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Postal Service Surcharge Could Slash Netflix Profit 268

mikesd81 writes " 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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Postal Service Surcharge Could Slash Netflix Profit

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  • by Anonymous Coward on Thursday December 06, 2007 @01:01PM (#21598873)
    Netflix says the whole thing is no big deal and they will change their envelopes if necessary. I don't see the problem. Netflix doesn't seem worried.
    • by timster ( 32400 ) on Thursday December 06, 2007 @01:04PM (#21598943)
      Note that this "analysis" is from a guy who's been recommending Blockbuster stock over Netflix stock for a while, and that's been looking like a really dumb recommendation lately. The scenario described in the article -- where Netflix takes no action to rectify a problem that would destroy all their profits -- is unreasonable on its face.
      • Re: (Score:3, Interesting)

        by Russ Nelson ( 33911 )
        But it creates a nice buying opportunity for Netflix stockholders ... or selling opportunity for people who had already shorted Netflix.
      • by A nonymous Coward ( 7548 ) * on Thursday December 06, 2007 @01:54PM (#21599703)
        Netflix also said they pay for pickup service even tho they deliver their shipments to the post office, at an estimated $100M savings to the post office. They could either demand the post office pick up as they are paid to do, or charge less for what they don't do.

        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.
      • by hal2814 ( 725639 ) on Thursday December 06, 2007 @05:11PM (#21603313)
        "The scenario described in the article -- where Netflix takes no action to rectify a problem that would destroy all their profits -- is unreasonable on its face."

        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.
      • Unless Blockbuster filed for a patent like, "A method for placing media into solid-cornered transport containers." If this is the case, we're all screwed.

    • by infonography ( 566403 ) on Thursday December 06, 2007 @01:09PM (#21599021) Homepage

      Netflix says the whole thing is no big deal and they will change their envelopes if necessary. I don't see the problem. Netflix doesn't seem worried.
      Agreed, They have been evolving their design [] for some time now this isn't a problem for them.

    • Netflix says the whole thing is no big deal and they will change their envelopes if necessary

      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.
      • Fortunately for Netflix, they have no intention of infringing on Blockbuster's patents on an envelope that doesn't jam DVDs. Unless of course Blockbuster also has a patent for "A Non-Postal Sorting Machine-Jamming DVD Envelope."
      • by Toonol ( 1057698 )
        Keep in mind that Netflix has already successfully sued Blockbuster over patent issues. Blockbuster suing back would only be fair.

        Well, fair might not be the right term, but there would be some irony in it.
    • by Kelson ( 129150 ) * on Thursday December 06, 2007 @02:36PM (#21600427) Homepage Journal
      Not only that, but the post office will probably prefer that solution to actually charging them the extra 17 cents to hand-sort.


      Cover the cost of extra work
      Eliminate extra work
  • by jacquesm ( 154384 ) < minus physicist> on Thursday December 06, 2007 @01:01PM (#21598875) Homepage
    simply distribute them digitally :)

    I'm sure that people won't mind downloading them and it will save some $.

    feel free to report any abuse on [] ;)

    • by gEvil (beta) ( 945888 ) on Thursday December 06, 2007 @01:03PM (#21598923)
      They already do have a digital distribution system--the mailman picks up the envelope with his fingers and drops it into my mailbox.
    • by Abreu ( 173023 ) on Thursday December 06, 2007 @01:04PM (#21598935)
      But then either one of these two things would happen:

      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

      • by Thansal ( 999464 ) on Thursday December 06, 2007 @01:28PM (#21599293)
        Interesting, The digital distribution that Netflix DOES have is not overly encumbered with DRM (My mum can use it with 0 problems), ran fine when I used it, and has a relatively decent selection.
        • by timster ( 32400 ) on Thursday December 06, 2007 @01:34PM (#21599417)
          And yet I can't get it to work no matter what I do. Though I think it would help if Microsoft released a version of Windows for the PowerPC.
          • Re: (Score:3, Funny)

            by petermgreen ( 876956 )
            Though I think it would help if Microsoft released a version of Windows for the PowerPC.
            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.
        • by ktappe ( 747125 )

          The digital distribution that Netflix DOES have is not overly encumbered with DRM
          Oh, really? So it will work fine on my mum's new MacBook and my Linux box then?
          • by Shakrai ( 717556 ) * on Thursday December 06, 2007 @03:57PM (#21602019) Journal

            So it will work fine on my mum's new MacBook and my Linux box then?

