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Ruling Confirms Postal Service Discriminated Against GameFly 152

Posted by Soulskill
from the stamping-out-unfairness dept.
An anonymous reader writes "It took almost two years, but the US Postal Regulatory Commission just ruled (PDF) that the US Postal Service '...had unduly discriminated against GameFly.' GameFly recently complained that the additional postage was costing them $730,000 per month."
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Ruling Confirms Postal Service Discriminated Against GameFly

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  • Now that Gamefly has won they can close up shop because everyone directly downloads their games directly from the Nintendo, Sony, or Steam stores now......

    • by Anonymous Coward

      Somebody doesn't know how Gamefly works apparently...

      (Here's a hint: think NetFlix for video games)

      • by SeaFox (739806)

        Someone doesn't understand the point the previous poster is making.

        (Here's a hint: he posted as an Anonymous Coward)

        • Gamefly is primarily a console game distributor. Nintendo only distributes Wiiware/similar titles online, Sony is mostly the same for their own network, and Steam is only for PC games.

          The point he's making makes no sense whatsoever. Gamefly's market is virtually untouched by all of these services.

    • by Anubis IV (1279820) on Thursday April 21, 2011 @03:26AM (#35890382)

      Besides game rentals, which is Gamefly's bread and butter industry, they also make a decent amount by selling used games. Their sales are regularly featured as some of the best on the 'net over at CAG [cheapassgamer.com]. They don't really sell new games, so until physical copies of games disappear (which may only be a console generation away), they should be fairly resilient. This change just makes them more profitable, but again, they are in a dying market, so unless they position themselves to survive it, as GameStop is trying to do by making some purchases of game streaming services, they won't be around in 10 years.

      • so until physical copies of games disappear

        Many PC games have already been made impractical to resell even if you have a physical copy by only allowing a key to be used online by one user at a time (starcraft did this), activation limits (e.g. spore) and/or tying keys to an account (e.g. steamworks). It's not clear whether console games will go down the same path but it seems likely to me that they will. IIRC sony were talking about doing this sort of thing in the wake of the PS3 crack (I dunno if they have gone through with it yet).

        A half way house

        • by Kelbear (870538)

          In time, publishers/developers will charge an unlock fee for the entire game. They are currently priming the market with DLC and pay-to-play multiplayer modes.

          This will let them take a cut of the used game sales, and though it will reduce initial sale prices (since some gamers offset initial prices with the resale proceeds), the payoff will be worthwhile to them since they were previously receiving nothing from the subsequent sales. Note also that the sales lost from the increased effective price to new buy

          • by Pharmboy (216950)

            In time? [slashdot.org]

            • by Kelbear (870538)

              Yes, in time. Like I said, they are currently priming the market with DLC and pay-to-play multiplayer modes. They haven't started charging unlock fees for the entire game on used game sales yet. They've only locked off DLC and multiplayer so far.

        • by mldi (1598123)
          Not allowing me to resell (in effect, who would buy a used game at the same price as full) should be a crime. It really encourages piracy because you get the feeling you don't actually own what you just bought anyway. It's bogus.
      • by tepples (727027)

        so until physical copies of games disappear (which may only be a console generation away)

        Games for this generation already run up against the single digit GB/mo cap of satellite broadband. Say your satellite provider limits you to 0.2 GB/day (source: HughesNet.com). Buy one PS3 game as big as a dual layer BD, and the 50 GB download eats up well over half a year of transfer. In some countries of Europe, even wired broadband has a cap smaller than 50 GB/mo. So I don't see physical copies disappearing at least until these caps are increased.

        • Having had it a year or so ago, HughesNet sucks, you don't want to be using it for playing games if you can avoid it at all, you're out of luck if you want to do online multiplayer. I don't think HughesNet, WildBlue and similar services have enough gamers to carry the expense of physical media for very many games. Besides, when you have consoles with only 120GB or even 60GB or 20GB for first gen PS3s, you can't take (m)any 50GB games. Smaller, less expensive games seem to be gradually displacing the real

      • Of course, not being around in 10 years doesn't mean you can't be profitable now if your prepared to drop everything once the market shifts. After all, they are losing almost a million per month...last February money around the lines of $50 million was offered for the company...
    • Not everyone lives in an area with broadband. Until they do, Gamefly has a huge built-in audience. It's rather comical to see people from urban areas comment on such things as if the rest of the world lived just like them.
    • I'd much rather have the USPS close up shop, or at least make it legal for first class mail competitors to exist.

