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The United States Postal Service has been facing rising costs and declining mail volume for years. The USPS lost $3.8 billion last year alone, and is looking at drastic measures to stanch the bleeding. Two such solutions are raising rates and suspending Saturday delivery, neither of which would be beneficial to the USPS’ largest corporate customer, Netflix. The Big Money has published a fascinating piece discussing the dilemma Netflix is facing with the USPS.

Netflix has a network of 58 highly efficient warehouses nationwide, and its customers have come to expect disc delivery times of just a day or two. The Postal Service has voiced a desire to cease delivering mail on Saturday beginning in fiscal year 2011. An elimination of Saturday mail delivery would cut a crucial day out of Netflix’s delivery schedule and cause subscribers to have to wait at least one extra day over the weekend for their films to arrive.

In addition, the USPS is looking at raising rates yet again, which it has already done four times in the last five years. Netflix, which anticipates spending about $600 million on postage this year, needs to earn about $2 per rented DVD to maintain its profit margin. The company is already spending about $.78 in postage per rented disc, and an additional rise in postage rates would further narrow this ratio, possibly to an uncomfortable level for the company.

As mail service gets more expensive and potentially slower, could Netflix’s growing streaming service make up the difference in the company’s bottom line? Unfortunately, less than a fifth of the company’s catalog is available for streaming, and licensing fees can be steep.
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Despite encouraging streaming growth, Netflix plans to maintain its by-mail presence for the foreseeable future.

Do you see a gloomy future for Netflix, Insiders, or will the company be agile and adaptable enough to overcome slower and costlier mail service?
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Will streaming be Netflix’s saving grace, or is it destined to remain a sideshow in the company’s business model? Tell us what you think in the comments.

(via The Big Money)

25 Responses to “Potential Postal Service Changes Could Hurt Netflix”

  1. Visitor [Join Now]
    Loof Lirpa [visitor]

    Aren’t fewer deliveries *beneficial* to Netfilx traditional mail-order business?

    • Visitor [Join Now]
      Vernon Dent [visitor]


      Remember 70% of Netflix’s trade is *catalogue* not new releases!

      This is like “throttling”, now Netflix has an excuse to send fewer titles per membership period. This effect is the same as a 15-25% price increase, therefore *good* for Netflix’s bottom line.

      • Visitor [Join Now]
        rb [visitor]

        Not sure how this can be beneficial for Netflix…even if Netflix then has an ‘excuse’ to send fewer titles per member, many members will probably cancel their membership if they receive fewer titles but still expected to continue paying the same price for their plan/membership. Unless Netflix lowers their membership price or increases their # of dvds sent with each plan without an increase in cost to the members, I think members will complain/cancel their membership. That’s not beneficial for Netflix!

        • Visitor [Join Now]
          Al [visitor]

          I actually see it as a benefit for both netflix and redbox. True people might be slightly annoyed that they can’t get a movie on Saturday in their mail, but most people will be upset at the USPS not netflix. It’s out of netflix control. Also, Redbox could see a pick up in traffic on Saturdays as people go out to rent a movie.

    • Member [Join Now]
      Hassen Ben Sobar [hassen-ben-sobar-2]

      ha ha ha! I get it Loof Lirpa = April Fool!

  2. Visitor [Join Now]
    Adam [visitor]

    Not when people WANT more movies. Thats 4 or 5 more days LESS people lose in “turning” the movies. Plus it looks like they will have to raise prices again if the USPS raises rates as expected. How, again, did you get beneficial out of this??

  3. Visitor [Join Now]
    Moviesrgood [visitor]

    is what it is
    so, the dvdkrog code is kroger specific right?

  4. Visitor [Join Now]
    slidecage [visitor]

    Ummm how is this helping netflix… There is NO Mail delivery saturday but the post offices WILL BE OPEN… meaning right now im doing

    Monday Netflix ships
    Tuesday I get them
    Weds I ship them back
    Thursday Netflix ships
    Friday i get them
    Saturday I ship them back

    If there was no DELIVERY On saturday the only thing that will change is I would have to drive to the post office to drop them off…. Redbox would still get them monday so NO changes i see

    • Visitor [Join Now]
      RK [visitor]

      So true!!