            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.

        • Re: (Score:3, Insightful)

          by encoderer ( 1060616 )
          Well, lets be real, their selection is nowhere near what it would need to be to consider it a viable service on its own right. It's OK since it's a free addition to your monthly plan, but that's about the extent of it.

          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
    • Or even less revolutionary, Netflix will redesign the mailers to look like BlockBusters, unless BB patented their envelopes. I haven't found any such patents in my preliminary search, but who knows what is going on nowadays with patents?
    • Re: (Score:2, Insightful)

      by Anonymous Coward
      Well, I do not want digital downloads. I have DSL and do not have cable in my area. Plus my hard drives don't have enough space. Plus my HD-DVD is in the other room connected to a big TV.
      So DVDs work just fine for me. Netflix, change the envelopes!
    • Re: (Score:3, Informative)

      Actually, for a serious answer, Netflix does offer streaming video on their site. Of course, it has the usual caveats--you must view the site in IE on Windows since it uses WMV. If you have a MCE machine hooked up to a TV, though, it's actually not too bad. You get 1 hour of viewing time for each dollar you spend on your monthly plan. That is, if you spend $13.99 for a two-at-a-time plan, like I do, you get 14 hours of viewing time a month. The selection isn't all that great so far (they're definitely testi
      • by TooMuchToDo ( 882796 ) on Thursday December 06, 2007 @01:18PM (#21599151)
        I'm currently building a set top box to handle Netflix Watch Now so you can view it on your TV. I offered to work with them to integrate with them at no charge (my selling point is a bunch of other features). They said they weren't interested. I'm still moving forward with the project though. Let me know if you're interested as a beta tester.
        • by joshv ( 13017 )
          Thanks, but I'll just keep connecting my laptop to my TV via the VGA port - you can keep your "bunch 'o features".
          • No worries. It's not marketing towards cheapo Slashdotters. It's marketed towards the same people who can and do drop $700 on a Series3 Tivo.
      • by timbck2 ( 233967 )

        you must view the site in IE on Windows
        That's a pretty huge limitation, especially for the Slashdot crowd! It certainly rules it out for me. Wake me it works on Mac OS.
    • by prestonmichaelh ( 773400 ) on Thursday December 06, 2007 @01:20PM (#21599185)

      I'm sure that people won't mind downloading them and it will save some $.

      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)

      • I don't even have a TV anymore. Ever since the net 'boom' (say mid '95 or so) I've tried to make everything digital and to have only one 'outlet', my PC. There isn't enough material on the 'idiot box' that I find interesting enough to justify having one and files are so much more handy than physical media. I live in the Netherlands, where a 10 Mbit/s DSL line is about $50 / month, it's not cheap but I'm sure they can't be making much money on this particular one :)
      • Re: (Score:3, Interesting)

        by QuantumRiff ( 120817 )
        I couldn't agree more with you. Now, if Netflix partnered with Tivo, and/or with Apple on the Apple TV, I would buy one in a heartbeat. Imagine the possibilities. For some reason, I think of a movie. I click a couple of buttons, and boom, 5 minutes later (to enable plenty of buffering) i'm watching it on my big TV. No waiting a few days for the mail to arrive, no driving down to the store. Say they had a rule that you could keep them on your Tivo or Apple TV as long as you wanted, but could only have
      • How about, instead of all that, simply having a network capable box that streams video from your computer with the service installed? IE your computer acts as the server, streams it to a box with no HD.

