US Post Office Wants Netflix to Pay More for Shipping Services

The USPS wants to increase the rate that they currently charge Netflix by 17% – this will drastically decrease Netflix profitability. Netflix will obviously try to offset this postage hike by passing on the rate increase to it customers, but that could result in a loss of customers. At the time of this writing, Netflix stock is pretty much unchanged, but I bet in the days to come, you’ll see the stock price start to fall, and once the rate increase is actually put into effect, the stock price will undoubtedly fall even more.

At the time of this writing, Netflix (NFLX)stock had closed at 23.49… watch for it to fall below 20 as the news of the USPS rate hike spreads.

USPS says that the rate hike will go to generate approximately $61.5 million over the next 2 years and will help cover the increasing processing costs. After an audit, the USPS concluded that 70% of the mailers “sustain damage, jam equipment and cause mis-sorts during automated processing”.

I haven’t seen any news about the US Post Office increasing rates for Blockbuster DVD mailers… I wonder if now is a good time to invest in Blockbuster???

One thought on “US Post Office Wants Netflix to Pay More for Shipping Services”

  1. I would look at two things here:

    1. The increase in rates on the consumer in general.

    2. Increase in postage = increase in writeoffs.

    The postal service slaps us with about a 5% increase every two years, so this increase is not really that far out of line, although it might be called unjust by some.

    A 17% increase would come off our net revenue as a general consumer, this comes off of NetFlix’s gross. While it may hurt profits a little, it won’t kill them.

    An added bonus might be that the price gets high enough that DHL, UPS, or FedEx can throw their hat in the ring. Think about actual tracking for your DVD’s…a nice concept.

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