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Who's Getting Throttled?

15 Feb, 2006 By: Holly J. Wagner

The consumer press has been beating Netflix up of late over its practice of “throttling” accounts — managing customer queues to give preferential service to low-volume renters.

While Netflix has been in the spotlight for the practice recently because of a class action lawsuit on behalf of its renters that forced the company to disclose throttling in its user agreement, the practice is one more aspect of online rental that Blockbuster copied.

I think the choice of terms is interesting in that throttling could mean accelerating or choking off — it refers to both ends of the spectrum.

But in singling out Netflix, the consumer press is doing the company a disservice. Blockbuster Online's terms and conditions include a section reserving the right to do the same things, namely rank customers by volume and give low-volume customers first shot at highly requested titles.

Maybe this is the online equivalent of late fees, a behavior modification system integrated into the commercial model. Every business model has to be managed for profit or it will fail.

It seems that most of the bad PR and regulatory action in the industry lately has more to do with disclosure than the underlying practices. Subscription rental is here to stay, so the companies doing it would be wise to disclose all their customer-affecting practices up front. In the long run it will be less expensive.

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