DailyTech - Revised Netflix Settlement Approved

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Internet Revised Netflix Settlement Approved
Michael Hoffman (Blog) - May 3, 2006 12:51 AM

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20 comment(s) - last by CorrND.. on May 30 at 1:11 PM

A class-action settlement was reached Friday and publicly released on Monday

San Francisco Superior Court Judge Thomas Mellon Jr. has approved the latest revision to the Netflix class-action settlement. If you're not familiar with the case, Netflix earlier admitted to delaying shipments to "less profitable customers" -- the customers that rent a significant number of films. Because the company was misleading customers about delivery time of movies, action was eventually taken against Netflix. Netflix will also be required to pay $1.3 million to Adam Gutride and Seth Safier, who are the San Francisco attorneys that decided to do something about Netflix throttling customers.

Netflix is now required to offer a free month of DVD rental service to 5.5 million current Netflix subscribers and former subscribers. The estimate for total settlement costs are almost $9 million, according to the company. Netflix will most likely begin sending official notices of the settlement later in May. The Associated Press reports:

Current Netflix customers with the $17.99 monthly plan will have the option to check out four DVDS at no additional charge, a $6 savings. About 3.7 million former subscribers will be offered a free month of the $17.99 rental plan.

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Drop flat fees

By OddTSi on 5/3/2006 2:14:35 AM , Rating: 2

They need to just drop flat fees. Just offer rentals for $1.50 per DVD (put a reasonable limit on how long you can keep the DVD like 2 weeks or a month) and call it a day. Flat rates for most people are a rip off because unless you're a heavy user (or renter in this case) you aren't saving much money at all. But in this case no one benefits from them because the heavy renters are limited. Plus there are a lot of people that don't want to join Netflix because they don't rent enough movies to make $18/month worth it, these people would jump at the chance of $1.50/DVD rentals.

This highly reminds me of the cell phone industry and their flat rates. They make all these promises about how much you get with that rate but MOST people never get even close to that. Like the plans that have 1000 minutes for $50 that are advertised as "5 cents per minute" but this is just a marketing gimic since most people don't use anywhere close to that many minutes. In fact I'd be willing to wager that most people would save money if there was a cell phone company out there that charged in a similar fashion to land line service and charged $0.10/min.

But most people can't seem to do the simple math that what you're paying at the per-item rate is what you pay for the flat rate divided by what you actually used, not what the company tells you you have with that plan. Take me and Netflix for example, since they've been throttling me I've been getting no more than 12 movies a month, that equals $1.50 per DVD which definately isn't as appealing as "unlimited rentals for only $18." It's even less appealing for people who are renting less. Same thing with cell phone companies, whenever you ask someone how much they're paying per minute they tell you about the max minutes available in their plan and how much they pay. It's seems to be a foreign concept to them that what they're really paying per minute is their plan cost divided by how many minutes they average per month.

RE: Drop flat fees

By rqle on 5/3/2006 2:26:42 AM , Rating: 2

low cost on a rent DVD isnt bad at all, am in for that. am still waiting for a good cheap movie service that offer download for a cheap price. current release that movielink i think is $4, i can rent that at my local store for less.

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Local prices still unbeatable

By feraltoad on 5/3/2006 5:15:07 AM , Rating: 2

I agree on the Flat-Fee thing too, but I think the marketing model is designed on the majority of people not using what they pay for. Just like those lifetime warranties at Auto-Parts stores they know 90% won't even bring it back one time. Midas gives lifetime brake service. Of course, they intentionally cross thread lugnuts to charge to replace them, charge ridiculous prices to put on rotors, etc. Now there's a company that needs to get sued. Their business model is the shaft!

I live like 10 mins from a Video Store that does .99 cent rentals on Mondays for New Releases. (They do .99 on older movies all the time) I can't beat those prices, even factoring in gas and it's spoiled me from using anything else. MovieStarz used to rent .99 on one day a week too and I wore that out since they had a wider selection. Too bad they quit, I can't imagine how they didn't make money off that. I don't even go there now at all.

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RE: Drop flat fees

By truthlight on 5/3/2006 5:26:00 AM , Rating: 2

It is important to realize that Netflix would be bankrupted if it offered the $1.50/DVD service since it costs them about 90 cents to pay for the forward and return postal on each DVD. Even DVDs might be selling for less than $10 in retail stores, movie studios charge $40+ on each DVD are for rental license-use.

If you don't want to pay $18/month, there's a $9.99/month option for people who don't rent as much.

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RE: Drop flat fees

By truthlight on 5/3/2006 5:45:28 AM , Rating: 2

correction:
it costs them about 78 cents for postage and return-postage on each DVD. http://www.boston.com/business/articles/2006/02/10...

See how a 2 cent increase in postage would affect them:
http://mediastockblog.com/article/244

Also, keep in mind that they need to build and maintain distribution centers and have to acquire (as in pay for) millions of DVDs each year.

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RE: Drop flat fees

By jackmaddy on 5/3/2006 10:02:07 AM , Rating: 2

I'm not sure I agree with this. Any local movie store you go to today charges almost $4.50 a movie including taxes etc. Add to the the price of gas and netflix is an incredible deal. I have the 2 DVDs at-a-time Unlimited! $14.99! You just can't beat the price and ease of use. Do the math, thats 3 movies in 1 month at a local video store. I love movies and probably watch about 12-15 a month that would cost me about $60 not including gas at local video store. I do agree that a flat fee would be a good option, however as someone pointed out for $9.99 1 dvd out at a time, but unlimited rentals, you can't beat it! Even if you only rented 2 movies in a month's time, that would cost you about the same as this option. Do the math, Netflix ROX, although the throttling is bogus and I can't wait for my free months subscription.

