GameFly has been at it with the U.S. Postal Service for nearly two years now over what it perceives as preferential treatment to Netflix, whose mailings GameFly alleges are given higher priority by postal sorters, not to mention a better postage rate. So much that savings from the postage rate Netflix enjoys would double GameFly's monthly profits.
The games-by-mail rental service's CEO underlined the point in a letter to the Postal Service in an attempt to get the matter resolved. Breaking it down: GameFly pays a flat rate of $1.05 per piece so that its disc sleeves avoid automated letter processing - which can be hazardous to the discs inside, even though they ship with a cardboard jacket (whose weight no doubt adds to the postage costs.) Netflix, admittedly lighter, pays only 44 cents to avoid auto-sorters.
The difference in what GameFly pays on the $1.05 rate, and what it would pay on a 44-cent rate, is about $730,000, wrote David Hodess, the GameFly CEO, in a letter obtained by Ars Technica. "This amount represents more than 100 percent of GameFly's monthly net income in 2011," Hodess wrote.
Ars Technica points out that it's not as simple as Hodess portrays it. Netflix has more than 10 times the shipping locations of GameFly, and furthermore, puts its discs in a big red envelope, which helps with manual sorting. GameFly's sleeves are more subdued, so as to not call attention to their contents. Sometimes people, including postal workers, steal the mail if they know there's a $60 video game disc inside. Ars characterizes GameFly's predicament more as a choice between a break on postage and the costs of replacing broken or stolen discs.