Why Netflix Should Run the U.S. Postal Service

If the U.S. government isn't willing to sell the Post Office to the popular DVD rental service, it should at least try to learn from how Netflix so efficiently moves so many envelopes through its system every day.

Netflix, with its neat little packets of DVDs, is running a national parcel distribution service on a massive scale, aided by the fast-crumbling U.S. Postal Service. So why doesn't Netflix buy-up the U.S.P.S and revolutionize it?

Netflix Mailbox

Herodotus penned the famous phrase "Neither snow, nor rain, nor heat nor gloom of night stays these courageous couriers from the swift completion of their appointed rounds" some 2,500 years ago, but now we're in the information age and the quote needs an addendum: "...except for the Internet." The rise of telecoms and Internet communications has seriously pummeled the USPS. Congress has begun hearings to consider cutting Saturday services, and cost-cutting moves are everywhere. It's basically following in the same footsteps of its cousin over the Atlantic--the Royal Mail, which has been making much of the same moves for years.

But over at his blog, David Strom, writer and 'Net expert, has taken the recent Netflix buyout rumors and turned them on their head: Netflix, he says, should take over the USPS. His reasoning is pretty sound:

  • Netflix already is expert at sorting, distributing, and accepting parcels and has much of the infrastructure in place already
  • Netflix has a revolutionary employee policy and has done an extraordinary job motivating its staff. It moves a phenomenal number of packets per hour with great accuracy
  • Critical business-to-business mail largely circumvents the USPS anyway, preferring dedicated companies like FedEx--so the USPS would be more efficient if it focused exclusively on standard mail packets
  • Netflix's DVD envelopes could be a model for standardized, postage-stamp-free mail packets. This means local post offices could close without upsetting people--if you can't fit something in a standard packet, you need to call UPS.

Compelling thinking, no? The key to Netflix is its standardization, which has facilitated its electronic product/packet tracking and sorting system, and taking this idea and applying it to the USPS is neat thinking. Standardization would make package sorting centers even more efficient, and that would save costs, which could be passed on to the consumer. The Netflix employee model would also be a revolution for USPS workers too--it's a kind of thinking that rarely manifests in big institutional companies and could be a highly motivating factor.

These are the exact same reasons why Netflix is such an object of fierce speculation in terms of potential mergers or acquistions. When you read "Amazon should buy Netflix" or "Netflix should buy Amazon," what people are really selling is the sophisticated model laying underneath what seems like a relatively simple DVD distribution business. Will the U.S. government privatize the Post Office and sell it to Netflix? Probably not. But as the USPS watches that flow of little red envelopes flow through its system every day, perhaps it should think more deeply about what it could learn about the business of getting mail from A to B most efficiently.

[via David Strom]

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23 Comments

  • Max Arroyo

    Great response on Twitter to the ridiculous notion that Netflix could run the USPS:

    BREAKING NEWS from Fast Company - McDonalds should hire a fat kid to run it because the fat kid is so good at eating burgers!!!

  • Aaron Cole

    @Kit
    "Borg" Is that the inevitable outcome? I once had a prospective employee tell me that he couldn't get his head around email and the digital conversations that his kids have so openly embraced, basically reiterating what's been said in this post. After he left I told a co-worker (off the cuff) that I wondered how he was going to feel when he finds out that his grandchildren have started swapping memories? It was a joke but, then I started thinking about how that would work and what would that do to the human race. If we assume that the cloud provides us with collective memories (blogs, flickr etc.) then is the next step a collective consciousness (google wave)? I've tried to think of it in the context of the human body, say each of us is a cell (with a brain) in that body. We're symbiotic in nature, we can't survive on our own yet, we each have independent consciousness. If we, however, swap too many memories than do we lose that individuality and turn into a collective soup? Are we the human race at that point?

    I imagine that we as individuals may each have a "safe-house" where we could isolate a portion of our consciousness away from the collective. Kind of like how our computers can be disconnected from the web. If I could use a Ghost in the Shell term, to run in "Autistic Mode".

  • Kit Eaton

    @Aaron... don't apologize--hearty discussion is what makes this site zing! I like your line of thinking... I too am old enough to remember spending hundreds of hours in the library at uni--and my students now would barely have to spend one! :) That said, I have one humorous aside for your suggestion though: Borg ;)

  • Aaron Cole

    @Kit Eaton
    I too have "digitized" much of my life. As for the books, I believe we'll always have our favorites stacked on some dusty shelf. I however can certainly see the appeal for ebooks, I live in a one bedroom with a toddler so space is always an issue. If I could transform a portion of them into ebooks, I'd do it in a heartbeat.

    If I could counter the statement about communications becoming extraordinarily consumable and forgettable. I'm old enough to remember going to the library to look stuff up because that was the only way we could. And, we needed a device to retain the information that we just learned otherwise it wouldn't have been very useful. Obviously that device was our brain. It was critical that we remembered what we had learned because trips to the library were time consuming and laborious. Now enters the digital age and information is a mouse click away. I've myself have already started to think of the web/cloud not as a device per se but, as an extension of my own mind. So if someone sends me an email or I comment on a blog and don't return to it. It may not be that I've forgotten about it, it's just simply "not in use" at the moment. I think we're coming to point in which it's no longer relevant weather the information resides on the C drive (our brain) or the D drive (the cloud).

