Controversial Postal Increase Starts Today

CNN has the story behind the controversial postal increase, Size matters, so does shape under new postal rates.

The Direct Marketing Association in New York is "very, very unhappy," said spokeswoman Stephanie Hendricks. "The rates go into effect on Monday under protest."

She complained that businesses also have to deal with a new pricing category called "not flat-machinable."

That pertains to mailings that are not flat and more rigid because they might contain things like cardboard. As such, they don't go through processing machines as easily as letters -- they have "parcel-like characteristics," Partenheimer said.

Rick Aristotle Munarriz on Fool.com: "Not all companies have the luxury of promoting paperless solutions. Netflix (Nasdaq: NFLX) and Blockbuster (Nasdaq: BBI) are bankrolling the postage on roundtrip DVD rental deliveries. This isn't a matter of a single monthly mailing. The average Netflix customer, on its most popular plan that allows for unlimited rentals with three flicks out at any given time, goes through 5-6 films a month. Today's rate hike will make the typical Netflix subscriber $0.20 to $0.24 more expensive to service."

Netflix CFO Barry McCarthy noted on the Q1 Earnings call that they hope to be able to offset the postal increase through shipping center automation, but it could impact gross margin in Q2.

Thanks to Carl for sending this in.

Comments

[kcholt68]

>The average Netflix customer, on its most popular plan that allows for unlimited rentals with three flicks out at any given time, goes through 5-6 films a month<

That's average? 5-6 a month seems awful low.

[Old Timer Too]

Yeah, I really have to wonder about that figure. If the 5-6 films a month on a 3-out plan is average, then NF has no reason to throttle anyone.

[Edward R Murrow]

Anything that makes the Direct Marketing Association very unhappy is cause for celebration for the rest of us.

I think that the Postal Service should be allowed to run as a for profit organization so I'm thinking that a bump from $.41 to $.50 should happen Jan 1, 2008. Just my opinion, I could be wrong.

[McDahling]

Why do they keep raising it? I can definitely see a raise to $.50 soon.

[JebNY]

We usually watch 2 movies over the weekend so I am almost always sending two movies back on Monday. The third DVD goes in somewhat randomly since it is usually a TV series disk that we watch over a few days to a week.

Was wondering, I can send 2 DVDs back in one envelope or two, which would be cheaper for NetFlix, does it screws up there work flow more than it save them in postage.

Jeb

[gir]

It's been debated, but I believe the general consensus is that NetFlix pays round-trip postage when they initially mail the DVD. You can put two disks in one envelope but it won't save NetFlix any money.

As for postage rate increases, I expect the ongoing hike in fuel prices has something to do with it.

[aussieguy]

Yes I would say skyrocketing gas prices and health care costs are the main culprits for increased postage costs. No doubt Netflix and Blockbuster will have to pass this increase on to customers sooner or later.....I believe it is called inflation.

[hawk5391]

You can still send something anywhere in the U.S. (even Hawaii and Alaska!) for pocket change, and it gets there safely better than 99% of the time and it arrives in a reasonable period of time. The postal service amazes me as an example of a government agency that is actually productive. Can you imagine if we put the DMV in charge of sending things across the country? Or worse, the Nazi-esque TSA?

[Scribe1964]

>The average Netflix customer, on its most popular plan that allows for unlimited rentals with three flicks out at any given time, goes through 5-6 films a month<

There are plenty of people who get their movies and let them sit around. There's someone on my friends list who has probably received less than ten DVDs in the last year (and she's on the 3 out plan!). She had "The Ring" at home for more than a year.

[Finngall]

>Why do they keep raising it?

It's the law. They're required to review their costs and their rate structure every couple of years and adjust rates accordingly. They're required to stay close to a break-even point, and every contributing factor is considered, so while the rate for a standard first-class letter (and most other things) went up, some rates stay the same, and and a few even decrease.

[BoB]

"not flat-machinable."

That should prevent people from paying 1st class rate to mail things like...

- a rubber chicken
- a pineapple
- a softball
- a coconut (just last week!)
(all that I've seen thru my station with an address written directly on the item)

These items are not machinable and need to be hand sorted and carried thru the entire process. They deserve to be charged a higher rate than the standard 1st class postage.

[Scribe1964]

<<<(all that I've seen thru my station with an address written directly on the item)>>>

Are you saying that someone actually wrote an address on a coconut and mailed it?????

[BoB]

"Are you saying that someone actually wrote an address on a coconut and mailed it?????"

Yes! All those items listed, I have personally seen. They had the address written, usually with a sharpie, directly on the item but the coconut was painted to look like a face and had the address written in paint on the "back" of its head.

Until this change, they were treated as first class mail and charged a standard fee - even though they had to be treated more like a parcel than a first class letter.

[jimofoz]

re: mailing coconuts.
Check out Wired magazine. They have a monthly contest for who can send them the strangest crap in the mail. I'm amazed at some of the stuff that makes it through.

[type-cast]

"Check out Wired magazine. They have a monthly contest for who can send them the strangest crap in the mail. I'm amazed at some of the stuff that makes it through."

Do you have a link for that? What's the name of the contest? I used to subscribe to Wired and I don't remember them doing this.