Could U.S. Postal Service changes speed the demise of Netflix’s DVD-by-mail service?

The U.S. Postal Service has raised rates and slowed delivery times for mail as part of an effort to improve the agency’s financial viability. But those changes could have a big impact on major customer Netflix, which still operates a U.S.-only DVD-by-mail business.
Could these changes be another nail in Netflix’s legacy DVD business as it focuses on streaming video? For many thousands of movie fans across the country that love the Netflix DVD service, that would be an unwelcome development.
The U.S. Postal Service enacted the changes on Oct. 1. Among the changes, the USPS has extended the service standard for some first-class mail from three days to five days. It also raised shipping fees.
Netflix addressed the impact of the changes in a blog post on Oct. 14.
Netflix said the recent USPS postage rate increase raised the cost of shipping a Netflix DVD by 16%. But Netflix decided to absorb the added cost to keep its service affordable.
Netflix also has made changes to speed shipping times. For instance, it doesn’t wait to receive a disc before sending a customer the next DVD in their queue. With its advanced return system, Netflix DVD mailers are scanned at the nearest USPS processing center and Netflix is alerted to their arrival.
“It is unlikely that USPS’s recent changes to service will affect DVD Netflix deliveries since we are not shipping coast to coast (which is USPS’s most impacted service),” the company said. “USPS First-Class Mail can take 1-3 business days each way.”
But with the USPS struggling financially, you can expect more changes to come.
Netflix’s DVD-by-mail business generated $44 million in revenue in the third quarter, down 25% year over year. In the second quarter, the service generated $46 million in revenue, down 25%. In the first quarter, the DVD service brought in $50 million, down 23%.

Photo: Netflix DVD mailers. (Netflix)