A little bit of Citigroup FUD via Boston.com:
Netflix Inc., the largest US mail-order movie-rental service, may suffer a cut in profit if the US Postal Service starts charging extra to manually sort the envelopes that carry its DVDs, a Citigroup Inc. analyst said.
An audit prepared by the Postal Service’s Inspector General last month recommended charging one unidentified company 17 cents per envelope for labor costs. Citigroup analyst Tony Wible, who said in a note to investors Tuesday that the company is Netflix, estimated the charge might reduce profit per subscriber to 35 cents from $1.05.
Mailers from Blockbuster Inc., the world’s largest video-rental chain, aren’t handled the same way, Wible said. He advises investors to buy Blockbuster shares. A Blockbuster spokesman didn’t respond to a phone message seeking comment.
Netflix saves the postal service $100 million annually because it pays the first-class postage rate both ways even though the company picks up returned mail at the post office, Netflix spokesman Steve Swasey said. Netflix ships about 1.6 million DVDs a day.
“It’s highly unlikely we would be assessed any surcharges, because we would change the mailer if required,” Swasey said.
I’ve been a Netflix subscriber for about five years. I can barely remember a time before I was a subscriber. In all of those years, and after thousands of DVDs mailed to and fro, I’ve not had a single one lost. Never. Ever. The article claims that the envelopes used by Netflix jam equipment, but yet I’ve not ever had one envelope come to me even slightly disheveled. If 100% of 2000+ mailings lead to no incidents, it’s apparent that any “problem” is statistically insignificant. Which means this whole story is utter FUD.
I did try Blockbuster for a while. While Netflix DVDs get to me in one day. It took DVDs from Blockbuster a minimum of 9 days to get to me. Sending them back was even worse. Four months after I quit the service I received an email notifying me that they had received a DVD I had mailed back well over four months prior. Four months to get a movie?! It certainly wasn’t the post office’s problem, as I send back movies to Netflix out of state every so often. And in those cases they’re received in 2 or 3 days.
I’ve been a satisfied Netflix customer for about three years now, and I’d rather pee on an electric fence than give my money to Blockbuster Video.
We have been Netflix customers almost 6 years and more than 850 discs rented and only a handfull rented 2x.
We have had a few discs not arrive, but get returned to Netflix, so probably a postal mistake (tearing off our address and leaving the return address.) We have had 2 get really lost Netflix never charged us, but just monitor us a little more. We have had 2 or 3 discs arrive broken. We get a very few scratched discs, always old ones. Never rent titles meant for children due to scratches! Netflix always sends a replacement.
I have only had two problems with Netflix.
1) Some times my DVDs don’t come in the correct order. This doesn’t happen very often.
2) I get a physically broken DVD in the mail from time to time. I blame that on the post office or mail carrier.
Other than those two things I am a happy customer.
Yeah its a good service, even when I lived in the Caribbean movies would arrive 2-3 days. Only 2 lost in 5 or 6 years.
Holy smokes! two out of three posts have gotten broken discs, I wonder if the postal service hires an elephant to step on them? it is not easy to break a disc. I have no experience with netflix but will say when I get items mailed to me I have had problems with theft when mailed from Texas, that may sound arbitrary, but there is something to it, once a year I get an empty box, look at the postmark; yep, Texas.
I work for the Post Office and this just smells fishy to me. Netflix addresses labels are read by our scanners better than (guessed by dealing with it) 90% of other mass-mailers. And I question how a Citigroup analyst got USPS audit information.
Blockbuster is one of the lousiest companies on the planet. They couldn’t pay me to deal with them,
#1 – I peed on an electric fence once, I would reconsider that statement. Even cows were laughing at me.
17 cents time two = 34 cents. $1.05 profit minus $0.34 = $0.71. So how did they come up with $0.35? Is Netflix also throwing out FUD?
Netflix has amazing service, prompt and I have never gotten a wrong DVD.
I’ve been a Netflix customer for about three or four years. I have had quite a few scratched discs. I bought a disc cleaner and that has helped in most circumstances although I have had one or two that I have had to return for a replacement. I have also had one lost on return which Netflix accepted and charged me nothing. Overall, I have been very pleased with Netflix and like SN cannot imagine what I’d do without it.
The fast service from NetFlix is due to the large number of local facilities they have.
