What is "Throttling"?
Throttling in its most basic form is the delaying of DVDs from shipping centers by a particular rental company. It has been one of the most hotly debated issues when it comes to online DVD rental companies and even been the topic of legal actions against companies.
It is done for a number of reasons, but ultimately believed to be in place as an effort to keep heavy renting subscribers profitable. When a particular company offers membership plans, they count on the individuals watching the DVDs for a number of days which in affect lowers their overall cost. We'll give an example below using fake numbers to show why this is beneficial.
Let's assume for the sake of argument that every DVD shipped out costs the rental company $1.50. This would include the cost of postage, advertising, envelope, the DVD (rights still need to be purchased through the film makers), web hosting, shipping center costs, and all other overhead. Then determine that we have two renters who each subscribe to a 3-DVD unlimited rental plan for $18. Now Renter #1 is a casual movie watcher who receives 5 DVDs a month while Renter #2 is an avid film buff who receives 15.
Renter #1
$18 monthly membership costs – (5 x $1.50) = $11.50 profit for the rental company
Renter #2
$18 monthly membership costs – (15 x $1.50) = $4.50 LOSS for the rental company
Now seeing as how these companies are not in the business for taking losses, what they'd do is hold the DVDs of renter #2 for an extra day or two so that his total number of movies rented is lowered to a profitable level.
You may say to yourself, "that seems fair enough". However, when you consider how these memberships are sold, it's greatly deceiving new members. Almost every major U.S. based rental company pushes "unlimited" rentals heavily in their advertisements. They give off the impression that your membership allows you the ability to rent as many DVDs as you can handle. This is simply not true though, and they have a secret cap inside their own system.
In 2004 a class action lawsuit was brought against Netflix in the San Francisco Superior Court (Frank Chavez vs Netflix, Inc). The lawsuit claimed Netflix misrepresented itself in relation to their advertising of unlimited rentals and one-day delivery. It was settled in early 2005 with Netflix offering members who had joined prior and canceled to a January 15th of 2005 to be able to sign up for a one month free membership. It allowed current members to upgrade to a higher plan for free for one full month. This settlement brought backlash from loyal subscribers who felt it was nothing more than a marketing ploy to gain new members and increase plans on existing ones. As a result of this lawsuit however, Netflix changed their Terms of Service Agreement to acknowledge throttling under the pseudonym of "the fairness algorithm".
As a solution to the throttling problem, we hope that companies can stop hiding behind technicalities in their user agreements and state what their cap limits are openly. Besides being disingenuous to members, throttling can cause confusion amongst subscribers who are expecting DVDs to be returned on specific dates. If the company typically receives your returned DVD in one day, and instead it takes four days, you may wonder if your DVD is stolen or your postal service has lost it in transit. This can cause accusing innocent postmen of theft or poor service for something they are not responsible for. It can also cause members to report a DVD as lost when it is not.
The problem with throttling seems to be increasing as companies expand shipping centers and improve their overall turnaround times. This is of course a catch-22 for the rental companies. While they need to expand and improve their shipping and receiving times, the end result equals more mailings a month and a higher cost accrued by themselves. This is why you're seeing members who have never been throttled in years suddenly experiencing this business practice.
It's tough to avoid throttling as the formula is unknown to the rental community. We are given vague responses such as "lower volume customers will receive priority with shipping and selection". The only way to surely stop it is to lower your consumption, which of course is not helping at all.
Unfortunately, throttling is simply a necessary evil of the rental companies to stay in business. All major companies including Netflix and Blockbuster do it on high volume accounts. If the "throttle" on your account is too much, definitely make your voice heard with your pocketbook and switch companies. In the meantime, we'll hope for more transparency from these companies so that customers know what they are paying for.