Post Office gives Netflix negative review
Packages of DVDs await shipment at the Netflix.com headquarters in San Jose, Calif.
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KAI RYSSDAL: If you're looking for something less taxing than housing policy a subscription to the online video rental service Netflix will cost you around 17 bucks a month. But the Postal Service says getting those DVDs to you is costing them an extra 21 million dollars a year. Marketplace's Lisa Napoli explains.
LISA NAPOLI: Netflix has built its mail-order rental business by picking up the cost of postage, both ways. The company gets a discounted rate from the postal service, on the premise that the millions of DVDs it sends can be handled by machines.
Gene del Polito of the Association of Postal Commerce says the postal service's inspector general report found a kink in that deal.
GENE DEL POLITO: The problem is, while the envelopes automated fine on the way out, they didn't on the way back.
The clean crisp edges of the Netflix mailers get frayed on return. The postal report says 70 percent of those return envelopes get stuck:
DEL POLITO: Consequently the postal service was manually processing a tremendous amount of the mail but still allowing them to get credit as if it were automatible.
If Netflix had to pay the 17 cents extra for manual processing on the 416 million DVDs it sends each year, it would cost the company an extra 70 million bucks annually.
Bulk mailer Todd Butler blames the extra labor costs caused by Netflix for the recent rise in postal rates:
TODD BUTLER: Every user of first-class mail is subsidizing the rental industry.
For its part, Netflix says it's saving the postal service money by picking up returned DVDs directly from the post office. All this could be moot in a couple of years anyway. DVD rental houses are quickly moving their business online, so you can download movies without even bothering with snail mail.
In Los Angeles, I'm Lisa Napoli for Marketplace.