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Netflix may face increased postage due to mailer design

Written by Rich Fiscus (Google+) @ 12 Dec 2007 0:08 User comments (25)

Netflix may face increased postage due to mailer design An audit performed by the Office of Inspector General, U.S. Postal Service (USPS) has concluded that there are problems with the envelopes used by online rental giant Netflix to deliver and return discs. The problem apparently occurs on the envelopes' return trip, after the consumer has ripped it open to remove the disc and then resealed it to return their movie. This leads to problems processing these envelopes by machine, and the need to hand sort 70% of these returns.
A Netflix spokesman said “The mailer is in compliance with the U.S.P.S. currently,” The report from the Inspector General's office confirms that following current Postal Service guidelines, Netflix had been told their envelopes could be processed by the machines, and recommends that those guidelines should be changed to reflect the problems the additional expenses incurred handling the envelopes.

The report recommends a $0.17 surcharge for each envelope unless the design is changed to make it more compatible with their sorting machines. This would reduce the company's operating income by 67%. Citibank analysts Tony Wible and Mark Mahaney downgraded Netflix’s stock Tuesday.

“Given the magnitude of this risk, we believe Netflix will work toward resolving this issue by redesigning its mailers. If the U.S.P.S. forges head with a rate increase, Netflix has more exposure to the change and is less able than Blockbuster to offset any increases with cost savings,” they said in an analyst note to clients. “A price hike would exacerbate the risks we see in Netflix’s business model as aggressive pricing, maturity concerns and higher costs prevail.”

Source: Video Business

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25 user comments

112.12.2007 0:42

love netflix so doesnt matter much to me figuring i get all my hd dvd's and blu ray movies through them so cant help but not trip off a increase of a 1$ if they charged more but i think they'd probably just redesign the envelopes..love them cuz Co*kbusters went blu ray only so its hard to rent hd dvd only movies.. but i dont get it seeing as alot of gaming mail sites/porn mail sites an other mail sites out have the same style envelopes yet netflix is the only one hit with some postal bullshiet? Sounds fishy to me but oh well Screw the mafia aka US government

212.12.2007 0:57

i just started netflix and i think they should change the envelopes. when i sent them back like 1/4 fo the thing is just paper that doesnt do anything they should just snip that piece off to same alittle paper and money at the same time

312.12.2007 1:48

Hmm, tough choice they have here. Get charged $0.17 extra postage per mailer or make the stupid things smaller.

412.12.2007 2:48

$0.17 per envelope? Yicks! That's be an increase of $5.44/month for my account alone.

Hand-sorters = creating more jobs! What's the beef?

512.12.2007 2:56

Originally posted by ShoeBark:
$0.17 per envelope? Yicks! That's be an increase of $5.44/month for my account alone.

Hand-sorters = creating more jobs! What's the beef?
For once it's actually not cheaper to ship the mail to china and have them sort it and mail it back to america.

612.12.2007 3:04

Netflix doesn't create more hand-sorting jobs. It delays other peoples bills and letters because of man power is deverted to treating Netflix mail as "special circumstance mail" Therefore, I thought 3 years ago that Netflix should pay more for the special treatment. If the returns aren't hand sorted then they are more likely to break and Netflix could take a bigger loss (the price of the dvd)than just paying the $0.17. Netflix should redesign the envelopes. Blockbuster envelopes wok just fine. So Netflix could do better envelope design.

712.12.2007 4:46

A few of you posters need to re-read the article. Neither Netflix nor the USPS is saying the envelopes need to be smaller. Also, the article stated that the discs were surviving the machine sorting that is successfully occurring on the 'outgoing' delivery.
Having worked at as a sorting clerk for the USPS, I believe the article correctly stated what is causing the problem: after the consumer has ripped open then resealed the primary mailer, there is too much damage and weakening of the envelope. All those tags of the sticker buttons that hold the flap shut, all the incomplete tears leaving jagged edges, and the slightly less rigidity of the envelope now missing one flap, causes the sorting machines to pass them through to the reject bin. If the optical sensors cannot read the barcode due to paper obstructions, bent flaps, tears, etc., they end up as hand sorts.
My guess is that Netflix will redesign the mailers out of a more durable paper with a cleaner tear seam.
As to other sites using similar envelopes not being mentioned in the complaint? Do the math; 70% rejects of 1,000,000 dvds from Netflix, or 70% rejects of 5,000 games / porns from any one other site? A sorting clerk might see 2 a day from the obscure sites, but 500+ from Netflix. You complain to the biggest source of the problem first, then wait for the economics to drive the small businesses to follow their lead.

812.12.2007 5:48

Sounds to me like a no brainer, redesign the envelopes.

912.12.2007 8:53

First off Netflix is compliant to the rules so is it their fault USPS is having problems because their expensive sorters aren't doing the job? I don't think so.

This is so typical of our post office and all government organizations blame and charge everyone else for their inadequacies instead of taking responsibility for their own actions and decisions.