      I’m on exactly the same schedule. It’s the only way to get a new release every week. If I miss the Monday shipment, the movie goes into a 3 month “long wait” queue. That why I hate the holiday week. It get me out of sync and I have to hold a move for a couple of days to get it back in the right schedule.

      A lot of folks have missed the point that they are only trying to cut out delivery. I hate the thought of driving the disk to the post office, but I drive enough for redbox rentals, so I guess it’s the price I have to pay to get Blu-ray rentals. Hate to see postage go up some more and I would rather they keep the post offices open on Saturdays if they can.

    • Visitor [Join Now]
      Tee [visitor]

      Funny, you just specifically spelled out how your paying for a month of service and 2/3 of it is spent in the mail – beneficial – how people see this as a good deal is way beyond me!!!!

    • Visitor [Join Now]
      magnet1 [visitor]

      It would make a difference to me. I get 9 movies a week because of the rotation I am on.
      Monday Netflix sends me 3.
      Tuesday I receive and return them. PO Box delivery early and then late pickup.
      Wednesday they ship 3 more.
      Thursday received and return.
      Friday they ship 3 more.
      Saturday I receive and return them.
      Would no longer receive Saturday until Monday (So cutting 3 movies a week from me), also screwing up new movies shipping to me on Mondays.

  5. Member [Join Now]
    jakoblin [jakoblin]

    This is april fool right ?? saturday no mail right ?????

    • Member [Join Now]

      This is not an April Fool. The USPS has been talking about reducing deliveries for a while now. Google it.

    • Member [Join Now]

      You’ve been really out of the loop haven’t you, the post office has been hitting the news headlines a lot lately saying if they don’t make any changes in the way they do business they are projecting a 238 billion dollar loss over the next 10 years.

  6. Visitor [Join Now]
    neighbor [visitor]

    Readers of this blog do not fit the profile of the typical Netflix customer. Most of my friends are in the category of letting discs sit around for a while before getting in the mood to watch it. In some cases, a movie may sit there for weeks before it’s watched, or even mailed back to Netflix unwatched. Saturday delivery wouldn’t matter much to these people.hardcore customers like the guy who poasted above (and me) who try to watch 2 cycles of DVDs per week through Netflix might switch to Blockbuster since the in-store option will be much more advantageous.

    • Visitor [Join Now]
      RK [visitor]

      There is only a couple of people I work with who have said that they maximize their Netflix membership (but nobody like I do). I’ve asked a lot of people I know how many movies they get a month from Netflix and they usually say about 8-10. And I ask them which plan they are on and most say 3. The ones with kids say they keep their movies forever. The ones with no kids or kids that are grown and gone seem to watch them more quickly. Wonder why???????? :-)

  7. Member [Join Now]

    netflix could build containers that house 4 dvds and you always send 4 at a time
    thus reducing the overall cost.
    big users of netflix do 3 movies at a time and send them all at once!
    there are many ways to cut costs!

    • Administrator
      Michael [administrator]

      That is a pretty cool idea and an interesting way to save costs. I am guessing they have thought of that, and it likely becomes logistically difficult because of barcodes, tracking and such. But, nice thinking!

  8. Member [Join Now]

    On a random Netflix related note, I hate the Netflix envelopes. I actually like the Blockbuster Online ones better. I mainly hate them because of the extra room on the side of the envelope where the dvd is not stored. I hope they change their envelopes soon!

  9. Visitor [Join Now]
    Dede [visitor]

    I wish they would just go to an all movies available online subscription service. I would rather d/l the movies to my blue ray player and watch them than mess with mailing dvds back.

  10. Visitor [Join Now]
    Jennifer [visitor]

    If I’m not mistaken, the no Sat delivery wouldn’t take place until 2011, plenty of time for NetFlix/Blockbuster to figure this out.

  11. Visitor [Join Now]
    David [visitor]

    Well if Netflix goes completely to streaming I’m going to have to stop using them. I don’t have internet access at my house, so streaming only is not an option for me.