Well, just imagine if users kept all their movies out indefinitely; that would take a major bite out of their profits, from either not having the same # of copies to ship, or having to reproduce more, with sleeves and such. The silly part is that if you're willing to endure lower profits short term and emphasize great service to as many as possible, you'll make up for it by greater goodwill (amazing how that's accounted for as 'intangibles,' but it's true) and therefore greater # of subscribers/volume. It's just like when bowling alleys offer $1/game bowling or less one day a week, they get far more business then, and that's extra profit 'off the top,' since they aren't doing more maintenance at the time they offer it (not oiling lanes, stripping them, etc.). I realize that analogy assumes ancilliary income (snack bar, bar, vending machines) is always present unlike Netflix who only has the online rentals for primary income. Still, a low-profit venture can always make up for it IF they garner goodwill and sufficient volume. An example of this was when 7Eleven in TX used to have Big Gulps for .59: a manager told me it cost them .20/soda (including straw, cup, lid), but because of sheer volume, they successfully ran it for year after year because of the incredible volume of thirsty customers. Additionally, those same customers then bought other snacks, meaning they profited more just by getting them in the store with a good deal.
Netflix could do better and hopefully will. Otherwise, they might find their online service suffers, due to the Walmarts, grocery stores, other B&M video places offering $1/day rentals on all releases. Since the avg. customer I've seen largely gets those, once all those places get their selection up (and continue with increasing the selection), Netflix might find they get less, because people will get wise to them shorting them deliberately, as is been shown to happen already.
As for their Terms of Service, I read it all when I signed up and never saw that, so that must have been added after I signed up. Of course, Chas's email and Matt's email are indicative of the trouble I'm having with them. Sure, a few titles I've asked for were low-circulation stock (3), but I've found a few recently they just obviously decided to 'delay,' because I've seen them and put them back in the mail the same day now since summer started. So, I'm now seeing them try to 'slam on the brakes' in an obvious way. I was getting 5-6 titles/wk, but the last 3 weeks I've had as low as 3, and starting to avg. closer to 4 from their deliberate delays. I emailed them about it and am curious to see what response they give (I know, I'm not counting on anything special). If they happen to admit to any more of this, I'll post it here for posterity and for more proof of 'nonposted' policy.