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.
