Netflix says Gamefly seeks special treatment from USPS- warns of reduced mailings if Gamefly wins
TweetIn comments filed with the Postal Regulatory Commission (PRC) this week, Netflix has accused Gamefly, the game rentals-by-mail company, of attempting “to manipulate the Postal Service, through the PRC, into offering it favorable mailing rates.” Netflix also issued a warning that a decision in GameFly’s favor could “result in reduced DVD shipment growth from Netflix as well as accelerate the ultimate decline of DVD shipments as Netflix would shift more resource to the digital delivery of content”. The PRC is in the process of investigating claims by Gamefly that the USPS gives Netflix a better deal than it offers Gamefly for mailing DVDs.
The Netflix charges came in response to a demand by GameFly that the Postal Service produce confidential Netflix research documents that were mentioned in earlier testimony by a USPS witness. The witness, Robert Lundahl, had testified that “certain changes in DVD design, manufacturing, packing and handling would enable GameFly to avoid DVD breakage from automated letter processing.” When Gamefly asked to see the research Lundahl used to reach this conclusion, the postal service had argued that it could not disclose the research because it was proprietary Netflix information. Gamefly responded that in that case, the entire testimony of the witness should be stricken from the record.
In its comments filing, Netflix said that it would release the research data “under seal”, meaning that it is not to be publicly disclosed. Netflix suggested though, that GameFly’s request was “principally an attempt by GameFly to gain for free the benefit of research paid for by Netflix”.
While Netflix is not technically a party to the GameFly complaint docket, it is obviously concerned about what impact the PRC’s decision in the case could have on its business, as evidenced by the final paragraph of its comments:
Lastly, Netflix wants to highlight its concern regarding the potential actions the PRC may take in resolving this matter. Netflix cannot but express the sense that it may become the proverbial innocent bystander who is accidently shot during a botched bank robbery. GameFly’s attempts to seek redress for supposed “discrimination” if satisfied by this Commission in a manner that impacts Netflix’s operations, could jeopardize what Netflix has been told is the most profitable mailing arrangement enjoyed by the Postal Service, and exacerbate the Postal Services’ already dire financial situation. Such a decision would likely result in reduced DVD shipment growth from Netflix as well as accelerate the ultimate decline of DVD shipments as Netflix would shift more resource to the digital delivery of content.
Witness Lundahl was to have been cross-examined this morning, but GameFly requested a postponement of the hearing due to the illness of its lead counsel. No new hearing date has been set.
September 1st, 2010 09:37
netflix gets special treatment in my office(at no additional cost)
September 1st, 2010 12:53
same here — we have a separate tray for netflix envelopes, segregating them from the rest of the outgoing mail — also, most days, the netflix mailings that the carriers get for delivery come in their residual letters, not DPS — this is common knowledge, so who’s BSing who ??
September 1st, 2010 16:16
Netflix announced a very long time ago that the time of physically spinning media was gone, along with floppies, cassettes, and eight track tapes. This is only a ploy to get more for less and to keep netflix in the positive money flow.
Everybody segregates netflix outgoing and no extra money for that extra process to avoid the floppy leading edge.
September 2nd, 2010 23:23
be real people…not the first time usps has lost customers at the top due to their fine handling of such problems.these are buisinesses that the usps needs, yet they still try not to work with anyone, just like out in the lobbies…c`mon prc, get someone who WANTS the postal service to work as the SERVICE it is supposed to be.
September 3rd, 2010 04:38
Netflix spends 500 million a year. I have seen only a handfull of gameflys come through my office.. Are we treating them different? Ive seen 1 customer get more netflix in a month than all the gameflys in year to my city.. If netflix is so concerned about gamefly how about the good ol USA. Just start renting games and netlix by size alone would squach gamefly. They pretty much closed blockbuster, hollywood video, and eveyone else.
September 3rd, 2010 10:36
Netflix has always had the inside track with the USPS. AVP Bill McComb was the first to defect in the late 1990′s to Netflix. From then on there was an open door policy into our facilities that few companies enjoyed, not to mention email access to floor managers (unheard of and disruptive to USPS operations). The advantage Netflix had was the Standard Operating Procedures (SOPs) written FOR Netflix and the handling of their product exclusively. An SOP can be written for the handling of a mail type but not exclusive to one company. As a Level 26 PM in charge of Plant Operations I turned this SOP over to the OIG’s in 2005. Unfortunately, nothing was done with that information. This is not to say we should not work with our Customers to streamline both of our operations but we can not do for one company what we will not do for another. The concept of Universal Service comes in various forms. One we did not uphold in this case.