        The box would come with the remote and some simple system to browse through and play your media files from your TV.

        Apple apparently has something similar, but I was thinking something more streamlined for ~$100-$150.

        The box could have anything/everything from coax to component to HDMI.
      • Xbox Media Center.

        Granted it doesn't work with this DRM crap. But ccxstream + XBMC the best home media setup I've seen out of anyone's house. Toss in (Mac) + rtorrent and I like it better than Tivo. (I never shift my media by 30 minutes to skip commercials, usually I catch it the next night, so this works perfectly.)

        Once they get it ported to Linux so that it'll do HD, hands down the best player anywhere.

        Granted it won't work with this DRM crap, but that's on their end, not mine.
    • They already do that.

      The selection isn't all that fantastic (probably the studios' fault), and it's windows-only for the moment, but it does indeed exist.

      I've had Netflix for about a year now, and have virtually no complaints about it. The price is reasonable (it's actually gone *down* since I started), the response time is impressive, and their selection seems to include virtually every Region 1 DVD on the planet... What's not to like?
    • by garcia ( 6573 )
      simply distribute them digitally :) I'm sure that people won't mind downloading them and it will save some $.

      It doesn't save me any money (not that I use Netflix) but I don't want to watch movies on my computer and I don't want to move a computer next to my main TV just so shareholders can sustain a profit. Not only that but I'm not saving any money when I have to pay for bandwidth to download those crippled videos. We all seem to forget that having the Internet connected to your house isn't free.

      I want
      • Wouldn't you agree, though, that they could make it tempting...

        Imagine being able to chose. Right now you can do the $14/mo 2-at-a-time plan. So imagine if they offered a way for you to cut the price in half for your plan. For $7 a month you get to download and burn, say, 9 DVDs. Their software would work to automatically D/L from your queue in off-hours and it could include integrated burning features.

        And, of course, you get to KEEP the DVDs you burn. Despite the fact that the plan would surely carry a "mu
    • by slapout ( 93640 )
      One world: bandwidth. I can get more bandwidth thru the US Mail than I can thru my internet provider.
      • yes, the latency is a killer. ;)

        Consider that the standard netflix plan is 3 DVDs out at a time. So I figure you'll be able to watch 1 movie a day, on average (1 day to mail, 1 day to watch, 1 day to return).

        Figure that the average movie can fit into 2gigs due to using more advanced compression than DVD's MPEG and that the consumer has a 2mbit connection. I figure it'd take roughly 16k seconds to download. 1k(mbit to gbit)*8(bit to byte)*2(figure only half the pipe is used for actual data, rest is for ov
  • Boiler Room (Score:2, Insightful)

    by cthulu_mt ( 1124113 )
    Sounds kind of like Blockbuster FUD.
  • A Non-Story? (Score:5, Insightful)

    by pyite ( 140350 ) on Thursday December 06, 2007 @01:02PM (#21598901)
    So Netflix says they'll change the envelopes. So really it's a non-story as there's no fundamental problem shipping them if Blockbuster can do it without having a surcharge forthcoming for them too.
    • Moreover, this type of thing happens all the time as companies test to see how much it will really cost to make a change vs. manual sort of existing product. In many cases, it's cheaper just to let them manually do the sort, depending on conditions. Hence why there are so many manual counters of pills in pharmacies, instead of some machine that just counts the pills.
      • by Dan Ost ( 415913 )
        Counting pills is the least important thing that a pharmacist does.

        Visually identifying that the pill is the correct kind of pill, recognizing potential dangerous interactions between medications, and catching physician/transcription errors are the kinds of things we expect a pharmacist to do. Some pharmacies do use machines for counting pills once the pharmacist has evaluated the prescription and verified the medication.
    • Yea it is always the big brother or big corporation against the little guy... While it is usually Big Brother going "Could you please do this an other way, your current way is expensive and I may need to charge more because of all the problems" If the USPS eats the costs then we will all pay for it even if you don't use netflix in higher postage costs vs. asking the major source of expenses to do some minor changes, that way netflix only has a minor inconvenience, USPS saves money, US Mail Users saves mo
    • by bartle ( 447377 )
      Very much a non-story. Salon [] covered this yesterday.