      • by geekoid (135745)

        It is legal. Stop with the lies.

      • by hedwards (940851)

        The reason why we have the USPS is to ensure that everybody in the US can send mail anywhere else in the US for the same price. As it is they don't have a monopoly in any meaningful sense, as it's just the mailbox that's restricted, there's no law against there being a separate dropbox for some other carrier. Or for mail to be left on the door step. In fact Amazon and most legal firms of any size already contract with private couriers for internal mail.

        At any rate, it would be tough for other competitors to

    • by iamhassi (659463)
      "Now that Gamefly has won they can close up shop because everyone directly downloads their games directly from the Nintendo, Sony, or Steam stores now......"

      I wish that were true! You still can't download most of the top games on any of the modern consoles. Mario Kart (any modern Mario game actually), Gran Turismo, Gears of War, etc, none of those games can be downloaded through their respective systems. In fact the Wii doesn't even have a hard drive to store games, instead offering to store games on
    • by tlhIngan (30335)

      Now that Gamefly has won they can close up shop because everyone directly downloads their games directly from the Nintendo, Sony, or Steam stores now......

      Microsoft, too. Xbox Live has offered both original Xbox and many Xbox360 games for sale online as well (I can't remember what they call it). Only bad thing is they aren't available on release day - it takes a few months for it to appear on Xbox Live as a downloadable game.

      I guess it's a concession to the physical stores...

  • GameFly? (Score:3, Insightful)

    by Anonymous Coward on Thursday April 21, 2011 @03:15AM (#35890312)

    I think, by definition, a summary should give people an idea of what the article is about. The summary doesn't tell me:

    1. Who is GameFly and what do they do?
    2. What the discrimination entailed? Did it just cost them more money to send postage?
    3. If GameFly recently complained, then surely it couldn't have taken 2 years?

    So many questions, if only I read TFA...

    • Re:GameFly? (Score:5, Informative)

      by dingfelder (819778) on Thursday April 21, 2011 @03:29AM (#35890394) Homepage Journal

      good questions.

      FTA, Gamefly, the popular video game rental service that operates through the mail, has filed a complaint with the Postal Regulatory Commission about the high number of games that are lost or stolen in the mail.

      The complaint (PDF) asserts that the postal service's automated sorting machines have a tendency to break a small percentage of discs, and that preferential treatment is given to DVD rental services like Netflix and Blockbuster.

      "According to Gamefly's numbers, it mails out 590,000 games and receives 510,000 games back from subscribers a month. The company sees, depending on the mailer, between one and two percent of its games broken in transit. ... Even if you assume the number is one percent, and a game costs $50 to replace, that's an astounding $295,000 a month in lost merchandise. ... That's not the only issue — games are also stolen in transit, which has lead to the arrest of 19 Postal Service employees."

      It took almost 2 years, but the US Postal Regulatory Commission just ruled that the US Postal Service "...had unduly discriminated against Gamefly." Gamefly recently complained that the additional postage was costing them $730,000 per month.

      From the Order on Complaint filed today by the PRC (the full report is interesting reading, if you're into that sort of thing):

              In this latter section, the Commission confirms evidentiary rulings made by the Presiding Officer; finds that GameFly is similarly situated to Netflix and Blockbuster; concludes that Netflix and Blockbuster have been given a number of preferences, including various forms of manual processing coupled with the avoidance of the non-machinable1 Complaint of GameFly, Inc., April 23, 2009 (Complaint).Docket No. 2009-1 Executive Summarysurcharge; and determines that the Postal Service has failed to present adequate and legitimate justifications for these preferences.