    The good news is that if we think of the cloud as a portion of our memory then we haven't forgotten how to write eloquent letters, we've just chosen not to. That means that any individual or future generation will have the choice to change that. The knowledge all ready exist in the cloud. All they'll need to do is access/remember it.

    I apologize for going off topic, wonderful discussion though.

  • Kit Eaton

    @Aaron. Heh. It's no mystery that when I digitized my life last year, I did the DVDs, music, photos...but not my book collection. :-) And I agree with your argument about the delivery mechanism being not so much at fault. In the digital era communications have become extraordinarily consumable. One merely reads them and forgets about them--it's not at all the same as keeping love letters in a box and re-reading them. The patiently-written letter seems to be another casualty of our consumer era.

  • Aaron Cole

    @Kit Eaton
    Ya, I work in a bookstore and it's interesting and sometimes humorous that people talk to me as though I have some sort of bias against the digital world. It's a faux argument really and I usually explain to them that books, like every other form of communication, are just a delivery mechanism. The same is true for written letters and email. It's the idea that's communicated that counts. So, if you boil it down to that then it's irrelevant how the idea's communicated only that it is and that it's understood.

    As far as written letter vs. digital communication, I believe that it's not so much the "delivery mechanism" that's at fault for the demise of eloquence as it is simply the way society thinks about communication. If we were to look back in time, somewhere around the 17th century, when it took months to get a letter from destination A to destination B. You had to put everything in that letter, it had to be the grand slam of letter writing because it could take up to a year to get a response. Fast forward a few hundred years and we now have the speed of light communication so it's ok to truncate messages and to make errors because they can easily be corrected.

    And caught in the middle of all of this is the USPS.

  • Kit Eaton

    @Chris. It's a thought experiment... and Netflix almost certainly has *something* to teach the USPS. Someone needs to tackle that $7bn deficit with some quick thinking. It's nearly half NASA's entire budget. Letters and junkmail could stop us going back to the moon!

  • Kit Eaton

    @Aaron. I am a massive fan of the written word, handwritten letter or digital... I imagine when the telephone arrived people thought it wasn't as personal a way of communicating as a letter, and the same arguments are leveled at the digital revolution. And digital has given us a wholly *new* way of communicating. I too think the physical letter's days are dwindling, and with it the traditional post service. Though it's sad, it's not *really* sad.

  • Aaron Cole

    @G R, only in jest.

    "I couldn't have said it better myself. Love the Stewart reference, too. Long live the [horse and buggy]. The [automobile] is not the end-all. Stop fooling yourselves, the [automobile] is not a solution in itself. It may speed up certain avenues of delivery, but in no way does it enhance the message. A [ride] in a [horse and buggy] can never be reproduced by an [automobile] and still retain the same charm and sentiment."

    It's been 82 years sense the Model T and I think it's safe to say that not too many people are sadden about the horse and buggy business going away. The same has occurred with letter writing and will occur with book publishing and everything else that can be converted from atoms to bytes. In another 100 years people will be looking back and asking how did these primitives ever live without memory/thought transference.

    I have no doubt that the USPS will be around for some time but, it's days are numbered and when that time comes we should let it go and not cling to some romanticized/tradition of having it around just for its own sake.

    Remember the horse and buggy days are gone.

  • Chris Dannen

    Netflix has nothing to teach the USPS. The USPS has an infinitely more complex job, and their technology is already considerable, especially in light of the challenge: move billions of letters from individual addresses using //handwriting// as the only bar-code.

  • Thom Mitchell

    Freddy Nager nails it perfectly with his spot-on comments. Kit Eaton's premise is fatally flawed. Netflix benefits from USPS's low rates - without which they couldn't have scaled to their current size. Netflix does a great job and is slowly making the transition to practical digital delivery, but physical delivery just isn't their strength which is why they outsourced that function to the USPS.

    USPS after all specializes in delivering mail 6-days a week to almost every address in america and they do it in bulk for less than $.44 an envelope. I would challenge any other business to deliver such consistently high results for such a low price. Sure other delivery services are more reliable but they cost far more.

  • Thom Mitchell

    Freddy Nager nails it perfectly with his spot-on comments. Kit Eaton's premise is fatally flawed. Netflix benefits from USPS's low rates - without which they couldn't have scaled to their current size. Netflix does a great job and is slowly making the transition to practical digital delivery, but physical delivery just isn't their strength which is why they outsourced that function to the USPS.
    USPS after all specializes in delivering mail 6-days a week to almost every address in america and they do it in bulk for less than $.44 an envelope. I would challenge any other business to deliver such consistently high results for such a low price. Sure other delivery services are more reliable but they cost far more.

