USPS Cuts Delivery On Saturdays: Netflix Could Benefit
With the announcement the United States Postal Service (USPS) will be shifting mail delivery from six days a week to five days a week, eliminating Saturday service, some businesses may be affected. The strategy of cutting back a day is intended to save the US Postal Service billions annually. The initiative is scheduled to cease Saturday mail distribution in August. But how will this change affect other businesses still dependent on mail for some of their services like Netflix?
Netflix stock hit a 16-month high in reaction to the news, according to the Associated Press. Netflix, a provider of media entertainment, still offers an antiquated DVD-by-mail subscription service. The postal change could collaterally result in subscribers watching fewer DVDs for the same monthly fee.
The red tell-tale envelope clad discs, normally delivered on Saturday, would instead be on the following Monday. This would cause a slight delay in the watch, return, and receive a new one cycle. Subscribers wanting a new movie for the weekend would have to mail back discs a day or two sooner in order to get another one by Friday.
The company anticipates customers will be dissatisfied with the changes, specifically from those trying to view the most DVDs per month. However, this particular audience is no longer as profitable to the company as it once was.
In 2011, DVD-by-mail subscribers peaked to 24.6 million, making Netflix one of the US Postal Service’s largest customers, spending an annual $600 million for round trip disc delivery. With the increasing popularity of streaming video, allowing for instant availability of movies and popular television shows, DVD customers dropped to nearly a third (8.2 million) as of 2013. This was in part to the company’s unbundling of the DVD and streaming services, making customers pay a subscription for each.
It is estimated Netflix will only spend $200 to $300 million with the USPS on delivery expenses in the next year.
It is likely customers will abandon DVD-by-mail entirely. The company does not foresee taking much of a hit in profits, mainly because Netflix’s licensing fees for internet video are higher than its DVD expenses.
Online retailer Amazon.com said it was not worried about the announcement’s effect on its business either.
[Image via Wikicommons]