              [1004] DVDs returned by subscribers to Netflix in its prepaid letter-sized mailers are non-machinable, and are frequently damaged or cause machine jams. DVDs returned by subscribers to GameFly also are damaged from processing on automated letter processing equipment. The Postal Service separates and hand processes a substantial proportion of Netflix’s returns without imposing a non-machinable surcharge. The Postal Service is unwilling to hand process GameFly’s returns causing GameFly to incur an additional ounce charge on its mail, which the Postal Service refuses to waive.

              [1005] To remedy this unreasonable preference, the Commission orders the Postal Service to establish two parallel rate categories within First-Class Mail for round- trip DVD mail. One category establishes that DVDs sent as presorted First-Class Mail letters to subscribers will not be subject to the non-machinable surcharge when returned. The other rate category provides that DVDs mailed as First-Class Mail flats to and from subscribers will not be subject to an additional ounce charge.

      The PRC order gives the US Postal Service 60 days to comply with the order.

    • by poetmatt (793785)

      Here's the laymans version of dingfelder's reply from me: gamefly is basically netflix for video games. So if you have a console + gamefly, you have a lot of options. It even works for online/multiplayer games. I think it's even the same $10/month as netflix, or $15/month or so?

      The post office was charging them extra to send the discs, they sued, they won - they were being treated differently than netflix, and they obviously aren't. It was a stupid post office move - you have a company which is entirely dep

  • Discrimination? (Score:3, Interesting)

    by Ventriloquate (551798) on Thursday April 21, 2011 @04:11AM (#35890650)
    Is this discrimination against Gamefly or favoritism of Netflix?
    • by meerling (1487879)
      Yes
    • by hedwards (940851)

      Why would there be a difference? In either case Gamefly isn't getting the same treatment as another outfit in a similar line.

      The main reason why I don't subscribe to Gamefly anymore is that the USPS takes as a matter of routine a full 6 days to deliver mail from any of the gamefly warehouses to me. Rather than the promised 4 days that it should take in the worst case. I wonder how much that costs them.

  • It cannot exist without raising fees year to year and dicking people around.

    My local postmaster is a totally uncommitted douche who will stand around and yak with a pal while there's a line six deep. I know, because I've gone through that line while he did it and I could hear every word of his entirely personal conversation.

    My local carrier has been changed up repeatedly and now I have a couple of them, one is okay, the other is a douche who can't go up and down my driveway without sliding around in a Jeep despite the fact that every FedEx driver and one of my two UPS drivers can make it in their poorly designed box trucks (poor for the country, anyway) without any difficulty.

    Finally, about 90% by number or 99% by volume of the mail I get is spam. Do you have any idea how many trees are cut down yearly to produce that shit? And yes, they really are cutting down trees, and yes, a significant percentage of that is not farmed timber, which does not make the best paper. And a truly puzzling percentage of this spam is printed on heavy, glossy paper. I could do without that nonsense. I really have no need whatsoever to receive anything from the USPS.

    • It cannot exist without raising fees year to year and dicking people around.

      Yeah, the billion dollar profits over each of the last 5 years shows they've clearly overpriced themselves in the market, and won't survive long.

      Personally, I think the fact you can get letters delivered up to 5,000 miles away for less than $.50 is pretty amazing, but if you want to think that's overpriced and they're screwing you, go right ahead.

      • Yeah, the billion dollar profits over each of the last 5 years shows they've clearly overpriced themselves in the market, and won't survive long.

        But they're doing 45 billion in business a year... 1 billion of that is under 3% markup. I don't think I'd call that "overpriced"?

        • by geoskd (321194)

          But they're doing 45 billion in business a year... 1 billion of that is under 3% markup. I don't think I'd call that "overpriced"?

          Actually, they're loosing [usps.com] 4 to 8 Billion per year, so if you look at their $67B in revenue form 2010, then $8B in losses amounts to 12% operating loss. That kind of performance put GM into bankruptcy in less than 2 years. The post office hasn't turned a profit since congress semi-privatized it in 2006, and cut off its lifeline to the US budget.

