GameFly Scores In Longstanding DVD Mailing Complaint

An anonymous reader writes "GamePolitics reports that the Postal Regulatory Commission has ordered [PDF] the U.S. Postal Service to equalize the rates paid by mailers who send round trip DVDs, and concluding (sort of) a dispute that has been underway for more than four years. The new postage rates take effect on September 30th. Some mailers, prominantly Netflix, send their round-trip movie DVDs as 'letters,' but GameFly's gaming disks are sent in slightly bigger envelopes as 'flats' to avoid breakage, and so GameFly has paid a much higher postage rate. GameFly argued that this was unfair discriminatory treatment because USPS was providing special hand-sorting treatment for Netflix disks without charging Netflix for the extra handling. But now there's a new twist: the Postal Service wants to reclassify DVD mailing [PDF] as a competitive product, where the prices would not be limited by the rate of inflation, because it says that mailed DVDs compete with the internet, streaming services, and kiosks such as Redbox. The regulatory agency is accepting responses [PDF] from interested persons until September 11th to the Postal Service's latest comments on its request [PDF]."

Comments

gamefly wins to lose

[Dan667]

sounds like in winning gamefly may have put the nail in their profit margin. Instead of adopting the Netflix mailer and accepting breakage as part of doing business everyone will now have to pay much much higher mailing. Ironically, this also will mean that dvd mailing services will probably start to die which hurts the USPS too.

Re:gamefly wins to lose

[MozeeToby]

They almost certainly almost never have to replace broken movies. Look at the shelves at the local brick and mortar rental store next time a big release comes out, see the hundred or so copies? 2 weeks later it's 50, 2 weeks after that it's 10. In a year there's only a handful. So Netflix has their stock of the new release which, even taking into account how long it used to take to get some new releases, is much larger than the stock they will need just a few weeks down the road. Breakage gets written off, so long as it doesn't outpace the drop in demand (which I suppose it will one movies are old enough, but that isn't the majority of the business) you never need to worry about it.

Re:gamefly wins to lose

[OverlordQ]

> Look at the shelves at the local brick and mortar rental store next time a big release comes out, see the hundred or so copies? 2 weeks later it's 50, 2 weeks after that it's 10.

Having worked in a video rental store, you'd be surprised how much those DVDs actually cost from the distributor. And yes, it's more than what you'd pay if you went out to buy it.

Re:gamefly wins to lose

[Anonymous Coward]

As an ex video store owner I concure that yes when you're a little mom and pop shop you get reamed. But Netflix is like blockbuster. They buy in bulk and get much better rates than we do. In 1992 we were typically paying about $85 for a new release, and customers expected us to have multiple copies. Meanwhile, blockbuster was selling them to consumers at $45. Eventually we went to a model where we'd buy 1 from the distributer (so we'd have it on the release date), and then buy a couple more from blockbuster to backfill our inventory as soon as we could. Even still at $4.00 / day for a new release it takes a while to recover those costs. The averge interest didn't typically last more than a month, so even with all 3 coppies out at 4 / day (and that doesn't always happen) we'd make a max of $360, of which $175 is purchase costs. Now add into that equation the bad VCR that wrecks a tape, the overhead of running a brick and morter business, payroll, etc. We went out of business shortly after Blockbuster got big. We just couldn't compete.

Reclassify as a competitive product?

[SirGarlon]

So, the Postal Service says DVD mailing competes with Internet streaming and ... that means they want to charge *more*?

"Competitive." You keep using that word. I do not think it means what you think it means.

Re:Ridiculous

[jd.schmidt]

Basically that is the problem, the prices do not reflect true delivery costs by government mandate. The USPS is mandated to provide certain types of services at a certain cost no matter what.

Effectively Netflix got low prices because they knew how to get their packages classified as protected mail. Also they really DID work very hard to make their packages as easy to sort and deliver as possible. They spent a lot of time working closely with the USPS to make a package that was easy for them to sort, they even went so far as to hire a bunch of USPS personnel to consult on how to do this.

One more point, CDâ(TM)s are super cheap, the costs are controlled by the publishers, so they can make or break Gamefly and Netflix.

Re:o man

[SirGarlon]

Tell that to Congress. They're the ones micro-managing the Postal Service and setting arbitrary rates. Those rates, BTW, are not sufficient to fund the Postal Service pension system at the level Congress demands, which is why the Postal Service is in crisis.

Re:Aaaaand...

[hedwards]

Not really, sure people are sending less mail, but mail isn't the only thing that the USPS delivers. I keep hearing people declare the USPS dead because of the internet, and the only reason they're having financial problems at all is because they were given a decade to fund their pensions 100%, which is more than what even responsible companies do.

What's more, the internet can't do things like have proper signature requirements, there's no guarantee of privacy like there is with things mailed within the US.

I know it's popular to badmouth the postal service, but seriously, how are physical things going to be transported without something filling that niche? And the USPS is pretty much the most cost effective way of doing that in the US.