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Postal Service Surcharge Could Slash Netflix Profit
Posted by
kdawson
on Thu Dec 06, 2007 11:58 AM
from the troublesome-red-envelopes dept.
from the troublesome-red-envelopes dept.
mikesd81 writes "Boston.com reports that Netflix Inc., the largest US mail-order movie-rental service, may suffer a cut in profits if the US Postal Service starts charging extra to manually sort the envelopes that carry its DVDs. An audit prepared by the Postal Service's Inspector General last month recommended charging one unidentified company 17 cents per envelope for labor costs. Citigroup analyst Tony Wible, who said in a note to investors Tuesday that the company is Netflix, estimated the charge might reduce profit per subscriber to $0.35 from $1.05. Wible advises investors to buy Blockbusters shares because their DVD envelopes don't have the problem (floppy edges that jam the USPS's automated sorting machinery). Netflix says the whole thing is no big deal and they will change their envelopes if necessary."
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Wal-Mart Closes Online Movie Download Service 136 comments
eldavojohn writes "A year after opening its movie download service, Wal-Mart has abandoned the endeavor. They claim this is a result of HP's decision to stop supporting its video download store software. The article also notes that, unlike iTunes, Wal-Mart offered variable pricing which attracted a lot of studios. 'The world's largest retailer instead turned its rental service over to Netflix Inc. Wal-Mart still operates a music download service and continues to sell CDs and DVDs at retail stores and over the Internet for shipping by mail.' Is this evidence of the strength of unified pricing in media downloads or just another company being squished by the giant Netflix & Apple?"
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Netflix says they will just change the envelopes (Score:4, Informative)
Re:Netflix says they will just change the envelope (Score:5, Insightful)
Parent
Re: (Score:3, Interesting)
Re:Netflix says they will just change the envelope (Score:5, Informative)
You need to look at what's probably going to happen. This FUD, if public enough, may cause Netflix stock to drop. This represents an opportunity for traders with a short position to cover by buying at a lower price. This also represents an opportunity for people who want to buy stock to do so at a lower price. The next expectation is that when the world realizes this is no big deal for Netflix, the stock will rise again and all those who bought low will have earned something on their investment.
Maybe you think that the suggestion was for the short-sellers to short some more at the lower price? That, indeed, would be an unwise move.
Parent
Re: (Score:3, Funny)
See the "or" connecting the two concepts? That means that you would do one but probably not the other. Reading lessons on slashdot. What ARE they teaching the victims of government schooling these days?
Re:Netflix says they will just change the envelope (Score:4, Funny)
See the "XOR" connecting the two operands? That means that one is true, but not the other. Reading lessons on slashdot. What ARE they teaching the victims of computer science these days?
No malice intended, just trying to be cute
Parent
Netflix also says they pay more than they need (Score:5, Interesting)
Either way, this is nothing but a conflict of interest from that so-called analyst. I wonder if the SEC will investigate him for this.
Parent
Re:Netflix also says they pay more than they need (Score:5, Informative)
Why did you assume you knew what I wrote, no matter how unclear it was, when you could have paused for a couple of seconds and thought that if it seemed so obviously wrong, maybe you misunderstood it?
How often do you mod? It would explain a lot of bizarre mods.
Parent
Re:Netflix also says they pay more than they need (Score:4, Informative)
Parent
Re:Netflix says they will just change the envelope (Score:5, Informative)
Yeah, that would be like a brick and mortar movie rental company only trying alternatives to their antiquated business model after years of hemorrhaging money. If this guy is analyzing Blockbuster stock, he's used to a company taking no action to rectify a problem that would destroy all their profits.
Parent
Re:Netflix says they will just change the envelope (Score:5, Informative)
Parent
Snarky comment alert! (Score:5, Funny)
Um, don't you mean they were intelligently designing it?
***
Hey, if it costs the USPS more, maybe they could pay for it from the ill-gotten profits they derive from selling spamming services!
Parent
Re:Netflix says they will just change the envelope (Score:3, Funny)
Ah ha! And that is when Blockbuster is going to reveal that they have a patent on the "Postal Sorting Machine Non-DVD-Jamming Envelope". I predict a $500 Billion patent infringement lawsuit to follow.