          The post office operated as a bureaucracy for so long, that the management there is incapable of surviving any real competition. Even in a market, where their m

      • by hrvatska (790627)

        Yeah, the billion dollar profits over each of the last 5 years shows they've clearly overpriced themselves in the market, and won't survive long.

        The USPS has been operating at a loss. They lost $8.5 billion in 2010. It's about to deplete its $15 billion line of credit with the U.S. Treasury by borrowing the remaining $3.5 billion At this rate it will go broke at the end of 2011. Congress refuses to let the USPS run in a sensible fashion. They are mandated to deliver mail on Saturdays and they are required to keep open every rinky dink little post office in existance, except in exception circumstances. If FedEx and UPS had to operate in a similar

        • by geekoid (135745)

          Not really. The PAEA (‘Postal Accountability and Enhancement Act‘) forced the USPS to pay 5.7 billion a year and not hold a surplus. They also make payments based on 800K employees as opposed to the actually umber of employees, 400,000.

          So basically congress screwed the USPS over in 2006. It was a step towards privatization of the service. Another small step from people who don't know history.

          http://www.usps.com/postallaw/_html/PostalAccountabilityAndEnhancementAct.htm [usps.com]

          and how much does this piss

        • Sorry, I just went back to the website the "5 years of billion dollar profits" sentence came from, and it was an old article on about.com. My mistake for following a few links and not checking the source.

          They have lost money the last 3 years, as the annual report states (which is what I should have looked up.)

      • by geoskd (321194)

        Yeah, the billion dollar profits over each of the last 5 years shows they've clearly overpriced themselves in the market, and won't survive long.

        Personally, I think the fact you can get letters delivered up to 5,000 miles away for less than $.50 is pretty amazing, but if you want to think that's overpriced and they're screwing you, go right ahead.

        For all of those out there who don't understand the post offices financial situation, They are regularly and routinely funded by congress to make up significant shortfalls in their operations. You can look at the USPS annual report [usps.com] for more information. Specifically, Page 86 where you can see that the USPS has had four solid years of 9 digit losses, and that the USPS currently owes the US treasury over 13 Billion in interest free loans. That is *after* the US congress voted in 2009 to forgive $4B in USPS d

        • by HiredMan (5546)

          If that doesn't amount to the US tax payers subsidizing a failed business model, I don't know what does.

          I don't think it sounds like that at all - I think it sounds like a schizophrenic "business" model. The USPS supplies mail to virtually everyone - that's their mandate. They maintain post offices in tiny places you wouldn't even consider towns and charge an extremely reasonable fee to move mail regardless of distance or address. They are an organ of the US government that has decided that almost all citizens should access to mail communications and I agree. What's crazy is to believe that they can do both t

          • by drinkypoo (153816)

            Moving scraps of paper mail around is an outdated concept. Today, people should have access to the internet if they want to participate in modern society. Packages are already moved more efficiently and effectively by private carriers. The only thing the USPS is "good" at, and by "good" I mean they do it at a loss year for year, is delivering spam.

    • yeah, LESS competition is good. we don't need a choice in mailing. everyone should use the 2 (later, 1, after they all merge) company to ship.

      such wisdom, sir. may I subscribe ...

    • Soooooo... we're going with anecdotes? Ok, I can do that. I have never once had a problem with the USPS, even on things where I clearly screwed it up. I've never seen them sit there and talk and ignore customers. I've never seen any of the nonsense that people routinely complain about and to be honest, I don't believe it. I've had the "privilege" of moving about once every three years or so, so I've had my fair share of regular postal employees to deal with and it's always been great. Contrast this wi

      • by geekoid (135745)

        The few times I need to go to the post office, it's been speedy and professional. When my delevery guy saw a change in mail pattern he came to the house and asked us about it.

        Seriously, for 50 cents, an 8 year old child can write, in crayon, and address of their grand mother, and it get accross the country and in her mailbox in 3 days is a good deal.

        Yes, I would like to see some changes int he USPS. Specifically a three day a week delivery, and more workers walking the routes.

      • by drinkypoo (153816)

        I've never seen them sit there and talk and ignore customers.