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Local Price Comment Above was Right

By deadrody on 5/3/2006 10:20:14 AM , Rating: 2

Hollywood video offers an "MVP" program for $10 a month. Rent up to three movies at a time, complete unlimited, for a monthly fee. Movies aren't MVP eligible until about 4 weeks after release, but once you wait out the 4 week period, you get into a schedule that makes it of no consequence at all.

You can rent 3 movies today, take them back tomorrow and rent 3 more. Considering the regular price of movie rentals even 4 weeks old is still $4, the MVP thing pays for itself the first time you rent 3 movies.

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RE: Local Price Comment Above was Right

By CorrND on 5/30/2006 1:11:05 PM , Rating: 2

MVP for $10 is just the first 3 months, then it's $15. Plus, because of Hollywood Video's franchising system, you're only an MVP at the store you sign up for. I did the plan for about 6 months and basically cleaned out the place of movies I wanted to watch. It finally got to the point that I was renting like 1 movie/week (basically the regular $4 rental fee) because I couldn't find anything. Hollywood Video can't hold a candle to the 60,000 movies that Netflix offers plus not having to wait 4 weeks for new releases.

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RE: Drop flat fees

By lemonadesoda on 5/3/2006 11:11:43 AM , Rating: 1

I completely disagree with your complaints.

As a government, it would be unthinkable to TAX people based on their IQ. Lower IQ, higher tax. Imagine the uproar.

Instead, allow commercial enterprises to develop services that only idiots pay for. eg. alcohol, tabacco, mobile telco-contracts etc. (note that mobile phones are also considered to be dangerous for your health in high doses).

Then, as government, you tax these commercial enterprises that make big $ from idiots. Hey presto. Indirect taxation of tools and fools.

I personally agree with this approach.

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RE: Drop flat fees

By Nekrik on 5/4/2006 3:24:59 AM , Rating: 3

I imagine you are right, you would cause quite the uproar over the excessive IQ tax.

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Wrong throttle

By mindless1 on 5/3/2006 9:28:24 AM , Rating: 2

$9 million in settlement and $1.3 million to the lawyers. While it's been a worse ratio than this, throttling needs applied to lawyers most of all.

It is downright pathetic what Netflix did though, I can't feel any sympathy.

RE: Wrong throttle

By Einy0 on 5/3/2006 9:43:38 AM , Rating: 2

I agree 100%. The laywers are the ones who stuff their pockets on these class action suits. Also I like the Netflix unlimited monthly system. I loved it before they started throttling people who actually return their movies like me. The thing is Netflix has gotten rich doing this same thing before they started throttling anyway. The system obviously works. It works so well, they decided to patent a bunch of stuff to try and push out thier competition. I have an account with Netflix still and I also started one with Blockbuster Online. Blockbuster is better, faster but their selection is not as great as Netflix so I'll keep both for now.

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RE: Wrong throttle

By Furen on 5/3/2006 10:01:53 AM , Rating: 2

Well, remember that most of these cases are in contingency basis, so if there is no settlement (or there is a summary judgement in the defendant's favor) then the lawyers get paid nothing. I must say that this settlement is not all that great for consumers (ie. you get your account upgrade for a month but then have to downgrade it yourself before the month is over...) but allowing lawyers to give themselves great salaries when taking cases on a contingency basis does allow more people to actually be able use the courts.

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RE: Wrong throttle

By jskirwin on 5/3/2006 4:10:25 PM , Rating: 2

The lawyers only got 14%? Slackers. Most of the class action suits I've seen have netted the shysters 35-50%. One of my friends believes that the buck ultimately stops with lawyers in America. These guys better pick up the pace.

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what's next?

By xit2nowhere on 5/3/2006 1:58:50 AM , Rating: 2

So, now are they gonna look for other ways to throttle the "unprofitable" customers ?

RE: what's next?

By dhei on 5/3/2006 2:07:14 AM , Rating: 2

first throttleing internet customers, now they found a way to throttle snail mail! the world is ending. :P

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changes

By Gooberslot on 5/3/2006 8:32:13 PM , Rating: 2

Are they going to change their policy or continue giving people the shaft?

RE: changes

By bbomb on 5/3/2006 10:47:13 PM , Rating: 2

If I was Netflix I would just change the terms of service to say that hey, if you want to rent our dvd a 3 aday just to rip them for piracy, we will slow your shipments down.

I doubt people are watching three movies a day.

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Those bastards

By Alexstarfire on 5/30/2006 11:27:04 AM , Rating: 2

I knew those guys were holding my movies, those bastards. It's not my fault I watch my movies the day I get them and put them in the mail that day. Well, I'll have to see if my dad gets one of those offers. I can't even remember the last time I had two movies at the same time, I get 2 and my dad gets one. I was going to complain a while ago, but I'm not the primary account holder. I kept wondering why I would send two movies back on the same day and get 1 in 2-3 days and the other would come a couple days later. I better be getting my movies on time now.