Re:Netflix says they will just change the envelope (Score:5, Insightful)
Compare:
Cover the cost of extra work
vs.
Eliminate extra work
Parent
Re:Netflix says they will just change the envelope (Score:5, Interesting)
I find it unlikely that they are "suffering". In fact, it's probably in the best interests of the Post Office to work with Netflix to find a solution to this and keep them around. After all, how many new businesses are there that rely on the good ole post office as a cornerstone of their business model? Not many I'd suspect....
Parent
Re: (Score:3, Interesting)
well, there is a simple solution for that (Score:4, Insightful)
I'm sure that people won't mind downloading them and it will save some $.
feel free to report any abuse on http://ntlgl.com/ [ntlgl.com]
Re:well, there is a simple solution for that (Score:5, Funny)
Parent
Re:well, there is a simple solution for that (Score:4, Interesting)
1- The downloaded files would have enough DRM on them to make them unusable
2- The MPAA would shut down Netflix in about two seconds
Parent
Re:well, there is a simple solution for that (Score:5, Informative)
Parent
Re:well, there is a simple solution for that (Score:4, Funny)
Parent
Re: (Score:3, Funny)
They already did with NT 3.51 and NT4 though they dropped it again pretty quickly and there are all the issues being a different architecture has on other operating systems to contend with too (i'm not sure if it had an emulation layer for running i386 binaries or not).
IIRC they also produced a version of NT4 for powerpc with updated directx for XBOX 360 developers which they supplied to said developers on powermacs.
Re:well, there is a simple solution for that (Score:4, Insightful)
Parent
Re: (Score:3, Insightful)
But they are adding new all the time.
And also, it's not quite as DRM-light as you make it sound. You have to have the newest version of Media Player and, if you already have that, you still have to download the newest DRM update. It can be a bit of a PITA to get working the first time, requiri
Re:well, there is a simple solution for that (Score:4, Insightful)
A) They say they are working on Linux and Mac support so they are either lying or telling the truth. Assuming they are telling the truth then what's your beef? The fact that the OS with >85% market-share was the first one they released the product for? Would you have focused your R&D dollars on releasing it for Linux or Mac first in their shoes?
B) How is it the fault of Netflix if the studios/copyright holders refuse them a license for digital distribution UNLESS the resulting distribution medium imposes DRM? Blame the studios and not Netflix.
Parent
Re: (Score:3, Informative)
Re:well, there is a simple solution for that (Score:4, Interesting)
Parent
Re:well, there is a simple solution for that (Score:5, Insightful)
I disagree with this. I would mind downloading them and I am computer guy/nerd/whatever. I don't want to sit in an uncomfortable office chair in front of a PC to watch a movie for 2-3 hours. I have already setup my TV, DVD Player, Surround Sound, etc. so I can sit on my comfy couch to watch movies. I also don't want to have to either purchase fancy speakers, etc for my PC (I don't play games, so I have no real need for them) and I don't want to have the hassle of trying to hook a PC up to my TV. Although I know all it would take would be a few cables and it isn't that hard to change the video source, I would have to have the following:
1. A PC to hook up to the TV (assuming I don't want to move mine from my desk in my home office)
2. Either a video card with an S-Video out or a TV with a VGA input
3. A way to make sure the PC was quite, but wouldn't overheat and could fit in my TV cabinet and still look nice (so my Interior Designer wife wouldn't freak out about the computer sitting on the floor next to the TV)
4. A wireless card for the PC, since I use a wired connection right now because my DSL modem/router is right by my PC and there is no cable run to where the TV is.
5. Some sort of remote for the PC, since there is no real good surface that is convenient and/or close by to use a mouse (assuming I had a wireless one) on.
