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Comments

WendyD

Not being a Blockbuster user, how do the envelopes differ? DVDs are the same size regardless.

usermonster

If I recall correctly, the DVD in the Netflix envelope is in the left side of the envelope, leaving the other end floppy, while in Blockbuster envelopes, the DVD is more (though not entirely) centered.

Robert_Dupee

Question is, can this be remedied without raising subscription fees? Hope so.

TPOLMike

If Blockbuster can get past this unaffected, I'm sure Netflix would simply redesign the envelopes to get around the fee. Maybe Netflix should starting shipping the DVDs FedEx?

Old Timer Too

Auditors are auditors and often do not take into account "special arrangements" made by various companies with respect to their mail. This is especially true of NF and I doubt seriously that the auditor fully understood the way the NF mail is handled. After all, did they actually visit a number of post offices to find out if their information is correct?

As to the size and shape of the envelope - it is laughable that NF sued BB over the concept of the return envelope (I don't think that has ever been resolved - maybe someone knows). Now it appears that the BB envelope is actually the better design for USPS purposes .

davidgrenier

If they can just redesign the envelope, then that works. But honestly, if they raised their prices a little, I wouldn't mind. I'm still getting a damn good value out of them. Some months - if we're watching a lot of TV on DVD - I'm getting close to 20 discs from them for whatever they charge for 4-at-a-time these days (around $20?). If I were renting from a store I'd either not rent nearly as much or pay way more just on the rental fees, never mind the late fees.

Even the months that I only watch 6-8 discs on 3-at-a-time, it's still cheaper than the store (and what I'd pay in late fees).

If my subscription went up $1-2 a month to cover the extra postage, I wouldn't really care.

Heck, even if they went to some lower priced monthly fee plus a small charge for every item shipped, I probably wouldn't mind.

rjm

This is a NON-EVENT.

NF will redesign the envelope if needed and comply.

Their postage will NOT be raised.

Dont trust the auditors numbers. Those guys are paid to find a result. If they were paid to find a different result, they could make the case the the USPS should LOWER netflix's rates.

Still, I wonder how & why it got to this !

Why didnt NF address it sooner ? Wouldnt automation help them ?

I think they do enough volume to where it doesnt matter one way or the other. But, if you want to pay me $100k, I will make a killer case either for or against NF !

jenelane

The envelopes are different. Block Busters Envelopes are really hard to tear....because of the paper they are made of...whereas netflix can be torn easily. Block Buster Envelopes are sealed completely and the Net Flix envelopes are not.All Net Flix has to do is create their envelopes like the Block Buster Envelopes. Simple....

jenelane

When they say return mail service...that has nothing to do with picking up mail at the post office..Return Mail Service means if you move then the post office forwards the mail to the new address or gives NetFlix or whoever requests it..the address for a fee.

superfunhappy

It's Blockbuster, not Block Buster
and Netflix not Net Flix.

Wait, I just read your second post. Nevermind, enjoy your hangover.

corey3rd

Netflix has a former Postmaster General on the payroll. Don't expect this to go any further. My mailman doesn't put the NF in with the regular mail. They just drop 'em in a hamper and NF picks them up.

jenelane

Thanks superrude I mean superfunhappy.....

peter

rjm said>>This is a NON-EVENT.<<

I agree!...This is just an excuse by the USPO to get more money so they can pay their pensions & salaries.

from the NY Times; "Far from being a drag on the post office, Netflix is a help, Mr. Swasey said. “We save them about $100 million a year,” he said. “We pick up the returns from the post office. They are not delivered to Netflix, even though we’re paying for it” by buying first-class postage for the DVDs.
“Even if there is some validity of the cost of hand sorting to the post office, it is more than made up for in the costs we’re saving the post office every year,” Mr. Swasey said."

Cheers

rk8801

Ok, since Netflix already picks the movies up from the post office, how about an end-run around the USPS? I envision red mail depositories next to every blue one.

It's like the reverse of newspaper stands.

Then NetFlix sends the collectors to the boxes around town each evening to collect the movies, rather than to the post office.

If there are, say, 100 red mailboxes in a city, with an average of 50 movies in each, NetFlix would save $2000 in postage (before the 17 cent surcharge). Pay 5 people $50 to collect them and your net savings is $1750 per hypothetical city per day.

Also- big red mailboxes with "NetFlix" on the side effectively provides the company with lots of little billboards.

