Netflix envelopes anger Postmaster, Postal Service balks
The US Postmaster General issued a report to the Postal Service recommending it either change its First Class mailing standards to disallow Netflix mailers, or start charging the company a 17 cent handling fee per envelope.
Apparently the two-way Netflix mailers were brought up in audit because approximately 70 percent of them have to be processed by hand. Automatic processing was found to damage either the DVDs or the sorting equipment, and the design of the envelope was reported to cause obscured return addresses and missorts.
Because Netflix mail traffic is so high (shipping an average 1.6 million DVDs daily,) the Postal Service incurred an estimated additional labor cost of $41.9 million in the last 2 years, and a forecasted $61.5 million over the next two years if trends continue.
Data presented in the Inspector General's report was accumulated over a two year period, explaining in great detail how the envelopes' "floppy leading edge" is the main perpetrator in mechanical sorting failures.
It appears that the company has eluded service charges and rate increases thus far because of procedural loopholes.
In 2002, the Postal Service Marketing Preparations and Standards group notified the company that its Mailers were automation-compatible, despite being found incompatible by Engineering two weeks prior.
Furthermore, the mailers currently adhere to the Domestic Mail Manual (DMM) machinable mail criteria, and the Postmaster General has indicated that the Nonmachinable criteria should be changed to include language to discourage this "floppy leading edge" business, but the Postal Service has yet to change anything.
While Blockbuster Online, GameFly, and Simply Audiobooks were all named in the report, Netflix is the "one DVD rental company" anonymously referenced the most in the report. They have yet to be legally confronted by the USPS on this matter, so DVDs continue to clog sorting machines across the country.