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Did the Post Office Just Seal Netflix's Fate?

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In an effort to reduce costs, it was announced early this morning that the U.S. Postal Service would end Saturday delivery in August of 2013.

While the announcement comes as no surprise to the street (the Postal Service has been warning of its possibility for years), it still holds serious implications for companies that depend on door-to-door delivery. Namely, Netflix (NASDAQ: NFLX).

The news would either mean Netflix will no longer be able to deliver DVDs on Saturday, or that the company would have to seek out more expensive shipping methods through UPS (NYSE: UPS) or FedEx (NYSE: FDX).

Either way, costs will be going up or revenues going down for the company, neither of which will help trader sentiment or the bottom line.

This brings up an important decision for Netflix: should the company move to an all-streaming premium product?

As Amazon (NASDAQ: AMZN) Prime continues to steal deals and provide its users with the pure streaming content they want, Netflix is still stuck in the days of sending discs via snail mail, forcing users to wait days and not mere seconds for their movies.

Netflix could use this as an opportunity to create a "Netflix Premium" product, where all video could be streamed for a higher monthly fee - (we're thinking maybe $20.00?).

This could be used as a transition over to a purely streaming model, move customers up to a higher price point, and allow the company to eliminate costly warehouses and cut down greatly on number of employees.

Following the news, shares of Netflix traded down as much as 0.70 percent, but have since leveled off to roughly flat from Tuesday's close at $174.39.

Posted-In: post office United States Postal ServiceNews Rumors Politics Offerings Economics Trading Ideas General Best of Benzinga

 

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