  • Thom Mitchell

    Freddy Nager nails it perfectly with his spot-on comments. Kit Eaton's premise is fatally flawed. Netflix benefits from USPS's low rates - without which they couldn't have scaled to their current size. Netflix does a great job and is slowly making the transition to practical digital delivery, but physical delivery just isn't their strength which is why they outsourced that function to the USPS.
    USPS after all specializes in delivering mail 6-days a week to almost every address in america and they do it in bulk for less than $.44 an envelope. I would challenge any other business to deliver such consistently high results for such a low price. Sure other delivery services are more reliable but they cost far more.

  • G R

    Freddy Nager, I couldn't have said it better myself. Love the Stewart reference, too. Long live the USPS and the written word. Digital is not the end-all. Stop fooling yourselves, digital is not a solution in itself. It may speed up certain avenues of delivery, but in no way does it enhance the message. A hand-written letter can never be reproduced digitally and still retain the same charm and sentiment. If I have to send a dear friend a letter in a NetFlix envelope, I will deny myself the need to insult my friend and use an alternate service. This article is opening up an interesting, but somewhat generic topic: why don't the efficient people take over the inefficient people? Well, if the USPS was a private entity, it would be possible and relevent. Since it's not and since we get way more than we pay for, I beg you to drop this idea and keep Netflix out of my business and keep my local USPS in my neighborhood.

  • Aaron Cole

    @Freddy Nager, I'd jump up and down for joy if Netflix went 100% digital tomorrow. Sorry USPS but the digital just passed you by.

  • Freddy Nager

    To quote Jon Stewart, "Why are you bagging on the post office? For forty-four cents, someone comes to your house, picks up some piece of crap you wrote and takes it to Wyoming on a plane…”

    The USPS has its problems, but I still support it. 44-cents, people, 44-cents! What else can you buy in America for 44 cents? I bought a Snickers bar at a service station the other day and it cost me a buck. 44-cents!

    In fact, the reason the USPS is in trouble is that its fees don't cover its costs. It can't raise its rates, like a private business can, without approval. Hence, businesses like Netflix are enjoying subsidized shipping: the USPS operates at a loss so it doesn't hurt private businesses like Netflix. Because of volume discounts, I suspect that Netflix is not even 44-cents to mail a DVD. If the USPS were to shut down, and Netflix had to use FedEx or UPS, Netflix would go 100% digital tomorrow. Kiss your red envelopes goodbye.

    I can also see what a Netflix-run postal system would look like:

    1. Instead of paying a per package fee, anyone wanting to use the system would pay a monthly membership fee billed to their credit card automatically. Whether you shipped 0 letters or 100 letters, you would pay the same monthly fee. It would be far more than 44-cents per package for most people. Know what you're paying for Internet, cell phone, or cable TV service now? That's probably what you'd pay for all-you-can-eat mail delivery.

    2. Netflix would shut down operations in remote areas. A for profit business cannot sustain unprofitable retail branches. So L.A. would have more Netflix mail collection centers than all of Wyoming. It's not personal; it's just business. People in rural states would have to rely on someone else with a national distribution network -- Mail by Wal-Mart, for example.

    3. Your letters would come with ads on the side. No big deal, right? Just hope it's not your competitor who's advertising on a letter you're sending your customer. Don't want that ad? Prepare to pay more.

    That said, as Marvin Gray notes above, this is a flawed premise to begin with. The USPS is part of Netflix's value chain. Indeed, it's a subsidized, money losing part that Netflix is enjoying. If it were to take over the USPS, Netflix would have to bear the full brunt of USPS' expenses.

    As I noted, Wal-Mart is a much more viable candidate for running its own mail delivery service, since it runs its own distribution network. There would be no home delivery -- customers would have to go to Wal-Mart to pick-up or ship anything. And that's something Wal-Mart would love.

  • Marvin Gray

    The problem with your reasoning is that The USPS is not the point A in the delivery system as Netflix is. The USPS neither prints up the catalogs or letters nor do they create the packages they ship. The USPS is what moves the DVDs from point A (Netflix) to point B (The consumer).
    With your reasoning, the USPS would have to become a printing company, a bank, a warehouse, a pharmacy, a medical diagnostic company...well, the list would go on.
    My point is where would Netflix be without the USPS? If Netflix would have to actually physically deliver their product (moving it from point A to point B) themselves, they would go out of business very quickly...And we taxpayers would have another company we would need to bail out.
    The USPS has to get back to what it was originally intended to be, a SERVICE, and not a business.

  • Don McDonell

    Netflix? What a joke, we who have to process THEIR mess at the Postal Service keep them in business! Their envelopes tear and rip in the machines because of their unusual design, and the USPS has asked them to change them, but to no avail....yet them want them sorted on letter machines! So we, out of a loyalty to all our customers, make sure as many are repaired and sent on as we can, even if it's manual sortation. People have very little idea the challenge of being required to deliver to every address in the country, every day, no matter the mail volume. I believe the USPS should be a tax supported agency, like any other in government, since we are mandated to do so much.