US Postal Service Proposes 7% Rate Increase for DVD Mailers

Update: Netflix's Steve Swasey on the proposed rate increase: "Netflix believes a stronger, more viable Postal Service with predictable service and affordable rates is preferable to a weakened Postal Service.  To that end, we believe the multiple proposals put forward by the Postal Service in its “Action Plan for the Future” will help secure its viability for many years to come and help assure that our nation continues to enjoy reliable, trusted and affordable mail service.   Netflix believes the United States Postal Service should have the ability to adjust to changes in technology and consumer demand."

Facing a projected $7 billion shortfall in 2011, the troubled US Postal Service is looking at dramatic changes to save money, including changing to 5 day service and raising postage rates. The new proposed rates for DVD mailers would increase by 7%, and according to NewTeeVee's calculations, the increase could cost Netflix $50 million or more in increased postage costs (Netflix spends more than $600 million per year on postage). The price increase would not go into effect until next January, if approved by the Postal Regulatory Commission.

Netflix's Andy Rendich recently testified before the Senate about the challenges the US Postal Service faces, and Rendich noted, "As such, we believe that the impact of a change in delivery frequency on our subscribers and our business would be relatively small." 

Rendich on a rate increase: "We believe that additional rate increases necessary to cover the Postal Service's retiree health funding obligation will unnecessarily impact businesses and consumers that utilize the Postal Service. Companies like Netflix will either have to bear the impact of this increase or pass that cost along to customers. In eithe rcase, we believe that these additional costs will only further exacerbate the challenges faced by the Postal Service -- making their products more expensive and further negatively impacting mail volumes."

The US Postal Service estimated in 2007 that hand-sorting DVD mailers from Netflix and Blockbuster was costing the US Postal service tens of millions of dollars in labor costs, and that number could grow to more than $30 million or more by 2010.

Comments

[Mongo]

If the change isn't going into effect until "next January" (i.e. Jan 2012), 7% is probably too little.
Even though it is a quasi-government agency, the USPS are one of the few government organizations that works well and with which I am satisfied. If they need to raise rates, so be it.

[FearNo1]

Netflix should do everything possible to increase the number of content for streaming. Postage cost will only increase over time.

[Fohf]

Wait? so they can't build an automated sorting machine to handle DVD mailers for less than 30 million dollars?

[Anthony]

Did I not hear the Post Office complaining about how e-mail and instant messaging has decreased their business? Well, DVD mail from Netfix and Blockbuster has increased their business substantially. DVD renting via mail did not really exist until Netflix introduced a paradigm shift of how to rent movies. Netflix business model brought tons of lost business back to the Postal system. Now the Post Office wants to claim that processing the extra business it gets is costing them extra money and they need a increase of 7 percent? I don't think the Post Office really wants to stay in business. The increase will only encourage another delivery system to watch movies. Netflix will be forced to use more "Streaming" of movies which will again mean less business for the Post Office. I think the Post Office need to re-evaluate how it does business. Most businesses I know want as much business as they can get so they make more money from the many customers by the quantity of their sales and service. The Post Office wants more money whether their business increases or decreases. They need to do some pay cuts, downsizing, and layoffs at the Top exe levels like everyone else since business is down. We are in a recession and nobody has the extra money they use to have so we cut back our spending and so should they.

Maybe the Post Office has outlived its usefulness since it can't adapt to new technology. The world is changing and they need to change or become extinct like the dinosaur.

[the dude]

Once again, Netflix is defending the USPS...... The post office, like all other companies that fund health care and pensions can't function in today's business marketplace. Their first step should be to eliminate the pension and make their employees fund their own 401k, with a fiscally responsible match. Whatever happened to Gamefly's lawsuit over the handsorting of Netflix and Blockbuster?

[Tsmith]

I agree with FearNo1 ... improve the Streaming service with higher quality HD (1080p) content. I would gladly pay Netflix more per month if they could provide a first class streaming service.

[Shawn]

The USPS is another bloated government agency, in the private sector they layoff unneeded employees. When they raise postage rates it only drives more customers away which lowers income, it's a vicious cycle.
If Netflix only streamed movies imagine the amount of content they could buy with $600 million.

[Not Whipped]

Jan 2011, not Jan 2012

[Will]

I think it's pretty clear that the USPS is acting out of desperation and seems determined to make changes which, as others have said, will almost certainly result in further reduced business for them in the long run. I wish they'd have more of a long view of things.

As for Netflix, they've already created a future alternative for themselves with Watch Instantly. It's certainly looking like the days of DVD-rental-by-mail are numbered.

[FearNo1]

Even if postage rates go up by 2 cents, netflix should be fine. They key thing netflix has to do is increase the amount of HD streamable content. As streamable content increases, the demand for DVD shipments will substantially decrease. I changed my netflix subscription from 3 to 1 DVD at a time thanks to streaming. Netflix may also introduce a cheaper stream only plan.

[Edward R Murrow]

It's called a Use Tax same as toll roads and bridges and is the fairest tax of them all. People who complain about Use Taxes are your typical Communist sympathizers who want people who don't use the taxed item to help pay for whatever they're using. Heavy users of an item should pay more.

Use taxes are much better than progressive taxes and especially better than regressive taxes.

[BP]

The USPS has, historically, only raised rates to keep up with inflation. They have added services, removed services, re-added removed services, kept up with technology, fallen behind technology, created new technologies, out-done the competition, fallen drastically behind them, out-done them once again and they've made just about every mistake and innovated in just about every way a company can.

All while, historically, only raising the cost of postage to keep up with inflation. That's fucking marvelous.

