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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.
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
Sorry about the writing. Robot fingers, you know? Cliff Steele in DOOM PATROL #23
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.
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
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Why is it I can write insightful comments but can't come up with a clever signature?
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
"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.