Netflix Goes Low Key in Envelope Test

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In a departure from its typical red envelopes with the company name and logo emblazoned in white, online DVD rental company Netflix Inc. recently tested an envelope that gives barely a hint of its origin.


The only clue that the mailer comes from Netflix is its name on the bar-coded return label and the spot where a stamp is affixed.


"This was simply a test in the New York market," Netflix spokesman Rick Sneed said. "We conduct several such tests every month, and this is just another. There is no particular significance to the white design."


He would not comment on the test's purpose but said the company has no immediate plans to abandon its main red mailer.


Netflix typically drops 1 million DVDs weekly to rental customers nationwide. The Los Gatos, CA, company ended 2002 with 857,000 customers, up 88 percent from the previous year. About 93 percent of those customers were paying subscribers, and the rest -- 61,000 -- trial users.


Cost or theft could be a reason for using blank envelopes, said Shane Randall, president/CEO of aNETorder Inc., a fulfillment company that works with clients such as Reader's Digest and National Geographic from its 318,000 square-foot warehouse in Louisville, KY.


"Our book clients have standard packaging and have their name or logos and our return address on the publications for return processing," Randall said. "Not much information about the publication is printed on the packaging, eliminating the temptation of theft."


Lost or stolen discs have not been a major problem in the past, according to a Netflix executive who spoke with this publication in November.


"A lot of people are honest, and discs aren't going to get lost or misplaced in the mail because if somebody, per se, wants to take the disc, there's probably better ways to make money than a used DVD that doesn't have box art," Leslie Kilgore, vice president of marketing at Netflix, said at the time. "So it's a pretty rare occurrence."


Still, no company, and especially not a big mailer like Netflix, would willingly disclose shrinkage for fear of damaging its reputation.


Movie rental is a $10 billion business dominated by stores. Blockbuster Inc., Dallas, has half the market. DVDs account for 41 percent of all movie rental revenue, according to Blockbuster estimates of the industry. Thirty-seven percent of U.S. households have DVD players.


As DVDs steadily replace VHS tapes, online rentals may creep up to 10 percent to 30 percent of the movie rental market from less than 2 percent currently, Kilgore said.


Sneed said Netflix sometimes works with movie studios to publicize movies on the envelope. "Monsters Inc." was a recent promo and, on occasion, characters make it to the envelope as a thank-you from the rental company to the studio.


"We don't sell the space," he said. "We just occasionally use it to promote a movie that we have a lot of stock of or something like that. So there's no significance to there being nothing on the envelope."


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