I’ve been a Netflix user for several years and think it’s great. I also work for the Post Office. I don’t think we lose any money handling them.. And for the number that go through the mail, an almost insignificant amount get messed up. Coming from Netflix to you, they come by the trayfull. Lots of trays every night. Coming to you, they have to be sorted through automation just like any other letter. And thats quite a trip through the machines! But there isn’t any special handling. When you return them they do need to be culled as much as possible out of the mail stream before going through the canceling machines… The canceling machines were designed to cancel your bills and letters to grandma. But that culling operation before the cancelers is normal, no extra manning for Netflix. Extra time is needed though to tray the DVDs, but once they are trayed individual DVDs are never handled again by the USPS. There are lots of mailings that cause more trouble then Netflix, more damage to equipment and other mail. This whole thing sounds suspicious, just because they’re successful.
Listen, I am no Blockbuster apologist, but I have used their on-line/mailer service and it worked just fine. No 9 day turnaround at all. I hated their in-store rentals but their on-line had a couple advantages over Netflix that made me make a rational decision to use their service.
(1)Weekly coupons for FREE in store rentals of Movies & Games
(2)In store returns.
Right now though, I use neither service.
If you read the article carefully they are jamming up the system when they are being shipped back. The postal service said that when they are sent out there is a hard edge that prevents them from jamming, but that the hard edge is lost with the return envelope. But as any netflix subscriber will notice, no hard paper is removed when you tear off the address label. The hard edges that were there when it was mailed to you still exists when you send it back too, so I think the Postal Service may still not know exactly why they jam. Besides, like Netflix said, they would just change the design if necessary. A design change is much cheaper than a rate hike.
Having used both Netflix and Blockbuster I too would say this story is a bit fishy.
Netflix is faster but if you go above their threshold you won’t be first to get the just released ‘blockbuster’ DVD’s. I have had one cracked disc and one correct sleeve with the wrong disc. I have also had several discs that never made it but ended up back at Netflix eventually. One was in limbo for 3 weeks. Netflix’s watch instantly online is great, I love it. The only problem is that the library is usually older stuff. IMHO it is better than the 2fer free deal of Blockbuster. And the post office can kiss that revenue goodbye 😉
Blockbuster usually takes a day or two longer and has less of a selection (IMHO). They have no problem sending out just released ‘blockbuster’ DVD’s, I guess they have more on hand. I don’t understand the go into the local Blockbuster to get 2 free movies BS. Why do I need to get a mailer if I can just pop into my local Blockbuster???
Both companies’ envelopes can get damaged. I chalk this up to my local post office. They have screwed up my and several neighbor’s mail and there is just no excuse. Everything is clearly marked. It makes me wonder what mail of mine has been orphaned.
FOR ALL THE SPAM/CRAP that arrives in my Mail…
If the USPS raised the price of BULK mail $0.05 for ALL of it…They would be making a fortune.
But, every time I turn around they are raising the price of Personal mail, $0.41 is getting abit expensive.
This story stank from the moment it appeared. As Ron Larson pointed out, the numbers don’t add up. The person who claims Netflix is the company that is at fault is not a Post Office spokesman. And Netflix can change the design any time it needs to, thus avoiding a surcharge.
Somebody out there is trying to push down Netflix’ stock price.
I’ve worked as a casual (temporary employee) for the post office in a processing center. I worked in the culling area. You drop mail in the box, a carrier comes picks it up and brings it to your local post office. The local post office dumps the mail together (containing packages, letters, among other things…). The mail is then sent over to the nearest processing facility. The culling area then recessives the mail in hamper carts. The mail is then dumped into a machine called a culling machine (really not creative…) This machine separates letters, packages, oversized letters, etc. Unfortunately the netflix envelopes tend to be picked out taking legitimate mail with it which must be removed by hand. On top of that if one finds its way through a canceling machine, who’s feed of mail must be constantly monitored for netflix envelopes, it will likely jam it. Its particularly vulnerable to jamming in the spot the mail comes out as the flappy part will be exposed to hitting a wall at around 30 mph (or something really fast). The machine often has to be shut down so the operator can remove the offending mail. This happens with regular mail as well, but not nearly at the rate. It would seem like the netflix envelopes cause a jam around 50% of the time, I’m probably wrong, but even if it was as little as 10%, thats a huge problem. Block Buster mailings do not have this problem.
Short story, the envelopes do cause problems jaming a variety of machines in the processing plant new mail recieving area costing many man hours a day for that area.
