USPS Says DVD-by-Mail Costs Taxpayers Millions

The Washington Times reports that DVD-by-mail envelopes are costing the U.S. Postal Service millions of dollars each year because the unusual envelopes require manual processing.

Rentals of DVDs from companies such as Netflix cost U.S. taxpayers tens of millions of dollars each year because U.S. Postal Service sorting machines can't process millions of return envelopes, government inspectors say.

The government incurs more than $20 million per year in labor costs to hand-sort DVDs. And costs are expected to total as much as $30 million per year by 2009.

"Because these mail pieces are not machinable, the Postal Service pays significant additional labor costs to manually process them," auditors wrote in a recent report issued by Tammy L. Whitcomb, the deputy assistant inspector general for revenue and systems.

Netflix's business is so closely tied to the cost of mailing a DVD that even a small increase could wreck havoc on profits.

via Delusional Duck.

Comments

[noe638]

If you are incredibly interested, here is a link to the OIG report from earlier this month...

http://www.uspsoig.gov/FOIA_files/MS-AR-08-001.pdf

I am a little surprised by this because I thought the USPS required envelopes to be submitted for testing before they established whether they qualified for reduced autosort prices. Did the Netflix envelopes and others (gamefly, bb, simply audiobooks) meet the criteria or not?

[Spiky]

You would think that it would cost the USPS less than $20 million to have someone invent a machine that could handle DVDs.

This is why our government is so inefficent...

[sluggo]

Okay, can somebody tell me... why, exactly, is the government in the package-shipment business?

[Im Not A Turnip]

"Rentals of DVDs from companies such as Netflix cost U.S. taxpayers tens of millions of dollars each year..."

"Taxpayers" such as Netflix members perhaps?

[Complication]

The USPS does have machines that can handle DVDs, but they are still being tested and not in use. It would be quite a while before small postal centers got these machines anyway.

If we take a conservative estimate of over $600 million in postage per year being spent by Netflix and Blockbuster alone then the $20 million dollar deficit is probably within the margin of error for the estimated labor. The conservative estimate is based on 10 million customers (see previous article), average of 2 shipments a week, 32 cents average postage for presort to and from, and 52 weeks in a year. I think this is just being used as justification for the new machinery.

With the new postage rates, it they got bumped to the "flats" rate because of rigidity then postage would be about double what it is and every plan would have a hard cap on shipments.

[Hunter McDaniel]

Maybe I just don't understand how the USPS works, but - why do these mailers needs to go through a sorting machine in the first place?

Coming from Netflix the mailers are pre-sorted down to the carrier level, and just need to be routed in bundles; taking them out of those bundles only screws up the work Netflix did. On the way back, they should all go into one big pile the first time they hit a sorting facility. No reason to look at any individual return mailer, unless they want to ignore the "Nearest Netflix Facility" instruction.

Am I missing something?

[silverball]

I don't see the US post office complaining about the millions they make off DVD rental. First Class mail is only growing because of these Companies.

[type-cast]

"Taxpayers" such as Netflix members perhaps?

Most taxpayers aren't Netflix members. If it isn't profitable to handle DVD-by-Mail under the current price scheme, they need to alter the deal so customers pay their own way. I'd be skeptical of the source, though. Everyone should know the Washington Times is a rag as is the New York Post. What other sources are there for this story, besides tabloids?

[type-cast]

Also, Netflix's envelope is poorly designed, and it seems clear that is what they mean by referring to envelopes with a "floppy edge", that can jam the sorting machines. So, it is really a simple problem. Revise their rules, and tell Netflix the envelopes they use are not acceptable. Cut off the useless edges to make them a proper sice, like Blockbuster's. Netflix's envelopes are 1" wider than BBO's, and 5/8" taller. Why should that be allowed?

[Firstlawofnature]

"If it isn't profitable to handle DVD-by-Mail under the current price scheme, they need to alter the deal so customers pay their own way."

If the post office was supposed to profitably deliver mail it would be called fed ex.

[rjm]

I have a hard time believing they are losing money with all the additional revenue the DVD mailers do.

However, if anyone can do it, the government can.

[hall]

"You would think that it would cost the USPS less than $20 million to have someone invent a machine that could handle DVDs."

I'm sure they could build a machine for less than that. Problem is, you have to build hundreds if not thousands of said machines...

