GameFly Scores In Longstanding DVD Mailing Complaint

An anonymous reader writes "GamePolitics reports that the Postal Regulatory Commission has ordered [PDF] the U.S. Postal Service to equalize the rates paid by mailers who send round trip DVDs, and concluding (sort of) a dispute that has been underway for more than four years. The new postage rates take effect on September 30th. Some mailers, prominantly Netflix, send their round-trip movie DVDs as 'letters,' but GameFly's gaming disks are sent in slightly bigger envelopes as 'flats' to avoid breakage, and so GameFly has paid a much higher postage rate. GameFly argued that this was unfair discriminatory treatment because USPS was providing special hand-sorting treatment for Netflix disks without charging Netflix for the extra handling. But now there's a new twist: the Postal Service wants to reclassify DVD mailing [PDF] as a competitive product, where the prices would not be limited by the rate of inflation, because it says that mailed DVDs compete with the internet, streaming services, and kiosks such as Redbox. The regulatory agency is accepting responses [PDF] from interested persons until September 11th to the Postal Service's latest comments on its request [PDF]."

gamefly wins to lose

[Dan667]

sounds like in winning gamefly may have put the nail in their profit margin. Instead of adopting the Netflix mailer and accepting breakage as part of doing business everyone will now have to pay much much higher mailing. Ironically, this also will mean that dvd mailing services will probably start to die which hurts the USPS too.

Re:gamefly wins to lose

[mog007]

Breakage is not a big deal for Netflix because brand new movies are not that expensive to replace. Even if they have to pay retail prices, you're looking at 15-20 bucks. Brand new video games are easily more than quadruple that at 50-60.

Gamefly wouldn't be able to handle those losses.

Ridiculous

[Hatta]

The postage rates should be based on the size and weight of the package, the origin and destination, and nothing else.

Re:gamefly wins to lose

[MozeeToby]

They almost certainly almost never have to replace broken movies. Look at the shelves at the local brick and mortar rental store next time a big release comes out, see the hundred or so copies? 2 weeks later it's 50, 2 weeks after that it's 10. In a year there's only a handful. So Netflix has their stock of the new release which, even taking into account how long it used to take to get some new releases, is much larger than the stock they will need just a few weeks down the road. Breakage gets written off, so long as it doesn't outpace the drop in demand (which I suppose it will one movies are old enough, but that isn't the majority of the business) you never need to worry about it.

Re:gamefly wins to lose

[Anonymous Coward]

1. Movies which come out to rental stores prior to general Sale copies cost a holy shitload. I'm talking several hundred bucks a copy.
2. This doesn't happen much any more, most companies are starting to release all at the same time.

But more important than anything else:
They are different products. Just because the physical disk shares the same physical dimensions does not mean the product has the same value. Gamefly is running a business where they can't accept as many busted disks as Netflix can, so they're trying to find a scapegoat to distract their investors from the fact their business model is starting to fail. They have the choice to either accept higher loss rates with more broken disks, or pay more for the shipping and send it in different packaging. I fail to see why the USPS should be involved at all in this.

Re:Ridiculous

[jd.schmidt]

Basically that is the problem, the prices do not reflect true delivery costs by government mandate. The USPS is mandated to provide certain types of services at a certain cost no matter what.

Effectively Netflix got low prices because they knew how to get their packages classified as protected mail. Also they really DID work very hard to make their packages as easy to sort and deliver as possible. They spent a lot of time working closely with the USPS to make a package that was easy for them to sort, they even went so far as to hire a bunch of USPS personnel to consult on how to do this.

One more point, CDâ(TM)s are super cheap, the costs are controlled by the publishers, so they can make or break Gamefly and Netflix.

Re:o man

[SirGarlon]

Tell that to Congress. They're the ones micro-managing the Postal Service and setting arbitrary rates. Those rates, BTW, are not sufficient to fund the Postal Service pension system at the level Congress demands, which is why the Postal Service is in crisis.