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GameFly Seeks Postal Decision

28 Mar, 2011 By: Erik Gruenwedel

CEO says delays costing service $730,000 monthly

GameFly, the Los Angeles-based online video game rental service, is asking the U.S. Postal Regulatory Commission to expedite action on a complaint it filed two years ago alleging preferential rates and treatment for Netflix disc mailers.

In a March 23 letter to the postal commission, GameFly CEO said David Hodess said delays in applying applicable rates charged Netflix for non-automated handling of first-class mailers are costing the company $730,000 a month – more than its entire monthly net income.

GameFly said it ships about 1.2 million game rental flyers per month. It is charged $1.05 per mailer for hand processing, while alleging that Netflix only pays 44 cents per hand-processed mailer.

“GameFly [has] spent 18 months working with the Postal Service in an attempt to resolve informally the issues on which the complaint was based,” Hodess wrote. “Delay in resolving the case … is costly to GameFly.”

The issue has, at times, become contentious, with GameFly accusing Netflix of attempting to overly assert its influence on a financially struggling U.S. Postal Service. Indeed, Netflix is the mail carrier’s largest individual customer, generating upwards of $600 million annually in postage fees. The U.S. Postal Service reported a net loss exceeding $8 billion in its most recent fiscal year.

Netflix, which is transitioning to a streaming service, has warned it would expedite digital delivery and reduce physical deliveries should it be forced to pay more to ship discs.

Regulatory expert Alan Robinson said in a blog post last year said the rate differences between Netflix, GameFly and Blockbuster Online, among others, underscores the shortcomings dealing with a system burdened by regulatory processes instead of the free market.

“All mailers would benefit from a Postal Service that had to know its customer's businesses as well as the customer in order to design its services and price its products,” Robinson wrote. “However, the current regulatory process does not encourage this and instead creates the adversarial environment illustrated by the exigent rate case.”


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