Netflix cuts costs by ending Saturday DVD shipments

Los Angeles TimesJuly 17, 2014 

Netflix has quietly stopped sending Saturday shipments to customers of its DVD subscription service, a move that could save the company 10 percent annually on shipping costs, one analyst estimates.

Last year the U.S. Postal Service considered ending Saturday mail delivery, leading to a report that said the change could make Netflix more profitable. Ultimately, the USPS backed off its plan to end Saturday deliveries, but Netflix has gone through with it.

The Los Gatos, Calif., company's shipment change was first noticed by a customer who alerted other Netflix subscribers on Movie Fans, an online community of Netflix users.

"I learned of this change while speaking to Netflix Customer Service about a problem with their website. They told me that Saturday deliveries were discontinued," the Netflix customer wrote on his post.

The company did not respond to a request for comment, but it has confirmed the change through one of its online pages, which says the company only ships DVDs Monday through Friday, excluding holidays.

Janney Montgomery Scott analyst Tony Wible had estimated that Netflix shipping costs would be $140 million in 2014 and $117 million next year, with costs coming down as more customers end their subscriptions to Netflix's DVD service. Ending Saturday shipments could save Netflix $14 million in 2014 and $12 million in 2015, Wible said.

"By doing this you end up taking some costs out of the system, which is needed as they get fewer and fewer subscribers on DVD," Wible told the Los Angeles Times. "They probably feel that they are at a point where the people who are (on DVD subscriptions) are just going to continue to leave whether or not they're getting DVDs on Saturday."

However, the move does not mean the end of Netflix's DVD service is imminent. Wible said he expects Netflix will continue its DVD business as long as it remains profitable.

"It's generating cash for them, which they're using to buy stuff for the streaming side of the business, and I suspect that they'll continue to do that until they lose enough subscribers that it's at break-even," Wible said.

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