DVD-by-mail is a business model in which customers rent DVDs and similar discs containing films, television shows, video games and the like, ordering online for delivery to the customer by mail. Generally, all interaction between the renter and the rental company takes place through the company's website, using an e-commerce model. Typically, a customer chooses from a list of titles online and adds titles to a queue. As a customer's requested titles become available, the company sends them out. When the customer is finished with the disc, they mail it back to the company.
Background
Most companies operate on the following model:
The customer joins the rental service, typically through an online e-commerce system and a website, and agrees to abide by a list of conditions, and provides some form of electronic payment (e.g., a credit card number). Once the customer has registered, they create a list of titles they wish to watch, which are ranked by the customer by priority. Titles from the list are mailed to the customer as they become available. The customer watches the films or uses the media and then sends the discs back to the rental company using the mail.
Most companies let customers keep the films for as long as they want; customers are, however, limited to a set number of discs out at any one time. Commonly, once a disc is returned, another is sent out. Some companies or plans may have a limit on the total number of movies rented in a month. Memberships are usually billed monthly, and includes postage both ways.
Variations exist; for example, some companies also offer video game rentals while others offer music. Redbox allows a user to reserve DVDs or Blu-ray discs online to retrieve and return the DVD at interactive kiosks located in various retail establishments.
Netflix began an online streaming program allowing for the online viewing of select movies and TV shows. However, around 4.2 million individuals in the U.S. still rented DVDs via mail from the company as of 2017 In 2023, Netflix announced it would be shutting down its dvd by mail service in September
Throttling
Given sufficiently fast mail delivery, customers on "unlimited" plans who return their discs quickly enough can receive enough shipments in a month that the company's cost of delivery exceeds the fixed monthly subscription fee, making this type of customer unprofitable. Even below this point, higher volume customers are less profitable than customers who receive fewer discs per month. If these customers become too numerous, there are various measures which the rental company can take.
One is the so-called "throttling" approach, which received significant publicity with regard to Netflix (which refers to the practice as a "fairness algorithm"). In this case, high-volume customers may experience a greater likelihood of (slower) shipments from alternative warehouses, when the nearest shipment center does not have the requested disc. Also, if there is a high demand for a particular disc, it is more likely that an infrequent renter will get priority over the frequent renters, with the latter receiving a movie further down on their list. They are also less likely to receive replacement shipments on the same day a disc is received. Similar "fair use" caveats can be found in the terms and conditions of leading UK companies such as LOVEFiLM. In Canada, Zip.ca switched to "capped" plans (with additional shipping charges for rentals over the cap) in part to avoid implementing throttling.
LOVEFiLM came under scrutiny from users over its claim to offer "unlimited" movie rentals. Some users reportedly found the company used long delays at the shipping stage to reduce the number of films a month a customer can rent. The company was subject to a dispute by the Advertising Standards Authority over the use of the word "unlimited" in their advertising. It was revealed that they practised throttling. The company itself claimed that this "fair usage" policy means all customers get a similar service.