USPS will come up with any reason these days to gouge us. I have had two different packages come back for lack of postage when the postage was determined and paid for at the post office by one of their own clerks. USPS has some serious problems that they generate and embrace, they are the ones that need to clean up their act.

1012.12.2007 9:20

Originally posted by bryguy12:
A few of you posters need to re-read the article.
That's not gonna happen here! lol

Originally posted by b18bek9:
love them cuz Co*kbusters went blu ray only so its hard to rent hd dvd only movies
You do know Blockbuster online still carries HD DVDs, right? And there are still plenty of brick and mortar Blockbusters that carry HD DVDs. Not all Blockbusters switched over to blu-ray.
This message has been edited since its posting. Latest edit was made on 12 Dec 2007 @ 9:21

1112.12.2007 9:40

they should fix the damned envelopes. its way cheaper than payin 17 cents.

if netflix has like 1 million customers. that 17 cents can hurt bad. its better to redesign the envelope. its a no brainer.

quit being cheap netflix u already dominate the mail rental industry

1212.12.2007 12:39

Screw USPS. I sent some mail out (going only across town) in a standard security envelope. It was 7 peices of 8.5 x 11 letter sized paper, folded into thirds to fit into the envelope. It came back with a stamp saying "17 cents needed" and it was overweight! WTF! No special plastic, etc. on the envelope and it was too heavy. USPS is greedy as hell, and I can see another increase in postage around the corner again.

1312.12.2007 18:47

they need better designed envelops prehaps a top load style...harder to screw up when you RE seal them.

1413.12.2007 10:35

There is nothing wrong with Netflix's envelopes not to say they couldn't use something else or improve them. This is about a very poorly run organization, USPS!, and they are on the brim of folding because they are sooo poor. Again how do you justify penalizing someone who is compliant, it is USPS that needs to make the proper changes. Netflix is COMPLIANT!!!!! Wake up please!

1513.12.2007 11:35

Originally posted by Mr-Movies:
There is nothing wrong with Netflix's envelopes not to say they couldn't use something else or improve them. This is about a very poorly run organization, USPS!, and they are on the brim of folding because they are sooo poor. Again how do you justify penalizing someone who is compliant, it is USPS that needs to make the proper changes. Netflix is COMPLIANT!!!!! Wake up please!
I would not say that they just need the labels to be read easier by their machines, change fonts maybe prehaps changing the design of the envelop alil, when you push milloins of envelops through the USPS you are goign to have to work with them on things.

1613.12.2007 12:11

Mr-Movies, I agree with you on the USPS. Their postage rates is outrageous. A private sector company could run it better and cheaper.

1713.12.2007 12:24

Originally posted by little155:
Mr-Movies, I agree with you on the USPS. Their postage rates is outrageous. A private sector company could run it better and cheaper.

I use them monthly or every other month, their rates for 5-7 days is quite good for most items, their express service is costly, they give out alot of packaging to and mail it free I would rather get my own and have a lower rate of 2-4$ less.


Again even if you are pushing it through UPS if the machines are having issues of 50% or more you will have to negotiate with them for a solution to the problem or be forced to pay more for shipping or not be able to use them for shipping.
This message has been edited since its posting. Latest edit was made on 13 Dec 2007 @ 12:26

Copyright infringement is nothing more than civil disobedience to a bad set of laws. Lets renegotiate them.

---
Check out my crappy creations
http://zippydsmlee.deviantart.com/

1813.12.2007 21:39

The Netflix envelopes is poorly design and the idiot in charge at the USPS that told them that it would run on the machine should get some brain. I work at the post office and I sort mails for the carrier to delivery. Every night I remove hundred of these Netflix envelopes from mails that I process. If you try to run these envelopes on machine that process around 40,000 pieces of mail an hour, you gonna get alot of Netflix send back to Salem or some of their other office. So to make sure that Netflix customer get their dvd, we have to run these separate from the rest of the other mails. Then the carrier need extra time to sort these Netflix into their mail route and so it take alot of time to get Netflix mail out compare to regular mail. Now you take the hundred that I remove and image how many cities there is in the US that have Netflix customer then do the math.
Also when these envelopes get jam and rip up then the mail behind it will also get jam up with these envelopes. If any of you ever got a pieces of mail tape up and send to you in a plastic bag then you will understand why Netflix need to redo their envelopes. Maybe they should use the same envelope as Blockbuster does because those go thur the machine ok.
I also agree that the USPS is wrong for telling them it was ok in the first place. But hey that what happen when u got these guys will a tie around their neck, not enough oxygen going to their brain.

1914.12.2007 3:08

After the envelope we get is opened and resealed it has a thin stickie strip on the other end.
This just started the last few months, their envelope machine needs realigned.

2014.12.2007 9:50

Quote:
Originally posted by little155:
Mr-Movies, I agree with you on the USPS. Their postage rates is outrageous. A private sector company could run it better and cheaper.

I use them monthly or every other month, their rates for 5-7 days is quite good for most items, their express service is costly, they give out alot of packaging to and mail it free I would rather get my own and have a lower rate of 2-4$ less.