To further enhance the experience, they should have a "returned today" button on the website that initiates their next selection being mailed out the same day, removing a day from the turnover rate. If a user isn't honest in their use of the button, it can be disabled from their account.

peter

Hey rk8801...that's a great idea!....probably too logical to implement.

I see an army of Senior Citizens making a few bucks picking up their areas' mailers & delivering them to the NF mailboxes.

Then we'll hear the overpaid (for the poor job they do) (yea, I know there are some good employees) Post Office start screaming about the competition & how they're LOSING money.

noe638

From the following article...
http://www.videobusiness.com/index.asp?layout=article&articleid=CA6510009
"The mailer is in compliance with the U.S.P.S. currently," he said. That is born out by the postal Inspector’s report, which confirms Netflix was told its envelopes are machinable. Because in practice they are not, the Inspector is recommending a change in the criteria for automated processing, which Netflix would then have to meet, or pay the additional postage.

Swasey is quoted as saying (in the NYT article)..."If the specifications of the post office were to change, we would change the mailer as necessary". Wibles comments sound like Chicken Little. I think he will say anything to bolster Blockbuster's stock price. His year end target in the beginning of '07 was $6.15 and here it sits at $3.13. I would be curious to know what information promted an upgrade from Citi from Hold to Buy? I hope it was more than this story!

Thank you Rick Munarriz...

http://www.fool.com/investing/general/2007/12/06/netflix-is-stuck-dude.aspx

"OK -- why not just say that from the beginning? Because the Citi analysts are bearish on Netflix -- and they have a buy recommendation on Blockbuster. They're using this flimsy non-news non-event as a platform for a pair of stock reiterations."

"Peddling fear is one thing. Peddling needless fear is something else entirely."

jenelane

The DVDs are getting damaged as well as the machines that they are run on. You would think that Netflix would want to save the cost of replacing the DVDs by making the envelope more compatible with the machines. Blockbuster doesn't seem to have a problem with creating an envelope that is......

Edward R Murrow

So let's go over the facts:
1) 70% of the Netflix return mailers aren't going through
2) An additional $21 million in processing labor of the Netflix mailers is being incurred by the postal department
3) Postmaster General allows Netflix to run steps #1 and #2 from above for years
4) Postmaster General William Henderson is hired by Netflix in 2006

Just a few questions:
o Can anyone but myself figure out how to connect the dots?
o When will Netflix get it's snot out of the public trough and pay it's own way?
o When can US taxpayers expect a refund from Netflix?

chi_tino

The "red box" idea is a terrible one. I joined Netflix because the closest Blockbuster is 4 miles away. Why would I drive a mile or two just to drop off my Netflix?

The whole value proposition is the time saved by dropping envelopes in YOUR MAILBOX. I don't have time to run errands every day.

Al

I agree that the "red box" idea is bad. People will tamper with them on purpose b/c they'll know that valuable DVDs are inside.

Sagodjur

Edward R Murrow,

Apparently you haven't been paying attention. The article is a scare tactic from a biased source. The USPS doesn't get funding from the public through tax payers. Netflix is only costing some tax payers money because some tax payers are Netflix customers. The original article upon which all of this is based is by a reporter at a newspaper owned by a would-be competitor of Netflix.

Do you think Netflix would allow the design of its envelopes to ruin its highly profitable business model? If they need to, they'll redesign the mailers. They didn't get to where they are by being complete idiots.

Jeff R.

The NY Times article is one of the most ridiculously biased articles I've ever read.

Netflix has ~6 Million mailers going through the mail system each day. What kind of fool would believe that they would accept a $0.17 rate hike per mailer without doing anything (On the order of $1.02 Million daily)? Why would you rate Netflix as a sell because of this? How does this make Blockbuster a buy?

That article is baffling. Long story short, as others have said, this is a non-event. USPS will either decide that they don't need to pay since they pick up their own mail, or Netflix will decide to redesign their envelope. In any case, it's a non-event.

machinegunn

Dedicated, Netflix only drop-boxes operated without the USPS is not even remotely feasible. The cost would be outrageous. Consider the decreased convenience for customers and the increased expense of collection from rural areas.

Edward R Murrow

"The USPS doesn't get funding from the public through tax payers"

Sagodjur, so you're saying that the USPS gets zero funding from the US Government? If the USPS does get funding from the US Government, where exactly does the US Government get it's money from?

"The article is a scare tactic from a biased source"

Are you saying that Tammy L. Whitcomb, Deputy Assistant Inspector General for Revenue and Systems is a biased source?

