The U.S. Postal Service (USPS) Inspector General’s office is not happy with the Netflix DVD rental envelopes. These red Netflix envelopes have to be sorted by hand, which is costing the USPS about $21 million a year. The Inspector General’s office has suggested that Netflix include a 17-cent postal surcharge on its mailers to help offset these costs.
Tony Wible, a Citigroup analyst who wrote a report on the issue, says that the surcharge would reduce Netflix’s income per subscriber from $1.05 to 35 cents. However, Wible also notes that Netflix is clever enough to create a redesigned mailer that would be machine-sortable, eliminating the need for the surcharge. In comparison, the return mailing envelopes of Blockbuster do not cause this issue. This could make a big competitive difference for the two companies.
“We know that Netxflix, which mails out about 1.6 million movies a day, is clever enough to create a redesigned mailer sometime soon.” ~ GearLive.com
Netflix mails out about 1.6 million movies a day, so even a small change in the cost of its mailers could have a significant impact on its revenue. It remains to be seen whether Netflix will redesign its mailers or pay the surcharge. However, it is clear that the USPS is not happy with the current situation, and Netflix will need to find a solution that works for both companies.
Frank Wilson is a retired teacher with over 30 years of combined experience in the education, small business technology, and real estate business. He now blogs as a hobby and spends most days tinkering with old computers. Wilson is passionate about tech, enjoys fishing, and loves drinking beer.