Netflix Might Not Miss Saturday Mail Delivery

DVD-by-mail company could profit from reduced postal service

By MICHAEL LIEDTKE
|  Wednesday, Feb 6, 2013  |  Updated 5:52 PM EDT
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Netflix Might Not Miss Saturday Mail Delivery

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SAN FRANCISCO - MARCH 30: Red Netflix envelopes sit in a bin of mail at the U.S. Post Office sort center March 30, 2010 in San Francisco, California. Netflix announced September 19, 2011 that they would spin off their DVD by mail service into a separate named company called Qwikster, keeping the Netflix name for their streaming service. (Photo by Justin Sullivan/Getty Images)

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Netflix won't miss Saturday mail delivery, even though the weekend service helped keep the company's DVD-by-mail subscribers happy.

The U.S. Postal Service's planned shift to reduce home delivery to five days a week instead of six might even make Netflix slightly more profitable by lowering the costs for sending out its familiar red envelopes with DVDs. That's because subscribers may be able to watch fewer DVDs for the same monthly price.

It might have been different if Saturday mail service had been eliminated three years ago, when idea was first broached.

Back then, mailing DVDs was still Netflix's main business. But Netflix's DVD subscribers have shrunk from a 2011 peak of 24. 6 million to 8.2 million as more people pay to watch video streamed over the Internet.

Netflix makes more money when its subscribers watch fewer DVDs in a month because its expenses go down while the monthly fee remains unchanged. The DVD plans start as $8, as do the ones for Internet streaming.

Even though Netflix has fewer DVD subscribers, that side of the business is still slightly more profitable than the streaming service. That's mainly because Netflix's licensing fees for Internet video are higher than its DVD expenses.

Netflix, which is based in Los Gatos, Calif., had little to say about Wednesday's developments, other than to say it's "in favor of a healthy postal service."

Netflix CEO Reed Hastings was more forthcoming during an April 2010 conference call with analysts. If Netflix were to lose Saturday home delivery before the company had more time to expand its streaming service, "it's not a good thing for us," Hastings said then. "We hope they hold off as long as possible, but we're also cognizant that the total health of the USPS is at stake, and they may need to make changes that they need to make."

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