 30th, 2008
• Country: United States
• Language: English

• Author: Jenny Baker
• Listed in: Film Gaming
• Tags: dvd rental rent dvd rental movies online dvd rental online movie rental rent movie