      But Steve Swasey, a Netflix spokesman, points out that the report does not mention a key fact about Netflix's deal with the Post Office: Rather than waiting for a postal carrier to drop off and pick up mailers at Netflix's distribution centers, the company itself transports the mailers to regional postal centers.

      Because Netflix pays for full First Class mail service, which includes picking up and dropping off, Netflix is paying for a service that it

    • by doublem ( 118724 ) on Thursday December 06, 2007 @01:32PM (#21599383) Homepage Journal
      The real story here is that the US Postal service is trying to pressure Netflix into changing their envelope design. This means Netflix is shipping so many movies that a flimsy envelope has gotten the attention of the US Postal service and is annoying the heck out of them. A sturdier envelope would no doubt be more expensive, but the odds are that Netflix will just do whichever is cheaper: Pay the extra fee or cough up the extra cash for new envelopes.

      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.
      • " badly they're getting nailed by Netflix." ...Can I rent a video of that?
      • gotten the attention of the US Postal service

        Netflix has had the USPS's attention for quite a while, thank you. It pays them to scan the barcode on the return envelopes and transmit it to the company, putting that disk in "Returned" status immediately. Mail a disk in the morning and you often get an email titled "We've received..." the same evening. That's one reason why their turnaround is so fast.


      • by Zymergy ( 803632 ) * on Thursday December 06, 2007 @03:39PM (#21601653)
        Having previously worked for the US Postal Service DELIVERING ACTUAL MAIL, I can tell everyone here that the flimsy (though protective) tyvek Netflix-style DVD-sleeves are not a favorite with USPS workers.
        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
  • Other factors (Score:4, Informative)

    by imstanny ( 722685 ) on Thursday December 06, 2007 @01:04PM (#21598931)
    That's not the only thing. One major factor attributed to eating away at Netflix a Blockbuster's profits are the Kiosks you can find at McDonalds. However, long term outlook is in streaming media. Blockbuster is trying to leap ahead and go mobile with their streaming. Netflix already has a service, which (from personal experience) is really good, if you don't mind watching movies on your Computer...
    • Re: (Score:3, Interesting)

      by Seakip18 ( 1106315 )
      I didn't know Netflix had a movie streaming service. It'd be pretty neat for HTPC setups. I can imagine MythTv getting a plug-in for that, simply browsing your movie list and streaming, maybe downloading it while the ethernet has an idle connection. Doesn't it already allow you to mess with your Netflix account?
      • Not sure. But the streaming is based on your subscription. I have teh $16.99/month one and I get 17 horus of streaming per month. The hours scale better with higher subscriptions. The only problem is that they have a much bigger catalog than their streaming service. Having said that, they have tons of new TV shows that can be streamed - which is how I spend most of my streaming hours. They also have a lot of movies that you never wanted to spend a movie ticket on, but wouldn't mind watching.
    • Netflix already has a service, which (from personal experience) is really good, if you don't mind watching movies on your Computer...

      ...and your computer is running Windows and WMP.

    • But I don't see streaming video becoming the end-all-be-all answer in the immediate future.

      There are still problems with it. Lower resolution, wait times for downloading, DRM restrictions, having to watch on a PC based system, etc...