The people - YOU people - who complain about the postal service raising rates are just as bad as the jackasses who complain that "movies were a nickel in my day!!!" and "you used to be able to buy a can of sodie pop for a quarter!!!" or "my car payments were only $37 a month in 1972!!!" and "we didn't elect black people president in my day!!!"

The more things change, the more they stay the same. Do you complain when you get a cost of living raise every year? No? Then shut the fuck up.

[Classaction]

Once again, the facts give lie to those who pretend the Post Office isn't subsidized by taxpayer dollars. The Post Office has been running a multi-billion dollar deficit for several years. By the end of this year they are going to be another $7 billion in the hole. That's $7 billion dollars in operating expenses that they can't make up with revenue. Yet in 2012, the Post Office is still going to be plugging along as the result of government appropriations that the Post Office simply can't make up for in revenue.

Time to end the postal monopoly.

[Shawn]

BP,
You either work for the USPS, are a troll or an idiot(or all of the above).

Inflation is stagnant right now because of the recession, the only reason the USPS needs more money is because they waste so much.

[Eddie]

I usually put two dvds in each envelope I send back. I wonder if that is more or less expensive for Netflix.

[Not Whipped]

BP, go away, you troll

[S]

@Eddie:

It's definitely cheaper. You're essentially costing NF half the normal cost to return two DVDs by using one pre-paid envelope instead of two.

[Crow550]

The Post Office should find a better way then to increase rates.

Be creative people. What are your ideas?

[Corey3rd]

you can sit here whining about the Post Office - or you can just mail a couple letters to relatives. When was the last time you sent grandma a photo of the kid instead of expecting her to download out of an email? If people would send a letter ever week, we wouldn't have this issue.

[BP]

@ Almost Everyone

So wait, because I point out the obvious, I'm a troll? No wonder all you guys do is sit here whining about Netflix - you live in a fucking vacuum! It's groupthink at its worst.

I don't get it. Nothing stays the same, yet you guys expect the Post Office to never raise its rates. You hold a hypocritical double standard to the post office - that it should neither receive government funding nor raise it rates - and yet, odds are, most of you are expendable wastes of company resources that expect yearly cost of living raises.

Whether you like to admit it or not, most of the world's governments and corporations are run by people much, much, much smarter than yourselves. Sure, it's easy for you numpties to whine about how evil Microsoft is, but odds are that you wouldn't be on the internet without them. Odds are there wouldn't be a Netflix. Lest we forget, the internet was created largely on the backs of government funded entities. Who did you send your complaints to then?

For the first time on this blog I fully agree with "Edward R Murrow". He knows what's goin' on. I sometimes wonder about you anti-pension people - your parents worked to make this country the best it possibly could and a part of that was GUARANTEEING that a hard-working person of any skillset could earn a fair working wage and, when they reach an age at which they are no longer of value to the working world, they receive a LIVING wage to supplement the retirement they saved for themselves. You know, sort of a "thank you" for a life's worth of effort.

What's so wrong with that? Did your parents not teach you to value anything in this world whatsoever? Not teach you to value anything but your wage, your retirement, your benefits?

Pensions aren't what's killing the USPS/most corporate entities. What's killing them is fucking idiots relying on cheap credit to get them through life: buying a house they can't possibly pay for, a tv on credit they can't afford and leasing a car they don't really own and have no equity in. Once the bubble bursts and growth ceases then all of these entities that previously relied on the markets to fund their pensions suddenly find themselves in need of a windfall... until the next bubble begins.

Instead of complaining about THINGS CHANGING FUCKING SHIT YO - like you people so often like to - maybe you should just accept the fact that nothing stays the same. Stamps of the future will be more expensive than stamps now. If that's required for the USPS to continue funding its pensions then so be it, those people deserve it.

Before you say they don't, before you criticize USPS employees for being lazy, before saying that Reed Hastings is a greedy sell-out or that Netflix doesn't care about its customers, why don't you stop and think of how you interact with your clients and co-workers. Just how well do you treat them? How hard do you work? Do you deserve 6% matching? Do you?

Before you step on a high horse you should remember that, odds are, you commit many of the same crimes as those that you are criticizing. That goes for me and it definitely goes for all of you.

[Not Whipped]

troll

[edword]

"We believe that additional rate increases necessary to cover the Postal Service's retiree health funding obligation will unnecessarily impact businesses and consumers that utilize the Postal Service. Companies like Netflix will either have to bear the impact of this increase or pass that cost along to customers."

How about passing the cost on to the employees with the golden health benefits.

[Edward R Murrow]

Damn it, somebody agrees with me? Where have I gone wrong? ;-)

Anyone attempting to tell the truth on this blog by critisising Netflix in any way is given the tar and feather treatment.

"I don't give them Hell. I just tell the truth about them and they think it's Hell." - Harry Truman

[TT Andrews]

7% postal increase = customer rate increase

5 day delivery service = less movies per week

Increased cost to consumers and less product. I will rethink my subscription if this happens.

[niceboobies]

BP, you make some excellent points in both your posts but mainly in the first 2/3rds...then you fall far away from mainstream and working-class America when you rail about 6% matching on 401ks (I've noticed many companies and huge corporations drop that match considerably or in my personal case, both previous and current companies I work for have dropped the match to the 401K completely b/c "we can't afford it" even though they are both multi-multi-million dollar profit machines) and especially this confused concept of yearly living wage increases...are you kidding? Yeah sure, for upper-middle class crust and up perhaps. You do so good until you bring up these two points that are clearly not true for the ever-shrinking "middle-class" who are really just falling into working-class status precisely b/c companies and corporations claim they can't afford to give us more than 25 cents an hour raise over a four year period. C'mon man, I know you're not a troll but you are out of touch somewhat.