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Here is the link to the video of the news coverage of that story.



You know, these are the benefits and burdens of having a business model that rests on an inefficient government monopoly (the USPS). In effect, taxpayers are subsidizing the Netflix business model because the current US Postal System is, like any public government monopoly, so poorly organized that it simply isn't profitable. The down side is that, eventually, it's going to bite Netflix and its users in the butt - either through the termination of Saturday delivery or an inevitable rate increase.


"In effect, taxpayers are subsidizing the Netflix business model because the current US Postal System is..."

Could you elaborate for us? According to the USPS website, they receive no tax dollars for their operations.



The USPS may indeed be inefficient (and hey, they lost one of my discs this week, what timing) but they certainly are far and away better than the mail services in other countries. I'm in a hobby that has a lot of members in other countries, and the horror stories they have about their mail services would make your hair stand on end to think about using that for Netflix. There are certain European countries that are somewhat blacklisted by private sellers in the hobby. Spain and Italy are two that come to mind. Actually, I'm glad this came up today, since I was already irritated at USPS for losing that disc.



That is what the post office says... it's just not true.

The USPS operates by primarily through appropriations, just like any other government agency. Now, because it's a non-profit, and the office is forced to fork over profits to the government (known as "revenue foregone"), USPS boosters argue that because the USPS has been taking back less in appropriations than it has foregone, it's not taxpayer subsidized. This was actually true for a period, but is not the case anymore, and has not been for several years.

According to the Post Office's own annual financial report, it's been running significant financial deficits for several years: http://www.usps.com/financials/_pdf/annual_report_2009.pdf

$5.1B in 2007, $2.8B in 2008, and $3.8B in 2009. Note the asterisk in Operating Expenses for 2009; they should have been on the hook for another $4B in 2009, but they petitioned Congress to lower their retirement contributions for the year. Unfortunately, they're just borrowing against the future, because their responsibility for those future costs has not gone down. As you can see, the USPS is over $10B in debt, and it's operating on appropriated money that it hasn't earned int he prior year - hence, it is effectively taxpayer subsidized. To make things worse, there is no real plan for profitability, and cutting Saturday delivery will, at best, merely reduce their loss for 2010.


In effect, taxpayers are subsidizing the trucking business model because the current US transportation System is...

In effect, taxpayers are subsidizing the lawyer business model because the current US court system is...

See? You can make anything into a subsidy. There are a few things that the US does right and one of them is the USPS.


Well, Mike, it so happens that I _do_ regard government subsidization of the transportation infrastructure to be a huge subsidy to shipping; and the Court system as a huge subsidy to the legal profession -- but in this case, that's neither here nor there. Those are, in any case, indirect subsidies. The subsidization of the USPS is DIRECT, in that the post office is the direct recipient of government appropriations that they have not, and are not, able to pay back into the system as revenue foregone.

I'm not telling you to hate the USPS as a result. I happen to think that the USPS does a surprisingly good job of doing what they do, despite the fact that their status as a government monopoly inevitably makes them terribly inefficient in a couple of different ways (and all things considered, I would rather the postal monopoly not exist). Some people argue that the USPS shouldn't have to turn a profit because it serves a broader social function, and we should expect to subsidize those benefits with taxpayer funds.

My point was simply to acknowledge that, well, this is what happens when you hedge your business model on an inefficient government monopoly. Netflix is currently experiencing a benefit from the USPS' ability to operate at a multi-billion dollar deficit four or five years running, but the caveat is that it finds its business model subject to the outcome of a political process between the Post Office and the government. It's a double-edged sword, and that's all I was trying to convey.




Calm down, BP. I just got an email from Netflix informing me that Paul Blart: Mall Cop was on its way to your house. No need to throw a tantrum!

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