      Some of these can be corrected through technology. Like a 'NetFlix enabled Tivo' where the whole system is integrated into the existing DVR hardware solutions. The wait time isn't horrendous, but if I have a DVD in hand, I can watch it immediately, I don't have to wait 30 minute
      • by bkr1_2k ( 237627 )
        I don't know if it's because I have a higher speed connection than you, but I only have to wait about 90 seconds for my Netflix streams to start. I don't like having to watch on a Windows machine, but that's really my only gripe. Some artifacts are noticeable when watching movies with fast motion, but it's not too horrible, especially on a small screen and otherwise I've been very satisfied with the netflix streaming function so far. It needs some work, and better movie selection, but so far so good, esp
  • Biased? (Score:5, Informative)

    by samkass ( 174571 ) on Thursday December 06, 2007 @01:05PM (#21598951) Homepage Journal
    It should be noted that this is an analyst who had already rated Netflix a "sell" and Blockbuster a "buy", and was trying to continue to justify his ratings when he wrote this. In reality, NetFlix is very postal service friendly (they pick up their deliveries themselves, for instance, saving the postal service $100M a year), and has already redesigned their packaging a dozen times and could easily do it again if need be.

    In other words, this is FUD spread by an analyst who wants to see his predictions about Netflix's stock swings come true.

  • 1. Get Blockbuster envelope
    2. Make similar design but w. Netflix logo
    3. Continue to profit

    Non-story in my opinion.
    • More like:

      1.Tell investors to sell Netflix and buy Blockbuster
      2.Write a FUD article saying that something going to destroy Netflix profits (with a side note that Netflix will fix the problem if needed)
  • by JimBobJoe ( 2758 ) < minus cat> on Thursday December 06, 2007 @01:05PM (#21598967)
    Unless this story is lacking on important detail (which I suspect it is) I can't help but feel that there was a major communications breakdown.

    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.?"
  • by boguslinks ( 1117203 ) on Thursday December 06, 2007 @01:06PM (#21598981)
    Netflix has changed the envelope repeatedly [] so I doubt they'll hesitate to do it again if not changing would cut per-subscriber profit by 2/3...

    Unless Blockbuster has patented "envelopes that don't gum up Postal Service machines".
  • 42 million dollars (Score:3, Insightful)

    by hansamurai ( 907719 ) <> on Thursday December 06, 2007 @01:10PM (#21599037) Homepage Journal
    This has cost the USPS an extra 42 million dollars over the last two years and they're just complaining about the floppy edges now? It seems odd that this wasn't brought up a long time ago considering Netflix relies on the USPS for distribution and not keeping them happy means not keeping their customers happy. Seems like USPS could have just said, "See this no floppy edges on the Blockbuster envelopes? Do it like that. Now." 42 million dollars is a rather large wake up call.
  • Summary (Score:3, Informative)

    by Spleen ( 9387 ) on Thursday December 06, 2007 @01:20PM (#21599181)
    USPS: Hey Netflix can you change your envelopes so they won't jam our machines?
    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.
    • I would even go as far as to say that Netflix wouldn't say "Why should we?" Anything that benefits both parties would be looked on as a big incentive. If the postal service can process the envelopes faster, DVDs get to/from people quicker, and Netflix can continue to add subscribers without service problems (at least at USPS, their distribution centers are a different story).
    • by Shados ( 741919 )
      I agree. The only reason Netflix didn't change yet is either because they didn't know, either because no one told them they "have" to (Have to meaning: either that or surchage your butt).

      Its such a simple thing to change, this is a non-story.
    • Re: (Score:2, Insightful)

      by R2.0 ( 532027 )
      It's slightly more complicated - the enveloped machine sort fine on the outbound trip, but had a tendency to jam up the machines on the return trip, because of improper hand sealing by the end user. I won't defend the design, but the problem is only half as bad as implied.

      Compounding this, the local post offices were doing the special handling ad hoc - after enough machine jams they said "screw it - pull all of the Netflix customer returns and hand sort." On an individual post office basis, no big deal -
  • Netflix is going to dip this afternoon, rebounding in afterhours and early tomorrow when people realize floppy envelopes can be stiffened with minimum capital outlay.
  • reports that Netflix Inc may suffer a cut in profits if the US Postal Service starts charging extra to manually sort the envelopes that carry its DVDs.

