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Tell them to stop giving preference to NFLX over BBO!

Gregory Conley

This article gives us a good idea of what Netflix pays to ship movies. Almost one third of Netflix's revenue(or adjusted to what Netflix believes will be there customer base at the end of the year) goes into shipping.

Uhmmm. I seriously doubt that 1/3rd of NFLX's total revenue goes into shipping costs, or maybe you have to explain it to me because I don't believe it.

Care to expand/clarify?

Morgan

Regarding the 1/3 shipping costs, it's a pretty simple formula to figure out, but I'm not sure of the source of Aron's $200M figure. Anyone care to enlighten me ?

Ann

$200MM seems like a reasonable number. If NFLX has 3MM subscribers, they rent 7 movies/mo, and each movie costs 74 cents in postage for sending and returning, that's $186MM/yr, which is pretty close.

It'd be nice to get a real answer on the postage question. I've seen people say that NetFlix is paying less than 5¢ per disc on postage, which I personally think is rediculous. The only thing I know for sure is that postage is no more than 55¢ (one way) because way back I got return envelopes with that amount stamped on them. I'm sure it's less now that NetFlix has arrangements with USPS, but not 5¢.

USPS does a phenomenal job, but when Netflix holds your DVDs for a few days, it's the USPS fault. USPS should stop giving them preferential treatment if they'll start blaming USPS for their messups.

I work for USPS, in maintenance. The clerks who sort all the mail-order DVDs (Netflix, Blockbuster, Wal Mart) don't treat any DVD different from any other. I have a Blockbuster account myself. I take my DVD's in and drop them off in the sorting area. So I see what goes on there.

Damocles

"when Netflix holds your DVDs for a few days, it's the USPS fault."

Spoken like a true shill. You completely contradicted yourself. How can it be the post office's fault if NFLX delays your shipments AFTER receiving DVDs? Plus, they lie about when they receive the DVDs to waste even MORE time. And they use these "nearest facility" envelopes, which don't work for a lot of people. They need to go back to printing the local facility address. The labels are a big source of delays for many people. My returns arrive in a day or two if I put them in a local return envelope; they take 4-5 days if I put them in a "nearest facility" envelope from another city. Yes, I know, they work for some people. But not all or even most.

Damocles

Can someone who works for the post office please tell us what it costs NFLX or BB to send a DVD each way? It gets boring hearing the unreliable stories of Netflix PR men, and shills. I can't believe it costs more than a dollar, round trip, because I got a mailer to return a DVD for a recall and it only had like 55 cents postage. Netflix is lying about what customers are profitable. Plus, they're making plenty of profit overall. They can honor the term "unlimited" and lose money on 1% of their members. They gain money or break even on about 99% of us. I'm sick of this throttling shit. Admit limits or stop lying, NFLX.

Actually, Damocles, I think you mis-read it. The statement made by the parent poster was meant sarcastically. He was citing that Netflix blames it on the USPS, which is the same thing you're saying. He just used sarcasm.

janet

recently I began to notice more people complaining about netflix delaying receiving returned movies for a couple more days, and that didn't happen before. Then I realized it's because they started to use those stupid "Nearest Netflix Shipping Facility" envelopes. I recently returned my movies, and one was posted returned FIVE DAYS LATER, although their shipping facility is right here in my city. Now I have to use their "Nearest Netflix Shipping Facility", and most of my movies are delayed being returned by at least a day or more.

I guess it leaves me with no choice but cancelling their account. I mean, I now only get two or three movies per week, where as before I used to get four or five on the three out plan.

So my question is, does anybody see a correlation between dumb "Nearest Netflix Shipping Facility" envelopes and their movies taking longer to being posted as returned?

When a Greencine envelope is mailed back it always has a 60¢ stamp which is first class.

