The U.S. Postal Service is tired of being used and abused by Netflix
Netflix is one of the most popular video rental services and it revolutionized the industry by expanding the mail rental business into a major market, by clever use of online services. It recently pleased customers by dropping its 3 DVD-at-a-time rental fee another dollar, to a low price of $15.99 a month. It also recently made up with long time rival Blockbuster.
However, Netflix has some serious competition for the online/mail-order rental market. Despite settling its difference with Blockbuster, the mostly-store based giant threatens Netflix by pushing its online offerings with a broad array of promotional offers. Further, Apple has been speculating on launching its own online rental service to rival Netflix.
Now Netflix has an unexpected new detractor: the U.S. Postal Service. The U.S. Postal Service's Inspector General feels Netflix has used and abused the system. The bone of contention is Netflix's use of oversized mailers. The use of these the Postal Service estimates cost a staggering $41.9M in additional labor over the last two years do to the "nonmachinable nature" of Netflix packages.
The Inspector General is fed up and is preparing to take action after mounting losses. Conservative estimates of the situation would account for $61.5M in additional losses over the next two years. The office issued an ultimatum to Netflix -- reshape their mailers or face a service charge of 17 cents a mailer.
While the small fine sounds insignificant, it is calculated that it would reduce Netflix's operating income by 67 percent.
Netflix agreed it will cooperate and redesign the mailer, but it is another bump in the road for the still wildly successful mail-order service.
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