    Our NPO does bulk mail pre-sorts for the military and others.

    The return address may say Kansas or Kentucky. But the postmark will be upstate New York.

    The disabled workers go home with a decent supplement to their monthly SSI or disability check and access to a free dental clinic and other services. The client saves a bundle on mail handling and

  • by dada21 ( 163177 ) <> on Thursday December 06, 2007 @01:28PM (#21599297) Homepage Journal
    Maybe it is time to seriously consider revoking the monopoly provision that the USPS has in terms of being the only legal first class mail deliverer. The last time this was seriously proposed and enacted was over 150 years ago []. That one competitive business put the USPS to shame and lowered prices and increased quality (as competition does).

    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.
    • I'd think the USPS would do fine for remote areas of the country

      Therein lies the rub. Delivering mail to Alaska costs way more than 41 cents or whatever it is now. Rural routes are just not very profitable.

      Any private competitor would focus on urban delivery as it's far cheaper, and they certainly would charge less than the USPS. That would force the USPS to greatly increase delivery rates as the remote delivery would no longer be subsidized by urban delivery. Or we'd be spending a bunch of tax money to
      • Re: (Score:3, Insightful)

        by dada21 ( 163177 )
        Oh, I don't doubt that rural deliveries would be more expensive -- but that's the responsibility you accept when you decide to move further away from urban areas. More gas to go places, more costs for communications (digital and physical), less choice in what you can buy locally, etc. The upside is more privacy, possibly more personal security, etc, etc.

        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
      • So tax the private first class deliverers to pay for the USPS to deliver stuff to Alaska for 41 cents. You'll at least be introducing competition in the urban market and making that more efficient, even if the rural deliveries still have to be done by the government.
      • 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.

  • by noidentity ( 188756 ) on Thursday December 06, 2007 @01:31PM (#21599379)
    This gives a good contrast with net non-neutrality. In this case, the envelopes (apparently) cost more to process than the postal service planned on. That's understandable since it's a fairly new thing to be shipping such mass quantities, so the postal service hasn't yet made a new category to cover it. So this isn't the postal service attempting to charge a customer more simply because the customer is making more money than another customer shipping the exact same envelope. Contrast this with net non-neutrality where the carrier wants to charge more to the more popular company per bit simply because that company has deeper pockets or is more profitable than some other company also transporting bits through the carrier.
    • Except it really does cost more (using the equation "Time = Money") to process the Netflix envelopes.

      It doesn't cost more to process a packet sent to Port 80 than it does over 23, 443 or 6667.
  • Netflix should go ahead and change it's envelope anway. They'd save a lot of paper.

    I already watch a few movies online.
  • by ryanisflyboy ( 202507 ) * on Thursday December 06, 2007 @01:59PM (#21599799) Homepage Journal
    I personally think the NetFlix envelopes are horrid. I've had them come in various stages of destruction to my home. Ripped edges, torn open, etc. Nearly every envelope we get looks like it was jammed in some sort of machinery... that is until about three weeks ago. It looks like the postal service changed tactics and is manually sorting NetFlix envelopes to keep their equipment running smoothly. I've had no problems with torn envelopes since then. Perhaps the postal service is simply wanting to be paid for the problems NetFlix envelopes cause.

    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!
  • by Nom du Keyboard ( 633989 ) on Thursday December 06, 2007 @02:09PM (#21599943)
    What we need is Postal Network Neutrality, and we need it now!
  • Looks like Blockbuster FUD to me.
  • A bit sideways of the topic, but I REALLY wish we had Netflix in Canada. It sounds like a great concept.

    Yes, sturdier envelopes would be good, less damage to the DVDs in the long run...
  • by jedidiah ( 1196 ) on Thursday December 06, 2007 @04:32PM (#21602579) Homepage
    This is rich.

    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...

When a fellow says, "It ain't the money but the principle of the thing," it's the money. -- Kim Hubbard