The Greencine envelope is heavier so I'm guessing Netflix pays about 50-55¢ each way.

richard

Wait until Netflix finds a way to partner with TiVo or Microsoft media center to send the movies directly to a customers HD. USPS wont be so happy then.

Damocles

"Wait until Netflix finds a way to partner with TiVo or Microsoft media center to send the movies directly to a customers HD. USPS wont be so happy then."

Why would we need Netflix to provide such a service> Our cableco, satco, or ISP would deliver that type of service. What do you think, we're all going to switch to a Netflix VOD scheme? Yeah, right.

NFLX is a doomed business model, esp if they keep on throttling people, while reducing their prices and service to "compete" with companies that don't limit DVD throughput. I get 18-22 a month from BB Online w/o even trying. (Keeping each disc a day or two.) NFLX used to give 16, then 15, 14, 13, 12... How low can you go? These stupid "nearest facility" envelopes are a royal pain in the ass, always adding several days to my returns. I save local envelopes and stuff 2 or 3 in them... At least that gives me 1-day return (plus throttling).

Damocles

I think Netflix should start printing the postage cost on each envelope - incoming and outgoing. That might give us a better grasp of what we're costing them as heavy users. Also, they should let heavy users pay additional postage and fees to rent movies a la carte. It would still be 1/2 to 1/3 what video store get.

Razor

"I began to notice more people complaining about netflix delaying receiving returned movies for a couple more days, and that didn't happen before. Then I realized it's because they started to use those stupid Nearest Facility envelopes."

You're right. I would get 1 movie a week sometimes if I used the dumb envelopes. It took 4-6 for my returns to be received. It is not just another case of throttling. Although NFLX may not mind, it also reduces the service level for light users. The USPS ignores the label most of the time and sends it to the stated address. I wish they would go back to using the normal address for the nearest facility, instead of assuming the post office will get it right.

"Now I have to use their "Nearest Netflix Shipping Facility", and most of my movies are delayed being returned by at least a day or more."

Just save up envelopes that are addressed to your city, and return 2-3 DVDs in each envelope. Throw away all of the envelopes with another city on their address. They don't work much. You should also report this problem to NFLX.

"I guess it leaves me with no choice but cancelling their account. I mean, I now only get two or three movies per week, where as before I used to get four or five on the three out plan."

No need to quit. Just lodge a complaint and save up the envelopes addressed to your local facility. Don't ever use the ones addressed to another city, as they seem to take unusually long for some people. Another option would be to make new labels that totally cover the old labels and barcodes.

CaT

"I'm guessing Netflix pays about 50-55¢ each way."

There is no way that netflix pays more than 37c per shipment. I am a member of intelliflix and they get by with sticking regular postage stamps on each envelope. Their envelopes are the same size and weight as netflix. Prepaid envelopes probably ship for less than 37c.

Aron

I think they pay about .68$ - .70$ round-trip. They get marginal savings for bulk shipping. I use to know more precisely but I haven't looked it up in a good long time. Both the guidelines on the USPS site and the public financial info corroborate that basic range IIRC.

My 200M$ estimate above would prolly have been more accurate to say 180M$, though they will exceed 200M$ by the end of the year.

Ann

Just following on the above, here's what Netflix says about their postage costs in their annual report for 2004 (form 10-K):
"Postage and packaging expenses consist of the postage costs to mail titles to and from our paying subscribers and the packaging and label costs for the mailers. The rate for first-class postage was $0.34 prior to June 29, 2002 and increased to $0.37 thereafter. It is currently anticipated that the U.S. Postal Service will seek an increase in the rate of first class postage and that any such increase would likely be effective starting in 2006."
Elsewhere in the 10-K they mention saving some money on postage by increasing their use of pre-sorting. The USPS website says that the rate for a presorted first class piece is 35.2 cents, so a savings, but not a huge one. Unfortunately, Netflix doesn't separate out postage costs in their financials - postage is in the "Cost of Subscription" category, which includes all the costs for the DVDs as well.

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