Rick Aristotle Munarriz, the Motley Fool contributor who wrote that good piece we told you about a few days ago about Netflix throttling was on the case again yesterday with a new disclosure. With apologies to those of you who have fled Netflix for less-throttled pastures, he informs us that Blockbuster Online has just changed its terms and conditions:
Blockbuster is revealing that it takes the rental volume of its subscribers into account during the allocation process.
Roughly translated, what that means is that if you are a very frequent renter, Big Blue will slow you down... in other words,"throttle" you, so you get fewer rentals and they don't lose money on you (or at least they'll break even).
Just like Netflix.
Munarriz says the big surprise is that the rental companies didn't see this controversy coming and he also says there's untapped revenue in their web sites:
Netflix, for example, could probably be helping to subsidize some of its high-traffic overhead if it did more than just occasionally print some ads on the DVD mailer. Everything from marketing materials to sample discs to product samples can be feasibly packaged.
The companies have also been slow to embrace interactive marketing. There is so much real estate on their sites ripe for third-party sponsorship, yet the companies have chosen to leave that opportunity on the table.
I don't think that's the way to go, though. I don't want to be bombarded with ads and sponsorships when I'm actively engaged doing business with you. I think that would go a long way towards further alienating me.
I know what you're thinking... hey, aren't those ads in the right and left columns on this very web site? Well, yes, but the occasional click or purchase helps defray the very real costs incurred when you visit this website for free.
In addition, the ads you see here are generally about new DVDs, the very thing you're actively engaged in learning about when you visit. I doubt very much whether a DVD rental firm will show you ads for other DVD rental firms on their site.
But I digress.
Munarriz mentions the model Amazon uses in the UK for their struggling DVD rental operation. They place a cap on monthly rentals, which is exactly what the Canadian DVD rental company Zip.ca just did.
Zip.ca has five different DVD rental plans offering 1, 2, 4, 6 or 8 DVDs out at a time.
But they all now carry limits.
Their 4 DVD plan, for instance, is capped at 11 DVDs a month.
They'll let you go over, but they'll charge you CAD $2.49 (about $2.15 in US dollars) for each DVD they send you above your limit. (The 6 DVD plan has a cap of 16 per month and the 8 DVD pan is capped at 22 DVDs per month.)
This seems reasonable to me, and while it probably was upsetting for those who were volume renters when it was first introduced, the key here is that they now spell everything out in advance for new members.
What Blockbuster and Netflix are battling is the public's perception that the limits they are imposing are unfair (even though they apply to a small percentage of members) and that they are changing the rules in the middle of the game (which they are).
After all, we were promised unlimited rentals!
Maybe there really is no such thing as a free lunch.
There's a very good all-you-can-eat sushi place not far from my home. Shortly after they opened and became wildly successful, they put a sign up saying that there would be a $2.00 charge for each portion of uneaten rice.
Apparently, some people were ordering with reckless abandon and consuming mass quantities - and not managing to get full - because they were eating only the expensive seafood and leaving much of the rice behind.
When they established the business plan for their restaurant, they no doubt assumed there was a limit to the amount of sushi one person could reasonably be expected to consume in one sitting. They hadn't counted on people not eating the rice.
Their remedy was not to slow down the delivery of food to the table, but to institute a penalty for those who tried to "game" the system by doing something the average person would not be expected to do.
Netflix is a lot like my local sushi restaurant.
They know there's a limit to the number of DVDs the average person can "consume" in month. If you stray too far from that, they begin to lose money, especially as postal rates rise.
So, can you have your cake (or Temaki-zushi) and eat it, too?
Well, Zip.ca still calls what they provide "unlimited" entertainment.
But they remind you that you'll pay for the privilege if you go above the limit.
I think that's fair and I predict that's where we might be headed with Netflix and Blockbuster here in the States. It seems more fair than throttling and ensures that very frequent renters get their fix. But what I'd love to see these guys introduce is what I'll call "roll over" rentals.
It's a concept some cell phone companies have embraced; if you don't use all your minutes one month, they get "rolled over" into the following month. When applied to DVD rental plans, this means the super frequent renters would still pay more (and there are not many who would argue that they shouldn't), but the average Joe who goes over the limit every now and again would not (provided he occasionally rented less than his monthly limit).
So go ahead, Netflix... cap my monthly rentals.
But if I only rent three DVDs one month because I'm busy or I'm on vacation, then why not let the "unrented" DVDs roll over, increasing my limit for the next month?
[Previously: Depends on the Meaning of the Word "Unlimited"]
[Previously: Netflix Clarifies Throttling Position]
[Previously: Back of the Line, FTC Finds Fault With Netflix Settlement]
[Previously: Netflix Settlement Delayed, Netflix Settlement Unsettled?]