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Online DVD rental company Netflix may suffer a cut into its profits if the USPS imposes extra postage for those cute, red envelops. 

The US Postal Service’s Inspector General has prepared an audit that recommends charing a company an extra 17 cents per envelop to cover labor costs.  If this “unidentifed” company is Netflix analysts project that their profits would drop from $1.05 per subscriber to 35 cents.

Could that company be Blockbuster?  The short answer is no.  Netflix’s competitor handles their online rentals a different way in the mail.

The IG said that a majority of the “unidentified company’s” envelopes have a floppy edge which means that the mailers must be handled manually, increasing the cost to ship.  Over the next two years the estimated cost of the manual handling will rise about $20 million.

Can this cause a big spike for Blockbuster’s stock?  Let’s look at some numbers.Netflix sends out about 1.6 million DVDs a day.  They save about $100 million a year by using first class postage even as they pick up the cost of the return postage. A spokesman for the company doubts that Netflix will add a surcharge to the price of shipping the DVDs.

As news of this hit the markets Netflix’s shares rose 18 cents.

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