Sure, I could watch it on my computer, but I just don't like it and feel that (other than here on slashdot) I am not in the minority. I also, like most people (again other than those on slashdot) don't have a media center type PC hooked up to my main living room TV. I know how to do I, and could do it, but it is a lot of hassle and expense when I can just rent/buy dvd's and put them in my already connected DVD player (that, by the way, I don't have to worry about security updates, blue screens, Linux configuration files, hard drive failures, etc.). Maybe as the media pc "appliances" become more common, this will become more of a reality, but I think right now, most people just don't want to watch a downloaded movie. (and don't even get me started on the likely DRM issues that would come with such a service)
Parent
Re: (Score:3, Interesting)
Re:well, there is a simple solution for that (Score:4, Informative)
That said, it is Amazon and for some folks around here, they're automatically disqualified as an option.
Parent
Re:well, there is a simple solution for that (Score:5, Funny)
Parent
A Non-Story? (Score:5, Insightful)
There's more to it than that. (Score:5, Interesting)
The fact that a Blockbuster shill is trying to spin this as some devastating catastrophe for Netflix is just proof of how desperate Blockbuster is, and how badly they're getting nailed by Netflix.
Parent
Re:There's more to it than that. = Subsidizing (Score:4, Insightful)
They can be rather slippery and are often difficult to keep a good grip on within a large stack of sorted mail.
I have no doubt that similar US Postal Workers have had identical frustrations not to mention that the thicknesses of the disks really add up and complicate the holding the 2 to 3 piles of hand-held mail when preforming dismount-delivery (on foot).
As a postal worker, you come realize this 5" square (and thick for its area) Netflix-style DVD envelope is being delivered by you many dozens of times per day (or more) and the disks *are* slipping out of the letter stack more easily than other types of mail when delivering mail 'in the field'.
You also realize that this Netflix-style mailer is NOT bringing the First-Class postage rate (but you spend MORE of your time handling it than the premium First-Class letters).. They do not even pay second-class or media-mail rates but a pre-sorted postage rate. Also, in all likelihood, the Netflix-style DVD mailer is causing just as much trouble for the automated sorting machines in the postal distribution centers. It also is not difficult to imagine that these odd-shaped and slippery (for mail) DVD mailers therefore must be handled by 3 to 4 more sets of human hands to get accurately delivered compared to the handling and delivery for standard premium first-class postage envelopes. Netflix, et al are probably paying at least half-as much to have them delivered as they would cost if delivered first-class (if even that). Even my credit card-statement comes First-Class!
If the profitable business models for these DVD rental/mailing companies is dependent on US Government (USPS) mailing subsidies, I suggest shareholders beware.
Individuals in the US, mailing their personal letters are *required* (most of the time) to use First-Class postage stamps (or equivalent). These same individuals are experiencing increasingly HIGHER POSTAGE RATES because, in large part, they too are subsidizing the added expenses of delivering Netflix-style mailers and other bulk non First-Class mail.)
Ask your postal worker what they deliver more of, First-Class mail, or "bulk mail"... you will see in their expressions the real answer to why we see the frequent postage rate hikes.
Shape and size of mail DOES have much to do with the *costs* and efficiencies in the delivering of the US Mail. I only wish the prices for mailing were adjusted accordingly (as we would all have MUCH LESS junk mail). -Z
Parent
Other factors (Score:4, Informative)
Re: (Score:3, Interesting)
Biased? (Score:5, Informative)
In other words, this is FUD spread by an analyst who wants to see his predictions about Netflix's stock swings come true.
communication breakdown... (Score:3, Insightful)
According to the article, USPS blew $40 million manually processing Netflix mailers, but apparently didn't bother talking to Netflix and saying "hey...uhh...can you help us out here.?"
so what, they'll change - again (Score:3, Informative)
Unless Blockbuster has patented "envelopes that don't gum up Postal Service machines".
42 million dollars (Score:3, Insightful)
Re:42 million dollars (Score:4, Informative)
Little issue here: The post office is not supported by taxes, income is solely through postage fees.
Though the post office does end up with the problem that if somebody's mailings are costing more than others, they can't just eat the losses - they either have to charge that person/business more or raise the cost for everybody.
In this case, I'm surprised they haven't complained to netflix earlier. They already have all sorts of rules for mass mailings in order to qualify for the best price structures. Stuff like printing the barcode on yourself, sorting it yourself, etc...
Parent
Summary (Score:3, Informative)
Netflix: Why should we?
USPS: We'll charge your $0.17 per envelope to process them manually?