As to the reports that they don’t cause problems, that is likely mail going to the customer, me having dealt exclusively with the mail going back to netflix. If you notice on a netflix package when netflix ships the mail to the post office the address is on the other side of the envelope. When the dvd moves through the sorting machine then, the dvd is the side is the one that hits the wall at the end of the sorting journey and not letting the flap bunch up the mail, and for some reason not letting the machine choke on it as often as there isn’t a loose flap can fallow the dvd being a little stiffer and handling the machine much better. The odd part is that this has been a known problem for over three years. The culling area pulls out every single dvd envelope from the mail and seperates them allowing the report of netflix not causing problems to be possible.
You now know how boring it is to have worked at the post office.
There is berry, berry good reason to suspect that either Mr. Citigroup Analyst or one or more of his clients / accounts have substantial interest in Blockbuster. There’s no doubt in any of my 3 minds that they’re behind this; Netflix is kicking their ass, and they’re desperate. Somebody would do well to investigate Mr. Citigroup.
Back in the Enron days, we got cheery advice about such companies, from these very same analysts. Who we’d later learn, had a vested interest in lying about the numbers. Now we get them pooping on a perfectly good business, in favor of its competitor. Does anyone else smell a rat at Citigroup? And shouldn’t the SEC be checking into this (and doing its job for a change)? Some big speculators probably bought Blockbuster stock when it was low, and now they need it pumped up, before the year is out.
THAT WAS ONE OF THE SCARIEST VIDEOS I HAVE EVER SEEN!!!!!!!!!! AFTER I SAW IT, NOW ITS JUST FUNNY!!! BUT BEFORE, I FELL OFF MY CHAIR!!!!!!!!
[She’s talking about the ghost car video. – ed.]
My parent’s have had Netflix for 5 years and I have had them for 2. I have had 3 movies show up cracked and several scratched. Only 2 disc’s were scratched so bad I had to get replacement’s for them. The first 2 disc’s of the old Firefly series.
I live in the silicon valley so my movies show up in 1 day. I have had 2 that took 4 days to get to me and 2 that took 4 days to return to Netflix. Not bad for 2 years I think. I have the unlimited, 3 movies at a time plan and I get 6 movies a week…..can’t beat that. I really like the Instant movie feature, I don’t mind that that most of the titles are older, but I don’t like that the horror and sci/fi sections are very small and are the worst of the worst, very few really good sci/fi or horror. Since sci/fi and horror are my favorites that ticks me off a bit. But, I have watched a whole lot of the documentry’s on Instant movie.
I hate Blockbuster and wouldn’t rent a movie from them if it came with free sex for life with Hiedi Klum.
Of course you don’t notice any problems with the discs you receive. If you would actually take 5 minutes to read the USPS report, you would quickly discover the problem at hand is not on the outgoing trip from Netflix to your home. Rather, it is after you convert the envelope and put it back in the mail to return to Netflix. The difference on the return trip is that the DVD is now on the “trailing edge” of the envelope, and there is a weak flap of paper which enters the machinery first, which has the potential to jam. When it’s coming from Netflix to your house, the DVD is on the “leading edge” of the envelope, and its rigid structure prevents the envelope from jamming.
I noticed many of you are confused as to why people are posting without reading the article.
That’s the norm here. Don’t let it distress you.
Personally, I have a number of friends that use NetFlix, but I personally do not. That may change as torrents are getting cracked down on.
I just got a crumpled Netflix envelope the other day. I think this proves that the envelopes can cause problems with the mail readers. Click my name to see the crumpled envelope. All I got was the top part.
http://tinyurl.com/2y8wfr
[Please use TinyUrl.com for overly long URLs. – ed.]
#24
Similar to having great results getting discs, I have only ever had one (out of 600-700) lost on return. So, again I question the degree of the “problem” being suggested by the PO. If the style of the envelope is really that much of an issue, I’m sure that Netflix can come up with an alternative that would make returns easy without having to be charged an additional fee by the PO.
Maybe we should have two postal tears, one were the common people can send there mail and one were the fat cat enterprises can send there malicious money making materials, so they can stop cluttering up the works. After all the US postal service is not a big truck, its a series of tubes.
After talking to a few family members about this that work at the post office it seems there are issues with the packaging. Both of them responded quite quickly when I mentioned the service. They both mention the fact that the packages don’t properly fit into the equipment and that they frequently have to put the packages back together while sorting. Take that as you will but I thought it was interesting. Also, when I mentioned that a cost was going to be added and thought it was 16 cents, they both said probably 17 cents as that is a standard non-machinable mail fee. Which turns out to have corrected my error. Take it as you will.