Again even if you are pushing it through UPS if the machines are having issues of 50% or more you will have to negotiate with them for a solution to the problem or be forced to pay more for shipping or not be able to use them for shipping.
If the machines aren't working and the sender is compliant to their rules so who is at fault? You say the sender but I'm sorry it is the service that mandates the criteria for sending. It is this lack of common sense that is the reason we have so many problems these days.

USPS before buying theses expensive sorters laid out specifications for what these sorters need to handle so if they are not doing the job then either USPS is at fault or the manufacture of the sorters are at fault but if the MFG's screwed up why did USPS sign-off for the gear. So at the end of the day USPS is to blame regardless.

Because of this the post office should either fix the problem on their end or change the rules for shipping and work with Netflix to fix the problem, and they should keep the expense minimal to Netflix. Netflix has already wasted a fair chunk of change for their original envelope which is compliant to the rules they should not have to waste more money because the post office can't handle what they say they can. What's next Netflix's changes their envelopes and now they are a problem too because again USPS doesn't have their sh*t together, I don't think so. If you owned Netflix Zippy you would be crying foul and be outraged but since it doesn't directly affect you it is easy to have this off based opinion, sad but true.

As to their envelopes like I’ve stated they could be improved, not that they need to be though. I use Netflix and Gamerang right now but have used others in the past and nobody’s mailers are perfect mostly because companies want to keep the cost down with out severe damage to their product. Gamerang’s envelopes are worst then Netflix with exception to their inner sleeve which is Styrofoam instead of paper, much better insert. I just don’t have any problems with Netflix mailer and it certainly seems to be in the same form as all other mailers. Yes they could go to a bubble pack mailer or cardboard one but the bubble pack and the cardboard ones have the same type of sticky adhesive that they are using now.

2114.12.2007 10:02

Mr-Movies
not really, the envelopes are getting caught on the machines misaligning them and clogging them, its a simple error even ore simple than the error the USPS did when they allowed them through, the envelopes need to e changed, no big deal.

Think foti like this if they changed it the damage to DVDs will go down 20-40% and speed of sorting to get to where they are going will go up 30%.


its all win.

2223.12.2007 15:47

Quote:
Quote:
Originally posted by little155:
Mr-Movies, I agree with you on the USPS. Their postage rates is outrageous. A private sector company could run it better and cheaper.

I use them monthly or every other month, their rates for 5-7 days is quite good for most items, their express service is costly, they give out alot of packaging to and mail it free I would rather get my own and have a lower rate of 2-4$ less.


Again even if you are pushing it through UPS if the machines are having issues of 50% or more you will have to negotiate with them for a solution to the problem or be forced to pay more for shipping or not be able to use them for shipping.
If the machines aren't working and the sender is compliant to their rules so who is at fault? You say the sender but I'm sorry it is the service that mandates the criteria for sending. It is this lack of common sense that is the reason we have so many problems these days.

USPS before buying theses expensive sorters laid out specifications for what these sorters need to handle so if they are not doing the job then either USPS is at fault or the manufacture of the sorters are at fault but if the MFG's screwed up why did USPS sign-off for the gear. So at the end of the day USPS is to blame regardless.

Because of this the post office should either fix the problem on their end or change the rules for shipping and work with Netflix to fix the problem, and they should keep the expense minimal to Netflix. Netflix has already wasted a fair chunk of change for their original envelope which is compliant to the rules they should not have to waste more money because the post office can't handle what they say they can. What's next Netflix's changes their envelopes and now they are a problem too because again USPS doesn't have their sh*t together, I don't think so. If you owned Netflix Zippy you would be crying foul and be outraged but since it doesn't directly affect you it is easy to have this off based opinion, sad but true.

As to their envelopes like I’ve stated they could be improved, not that they need to be though. I use Netflix and Gamerang right now but have used others in the past and nobody’s mailers are perfect mostly because companies want to keep the cost down with out severe damage to their product. Gamerang’s envelopes are worst then Netflix with exception to their inner sleeve which is Styrofoam instead of paper, much better insert. I just don’t have any problems with Netflix mailer and it certainly seems to be in the same form as all other mailers. Yes they could go to a bubble pack mailer or cardboard one but the bubble pack and the cardboard ones have the same type of sticky adhesive that they are using now.
Help them out by simply cutting the sticky part off like we did. No big deal. You would think people would notice something like (Hu that is going to stick to something else in the mail).

Also noticed the last 3 DVD's had no sticky on the bottom. Also noticed we only got 3 DVD's last week :}

2323.12.2007 17:51

That sticky isn't that easy to tear off with out damaging the return envelope. Even when you do, there are still little bits there, they need to get rid of it. Or make it easier to remove.

2423.12.2007 21:03

Even the postman wants a piece of the action :)

2531.12.2007 7:25
sandygee
Inactive

Well I have been a Blockbuster Total Access member since its beginning and the fees have constantly been raised a buck or two here and there - now I just got hit with an email from them that the service I have is going up TEN DOLLARS - they are out of their minds! Netflix just got another customer when my Blockbuster membership runs out in two weeks!

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