Netflix: We'll change our envelope.
Is there really more to this? I would think Netflix would want the post office to be able to more efficiently process the mail. The faster it's processed, the faster it can be loaded on a truck and heads out. If the mail is delayed due to manual processing, Netflix customers are going to be less satisfied.
Don't change the envelopes, change the deliverer (Score:4, Interesting)
I still can't figure out why we're accepting the postal service when there are many more companies that provide better service for other forms of mail (priority, ground, freight, etc). Even the USPS uses FedEx for their International Express service.
The USPS has one big problem: it can not compete well. It's run by bureaucrats who know they'll get paid regardless of service levels or prices. UPS and FedEx woo my businesses regularly (we mail a ton of stuff), and the prices haven't changed much even with fuel surcharges and the rest. I get an amazing rate for local deliveries of packages under 8 pounds, and it all ends up landing next day just via ground delivery.
I really haven't heard one good reason why we can't let competition into the first class mail market. Yes, the Constitution provides for the Federal Government to maintain mail delivery, but it doesn't actually say they should be the only providers. I'd think the USPS would do fine for remote areas of the country, and the big boys would bring prices down, and service up, by entering the market that desperately needs help.
Re: (Score:3, Insightful)
I serve some churches in Alaska, and my shipping charges via FedEx are more expensive, but not that much more. I recently shipped an 8 pound package to A
Just remove the monopoly, and regulate the market (Score:4, Insightful)
There's a simple answer to that though; instead of giving the USPS a monopoly, require all mail carriers to provide fixed-fee service to the entire country. Don't limit how the carrier does this; a carrier concentrating on urban service could (for example) pay the USPS to handle remote areas, and eat the loss whenever it leaves its own delivery area; if it's got a process advantage over the USPS (such as better sorting systems), it may not make a loss whenever it does have to pay the USPS to fill in coverage gaps. To protect the USPS from abuse, once you're a mail carrier, you may not make use of another carrier's fixed-fee services (so you'd need to negotiate a suitable commercial contract with the USPS to fill in your coverage gaps).
If postal services are a natural monopoly, the USPS ends up as the only carrier. If there's room for someone to undercut the USPS, they will do so, and make a profit in the process. So long as the USPS isn't stupid enough to set its rates below the level where they can continue to make a profit on every delivery, it survives to provide fill-in coverage.
Put another way; the USPS is a monopoly because we want reliable postal services at a fixed rate, anywhere in the country. If we regulate for the outcome we want, and let private enterprise do as it wishes within those regulations (with business-destroying penalties for flouting them), we should get the results we want for the minimum price possible. If that means a USPS monopoly, it's clear that the monopoly is a consequence of our desire; if it means competing carriers, then the monopoly was an inefficient way to get what we wanted.
Parent
Re: (Score:3, Insightful)
I actually do hang out with one of my UPS drivers regularly at a local saloon, and he's told me that he would have no problem at all delivering first class mail to customers he alreadys serves (duh). We receive a daily UPS and FedEx pickup, as do hundreds of my customers. For those customers, the cost to UPS is negligible in terms of warehouse-to-end costs. Sorting would introduce a cost,
Related to net neutrality (Score:3, Insightful)
Let's Hope Netflix Changes Envelopes (Score:3, Interesting)
Other than that, I'm a huge NetFlix fan and hope they can work this out. The last thing they should want to do is make their delivery channel angry. Their business depends on it. I had naively imagined the problem was solved because NetFlix was working with the USPS. Let's hope the NetFlix managers figure out they need to be nice to the postal works. You DO NOT want to make your mail man angry! TRUST ME!
Network Neutrality (Score:3, Funny)
Forget Netflix, surcharge the spammers! (Score:3)
Spam is a burden on everyone. It's a waste of time and resources
and is a nuissance. In some cases, it might even be a threat to
your financial reputation.
Yet they would rather shakedown a company that is actually
doing something constructive with the postal service. If the
postmaster general doesn't like Netflix envelopes, he could
make some constructive suggestions.
Forget charging Netflix extra. Take this charge and apply it
spam and especially bulk mail.
I rather doubt that bulk mail was originally what Franklin
had in mind...