Perhaps I'm paying attention all too well.

cobalt_z

According to the laws which the USPS operates under, the U.S. Postal Service is a semi-independent federal agency, mandated to be revenue-neutral. That is, it is supposed to break even, not make a profit. It is not funded by taxpayer support

Sagodjur

Edward R Murrow,

According to a website of the National Association of Letter Carriers, "Today the USPS is funded entirely by revenues from postage."

http://www.nalc.org/postal/perform/selfsufficient.html#subsidize

Another source from the USPS website states that the USPS, "has generated its own revenues from the sales of stamps and related services without taxpayer subsidy for postal operations since 1982."

http://www.usps.com/communications/news/press/2003/pr03_033.pdf

Others have already commented on the bias of the Citigroup analyst(s), so I'll not beat that dead horse.

But maybe you should actually read the report itself:

"Management was not responsive to the findings and recommendations because, although they indicated agreement with the recommendations, they did not provide actions to address the recommendations nor did management provide action completion dates. Management has no initiatives in progress, completed, or planned to address the issues in this report. "

And later on where management's comments are listed, management specifically says that it won't take action to revise the requirements for the mailers because it would affect too great a number of customers. So its all smoke and mirrors from stock market hype-sellers.

I've seen variations on the article that state that the USPS is demanding Netflix change the mailers or face the surcharge, but this is just a report from basically a number cruncher who only makes proposals and doesn't actually make the decisions.

And yes, Tammy L. Whitcomb is a biased source, one that doesn't take into account the amount of money Netflix claims it saves the USPS, much less how much business the USPS would lose if Netflix were to cease to provide the USPS with its business.

Any questions?

"However, unlike other private businesses, the Postal Service is exempt from paying federal taxes. USPS can borrow money at discounted rates, and can condemn and acquire private property under governmental rights of eminent domain.

The USPS does get some taxpayer support. Around $96 million is budgeted annually by Congress for the "Postal Service Fund." These funds are used to compensate USPS for postage-free mailing for all legally blind persons and for mail-in election ballots sent from US citizens living overseas. A portion of the funds also pays USPS for providing address information to state and local child support enforcement agencies, and for keeping some rural posts offices in operation."
http://usgovinfo.about.com/blpostalservice.htm

It's tough being me and always being right.

CJ

Sounds like NF needs to fire whomever its Regulatory Affairs person is and get somebody competent. NF should have been on top of anything like this - possible problems with envelope size, USPS Auditors apparently unaware envelopes are dropped off/ picked up at Post Offices, etc. Things like this audit would never see the light of day if NF had their act together a little better in their Regulatory Affairs Dept. Microsoft learned that lesson the hard way years ago, where they had nobody watching out for their interests in Washington DC. Microsoft sure does now...

hawkeye

I do notice that my Netflix envelopes often come a bit wrinkled or torn. I was a Blockbuster enrollee for awhile and never seemed to have envelope problems. Maybe Netflix does need a redesign.
P.S. Netflix has an opening in the envelope that the inside DVD envelope UPC bar will fit in if you place the DVD just right. Does Netflix actually use that, they have never mentioned any need to place it in that way.

profpudwick

Hawkeye, I've wondered about that as well. If they simply toss the red envelopes in the Netflix bin, what's the point of the scanning?

On the other hand, my girlfriend, hardly Ms. Mechanical, put one in backwards, and got the resulting e-mail quereying her about when did she send it, from where did she send it, und so weiter.

Is it for the tiny post offices with no big bin for Netflix mailers?

profpudwick

query; queried; querying. I have maed a typo.

Jeff R.

@Hawkeye & profpudick

I'm pretty sure that barcode window is for Netflix's use for matching up a particular DVD with your account (when mailing them out in the first place). When you receive your movies, it's always lined up. I've noticed no difference at all when sending them back if I line it up or not.

profpudwick

Jeff R., so it doesn't matter if the return envelope has the inside envelope oriented so that the bar code is not readable? Can anyone scan that code and reveal what it says?

Jeff R.

profpudick,

Why would they need to scan it while it's in the envelope (on the way back)? They've got to take it out of the envelope anyways. For sending them back, it doesn't matter. There are also no instructions saying to line up the barcode, so that also leads me to believe that it doesn't matter.

I'm pretty sure the barcode is there (viewable) so that they can scan an outgoing envelope and then the appropriate address sticker is applied to it.

Bill

Our mailman has stopped picking up our return netflix envelopess. Anyone know anything about this?

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