Slashdot Mirror
Postal Service Surcharge Could Slash Netflix Profit
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."
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.
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...
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.
E pluribus unum
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".
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 testing the waters with it), but they do have some recent movies, some decent TV shows, and a whole ton of BBC stuff. I ended up finally watching Heroes season 1 using it last month (although I ran out of time and had to rent the last disc to get the season ending). I plan to watch Season 2 when my time resets next week.
This guy's the limit!
Sorry about the writing. Robot fingers, you know? Cliff Steele in DOOM PATROL #23
In my short tenure in the post office in the area where freshly received mail would be brought in for processing, we would have to manually remove the netflix envelopes (all being envelopes sent back to netflix after the customers watched). Since the DVD portion of the letter is not balanced, leaving the large flap of paper to cause problems in the canceling and sorting machines. However, Blockbuster's envelopes do not have this problem as the DVD is left in the center leaving very small flaps that do not cause problems.
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.
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.
Do Or Do Not, There Is No Spoon, There Is Only Zuul. Everything in the above post is probably opinion.
The U.S. Postal Service is self-sufficient (not subsidized):
http://www.nalc.org/postal/perform/selfsufficient.html
http://usgovinfo.about.com/blpostalservice.htm
Why would someone that shorted the stock want to buy more at a lower price ? Perhaps you do not understand the concept of "shorting" a stock.
You sell short when you feel the stock will drop to a LOWER price then the current price. In essence you sell stock you don't have , then buy the stock to deliver at the price you sold it as.
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.
GreyPoopon
--
Why is it I can write insightful comments but can't come up with a clever signature?
Not when that 42 million dollars is eventually going to come out of Taxpayer money, y'know.
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...
I don't read AC A human right
We've got http://zip.ca/. Pretty much the same thing.
It's interesting to note that Netflix' former COO, Bill Henderson, was the United States Postmaster General from 1998 to 2001, so I have to think their relationship with the USPS is nothing but close.
Note: Henderson's role changed to strategic advisor in February 2007.
There is no barcode on the envelope that corresponds with what movie is inside. People that have more than one movie don't have to return them in the envelope they came in. Netflix tell you if you lose an envelope to mail two DVDs back together. There are eight possible orientations for inserting the DVD into the envelope, only one of which will result in the barcode showing through the cutout, and Netflix doesn't care how you do it.
So I call bullshit.
No, Netflix said they are paying a rate that entitles them to have the post office pick up their mailers, but Netflix delivers them anyway. That is the $100M cost savings. Netflix says they are either paying too much or the post office is saving by not doing work they are paid for.
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.
Infuriate left and right
Whoever said that has their facts wrong. I was a logistics manager for 22 years in a major company, and I know how the USPS handles large mailers. We used to mail over 60,000 pieces of mail each week and the USPS doesn't pick it up unless a mailer contracts them to do so. Then, the USPS uses private firms to pick up.
== First cross river, then insult alligator.
"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.
I know it's not Netflix, but you can do that with Amazon's Unbox videos. You can order them on the website and they'll get automatically delivered to your TiVo. Seems to work pretty well when I've tried it. There's also a rental model instead of purchase, though I'm not sure how that works with TiVo.
:)
That said, it is Amazon and for some folks around here, they're automatically disqualified as an option.
rj