After one of our UCAN staff had a rather disappointing experience with purchasing a Netflix gift card or subscription for a loved one, we looked into the details of Netflix's Terms of Use to determine what restrictions are involved with purchasing gift subscriptions. After reviewing the Terms and contacting Netflix to clarify some details, we found a few things we thought buyers should be aware of. Listen to Carter discuss Netflix on the UCAN.ORG podcast here .

But before we get started, I realize some of you Clint Eastwood fans reading this might be thinking to yourselves, "wait a minute, why is ‘The Ugly' first when the title of Clint's greatest flick is ‘The Good, the Bad, and the Ugly," not ‘The Ugly, the Bad, and the [Decently] Good?'" Well, don't fret mon frère, here is your answer: unfortunately, we found more ugly and bad aspects of the Netflix gift card subscription service than good. So, without further ado, here is what we have found:

1. First off, Netflix gift card subscriptions are non-refundable. So, if the recipient of the gift card subscription either cannot or does not want to use the service, you're stuck with it. For options available in such a situation, see "The Bad," below.

2. The ugliest, and seemingly sinister, aspect of Netflix gift card subscriptions is the "opt-out-only" rollover billing. What is this, you ask? Well, when the gift subscription recipient enters a credit card number into the account to activate the gift subscription, the Terms of Use states the gift subscription recipient authorizes Netflix to automatically bill that person for monthly subscription fees and applicable taxes, once the gift subscription period ends, for the cost of the plan associated with the gift subscription, unless the gift recipient opts out prior to the expiration of the gift subscription.

Now, Netflix is obviously hoping users of gift subscriptions will enjoy the service so much they continue on as paid subscribers. But, for all those who are NOT interested in continuing on as paid subscribers, anyone who fails to cancel their service prior to the gift subscription's end will be rolled over into a paying subscription status. So, if recipients of gift subscriptions forget at the end of the gift periods to cancel their accounts, they will be automatically billed for the next month's service.

Depending on the details of when a person receives his credit card statements in the mail and when the paid subscription begins, it's possible for Netflix to get up to two months of billing out of an unknowing subscriber before he realizes (from looking at his first credit card statement received since Netflix started billing him) that he is now a paying subscriber. At this point, unwary subscribers are trapped into paying for either one or two months of service by the fact the Terms of Use clearly states refunds or credits are not available for partially used subscription periods.

How does this affect Netflix? It affects their bottom line, and very handsomely I might add. Just multiply the cost of monthly subscriptions by the number of people you think could end up falling into such a scenario each year (I don't want to speculate, but out of 8.8 million subscribers in 2006, that number could be significant). The result could easily be in the tens or even hundreds of thousands of dollars per year in what essentially amounts to what is in our opinion, unconscionable gains. And so I ask you, are Netflix's policies sinister? Perhaps; but that's up to you to decide. Are they ugly? We think so.

3. A gift subscription recipient is required to enter a credit card number in order to activate a gift subscription. Although the credit card protects Netflix's property by enabling it to bill people for lost or damaged DVD's, the reality is that many people either don't have credit cards or aren't willing to give up their credit card info to a company whom they don't really want to use other than for use of the gift subscription.

4. If the recipient wants to use the gift card subscription, but either does not have a credit card or refuses to enter one into the Netflix system, the good news is that gift subscription purchasers, if they choose to do so, may enter their own credit card numbers into gift subscription recipients' accounts. While I certainly do not recommend doing this, unless it's with someone whom you absolutely trust with no reservations (and even then it's not highly recommended), at least it's an available option.

5. But, what happens if you buy a gift subscription for someone whom either cannot or does not want to use the gift, and whom is not willing to enter your credit card info into their Netflix account? If the gift subscription code has not been activated after one year, Netflix will email the purchaser of the gift subscription to let him know the gift code has not yet been activated. And keep in mind that one year from the date of purchase, gift subscription periods begin to run even when gift codes have not been activated. While this specific point should fall within "The Bad," I couldn't separate it at this point from the somewhat surprisingly two fairly good options available to the original purchaser.

The first option is for the original purchaser to activate the gift code himself to apply it to his own account. So, even though it's not refundable, the purchaser can at least get the value out of the gift subscription which was originally purchased for someone else. But if the purchaser is not a Netflix subscriber, he needs to set up a new account to use the gift subscription. Of course, the ugly part of this is that the purchaser will now be subjecting himself to the "opt-out-only" rollover billing practice discussed above.

The second decent option available to the purchaser of the gift subscription is that he can transfer it to someone else. Even though the Terms of Use states gift subscriptions are only transferable one time, this is somewhat misleading. The gift code itself is transferable an unlimited number of times. Netflix does not track, and has no way of tracking, the number of times the un-activated code has been transferred. So if you give me a code, and I don't want it, I can give it to my brother, who can give it to one of his employees, who can give it to her boyfriend. No problem.

However, once a gift code has been activated, regardless of whether it's before or after one year from the date of purchase, the gift subscription itself can only be transferred once. To transfer the gift subscription, you basically have to transfer the entire account over to the new person by changing the name, address, and email account associated with the Netflix account. But the Netflix system will only let this happen once.