        That must be nice for you. I made eye contact with the postmaster several times while he was jaw-jacking. I regularly get slips that say a delivery attempt was made while I was home and the gate is open. The douches who drive the mail over Cobb Mountain will NOT repeat NOT pull over not matter HOW many people are stacked up behind them, in spite of being required by law to do so at five followers. My first carrier was a sour bitch to me until I stopped and called in an engine failure for her... bitch by def

    • by geekoid (135745)

      You cans top the spam. Of course if you did the reasonable steps to do that, you wouldn't have anything to whine about.

      Who am I kidding, people like you can always whine about something. Spam isn't the USPSs fault. People chose to spend money and send you something. There responsibility is getting it to you, not to judge content and try to evaluate who would want said content.

      As surprising as it may be for you, other people use the USPS. It's not about YOU.

  • Bad ruling (Score:2, Insightful)

    by afidel (530433)
    Why should the USPS be forced to subsidize a business that's unwilling to make simple technical changes that would reduce their cost to process their bulk mail? If you cost them more money you *should* be charged more, especially when you are told what fixes you can make to accommodate them and get the better rates. The postal service is subsidized by the taxpayers and any shortfall from a bulk customer like Gamefly will either be shoulder by us directly through larger appropriations or through rate hikes.
    • by sjames (1099)

      They're not being forced to subsidize anyone. They're being forced to either subsidize everyone in that class or none of them. They are perfectly free to choose none.

      The real question is why were they freely choosing to subsidize Netflix?

  • They decided to revoke the non-machinable surcharge on Gamefly discs, to match what is being done for Netflix and Blockbuster discs. However, I think they should have decided to impose the surcharge on all three. I used to work for the Postal Service, and I can say that there really is additional manual processing required for the DVDs, and that they should probably all be processed as flats (e.g. like magazines) instead of like letters. The biggest problem is the fact that they don't meet the Postal Ser

  • Here's the real deal. Mailing a DVD cheaply is hard. There's a huge price differential, about 4x, between the postage for a "flat", such as a DVD in a reasonably sturdy cardboard envelope, and 1 ounce USPS first class letter postage. First class letter postage is only available to mail pieces which meet certain size criteria which allow them to go through automatic sorting machines.

    Netflix developed a package which, with DVD inside, weighs under 1 ounce, and sort of meets the criteria for first class l

    • by WhiteDragon (4556)

      Here's the real deal. Mailing a DVD cheaply is hard. There's a huge price differential, about 4x, between the postage for a "flat", such as a DVD in a reasonably sturdy cardboard envelope, and 1 ounce USPS first class letter postage. First class letter postage is only available to mail pieces which meet certain size criteria which allow them to go through automatic sorting machines.

      Netflix developed a package which, with DVD inside, weighs under 1 ounce, and sort of meets the criteria for first class letter postage. "Sort of" means that it sometimes jams up or gets broken in the machinery. However, the USPS allowed Netflix to get the first class rate, and then manually pulled most returning Netflix mailers from the mail stream for manual processing. (Returns are the problem - on the outgoing side, Netflix is sending uniform pieces in bulk, pre-sorted, to get the best rate. Returns just come in from mailboxes, unsorted.)

      There is a postal "non-machinable" surcharge, however, which should have probably still applied to the Netflix mailers.

      Here's the relevant part of postal regulations:

      Nonmachinable Criteria

      A letter-size piece is nonmachinable (see 6.4) if it ...
      e. Is too rigid (does not bend easily when subjected to a transport belt tension of 40 pounds around an 11-inch diameter turn).

      From my experience working at the Postal service, I'd say that the Netflix discs (again, this is talking about the returns to netflix, which

  • I've read the ruling [prc.gov], kinda prepared to find out that the Ars Technica article had misunderstood or misrepresented something important about the situation, but it doesn't.

    Actually, it pretty much says "Netflix made business decisions that made it unsuitable for the carefully negotiated deal Blockbuster and Netflix got, didn't want to prepay the way they did, used heavier mailers, and in general was unwilling to make the USPS job easier like the other companies. The situations are not even remotely comparabl

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