[CJ]

Completely bogus article. The USPS rates are not even remotely based on any kind of cost of service study (my career field last 35 years); they are all politically determined a subsidized by our taxes. To say that hand sorting costs so much per year is meaningless - the rates aren't designed to recover costs to serve type revenue anyway.

Plus the article never states how much of the $20 million total USPS claims handsorting costs is allocated to DVDs by Mail - is it $5 million. $10 million, who knows.

Sounds like a better use of my tax dollars than a lot of other current uses.

[Im Not A Turnip]

@Type-cast: "Most taxpayers aren't Netflix members."

That's absolutely true. But... a large percentage of MY taxes don't directly benefit me in any way whatsoever either. Should *MY* tax dollars really go toward subsidizing a highway project in a state I'll never even visit? Technically, no, but it probably all evens out in the end. So what if non-Netflix user pays 1/1000 of a cent per year to subsidize my Netflix postage. It's gotta be MY turn eventually!

[rtedn]

The USPS the only governmental entity I have any faith in...

http://www.usps.com/communications/newsroom/postalfacts.htm

Bullet #9:

[We] Do not receive tax dollars for operations. We are a self-supporting agency, using the revenue from the sale of postage and products to pay expenses.

[grainnefae]

What the USPS is really complaining about is having to provide jobs for new postal workers who would otherwise be flipping burgers for minimum wage. It seems to me they're doing a public service by hiring a few extra people to help sort the mail. They should be proud of that! Besides, who is paying the postage both ways? NETFLIX. I think Blockbuster also pays postage both ways too.

According to the last US Census, there are 209,128,094 people over the age of 18 in the US. So, if the USPS is incurring $20mil in extra costs each year, then that is only about 10 cents extra tax per person, per year. Unless my math is wrong.

In the Media section of the Netflix website it says: "If Netflix members drove to and from a rental store, they would consume 800,000 gallons of gasoline and release more than 2.2 million tons of carbon dioxide emissions annually."

So, is 10 cents too much to ask for a somewhat better environment? I don't think so. I'm all for any company, be it Netflix, Blockbuster, or any online company that can help make that kind of dent in our environmental craposphere.

[willbueche]

If the USPS feels overburdened, they could simply stop accepting junk mail. No one would mind.

[BoB]

[quote]

Maybe I just don't understand how the USPS works, but - why do these mailers needs to go through a sorting machine in the first place?

Coming from Netflix the mailers are pre-sorted down to the carrier level, and just need to be routed in bundles; taking them out of those bundles only screws up the work Netflix did. On the way back, they should all go into one big pile the first time they hit a sorting facility. No reason to look at any individual return mailer, unless they want to ignore the "Nearest Netflix Facility" instruction.

Am I missing something?
[/quote]

----------------------

The mail is sorted down to what is called DPS (Delivery Point Sequenced). What this means is that latter mail is sorted and laid out in trays according to how the carriers route is run. Mail for the first stop on the route, is first. Mail for the last stop, is at the end in the last tray.

Carries may have anywhere from 4 to 12 trays of mail depending on the route. They also carry a 2nd bundle (trays) for FLAT mail (magazines, newspapers, small bulky items, etc.) That means a carrier has to pull from 2 trays for every stop.

Some POs use a 3 bundle system and place flyers, circulars, sale papers in it.

The more mail that can be run thru the sorters (DPS) makes it easier and faster for the carrier to run his/her route. Larger or non-conforming items have to be hand sorted by the carriers every morning and mixed in with the flat mail (2nd bundle)

While NF may be carrier route sorted, if they are not run thru DPS, then they would have to be carried as a 3rd bundle or hand sorted into the flats every morning. If other shippers (Blockbuster, Comcast flyers, etc.) did the same, a carrier would have multiple bundles to pull from which would be impractical.

[Edward R Murrow]

Does this surprise anyone that corporations eat like sows at the public trough?

[Zan]

"According to the last US Census, there are 209,128,094 people over the age of 18 in the US. So, if the USPS is incurring $20mil in extra costs each year, then that is only about 10 cents extra tax per person, per year. Unless my math is wrong."

The only problem with your math is that no tax money goes to support the USPS. The USPS is entirely funded by postal fees and retail sales. Therefore, the $20mil in extra costs may result in a postage increase, but will result in $0.00 extra tax per person per year.

[Billy West]

Taxpayers DO NOT pay for postal service.
USPS raises funds from selling POSTAGE!
Your taxes do not pay for Netflix.