I agree and disagree. Option paralysis on movies is real - It does introduce friction to think about how you felt about the movie. I think that's time well spent for netflix users. I, personally, like to think about and re-enjoy my favorite moments from movies, and coming up with a rating encourages me to do that.

The second problem is controllable. Ultimately, Netflix is learning my rating habits, and can pick people who have similar sets of ratings. They don't need to know whether "Ernest Saves Christmas" is a better movie than "The Godfather", they just need to find other people who've rated them 5 and 4 stars respectively and figure out based on their ratings what I'd think of "A Series of Unfortunate Events".

There's a second aspect: They can figure out from the distribution of stars that you've given whether you're a binary rater (all 1 and 5), one who uses the full scale (a mixture of each), have a critical bent (more 3s, than 4s or 2s than 1s or 5s), or simply tasteless (see above). They can leverage that into the averages - Weight the ratings based on who's using what rating. A thousand people hitting 5 star who're all habitual 5-and-1 raters might do less to move a movie's rating than one critic rating a 4. And that's okay.