Netflix Moves to Reduce Lost DVDs

Online DVD rental service Netflix Inc. said last week that a change in its customer service policy is designed to better monitor reports of lost DVDs by customers.

The policy change began in late March, about the time that Netflix fired two employees from its Flushing, NY, distribution center involving the theft of DVDs. However, Netflix spokeswoman Lynn Brinton said the change was unrelated to the firing.

Under the new policy, an unusually high number of DVDs reported lost by a subscriber triggers an “e-mail to that customer that says, 'we are having problems processing your account, please call us at this number and we will resolve it with you,'” Brinton said.

Previously, when lost-DVD reports passed a certain number, the customer's account was placed on hold until the customer declared the losses to the U.S. Postal Service for review.

Netflix fired the two employees after a three-month investigation done along with the USPS. Any loss rate at Netflix above 1 percent automatically triggers an investigation, and the Flushing distribution center had a 2 percent to 3 percent loss rate in December.

“When we concluded the investigation in March, we dismissed the employees that were involved,” Brinton said.

DM News reported in its Feb. 10 issue that Netflix had drastically toned down the visibility of its envelopes in a New York-area test in January. Instead of its traditional red envelopes with the company name and logo in white, Netflix switched to a white envelope with no company logo.

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

Brinton also said the test was not done in response to the thefts in the Flushing distribution center. Netflix, Los Gatos, CA, has returned to its red envelope in the New York area.

Last June, a mail handler in the postal service's Tampa, FL, processing and distribution center was sentenced to 18 months in prison, three years of supervised release and restitution of $21,295 to Netflix for stealing DVDs from the company.

According to a USPS report, postal inspectors identified the employee after numerous complaints from Netflix about missing DVDs that customers claimed they had mailed back to the company.

Inspectors recovered thousands of DVDs while searching the subject's vehicle and residence with losses exceeding $100,000. The report also said postal inspectors now work closely with Netflix on a national level to increase mail security.

Meanwhile, Jimmie Capers, a USPS custodian in the Flushing general mail facility, was arrested last October in the theft of DVDs from the facility. Postal inspectors recovered several hundred DVDs from his residence, according to testimony from an inspector.

Brinton said Netflix had no knowledge of that arrest, and the postal service would not comment on whether the DVDs were from Netflix.

According to court documents, the case, which referred to Capers as Jammie Capers, was dismissed on a government motion Feb. 12. However, a spokesman for the postal inspection service said the case is still active.

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