I previously wrote about the U.S. Postal Service lawsuit in which it had accidentally used an image of the wrong Statue of Liberty in its Forever stamps for several years.

There's a stunning detail in the court opinion on that case that merits a closer look. Because if you focus closely enough on it, you might wind up wondering how come the postal service can't find a way to turn a profit.

And to be clear, it doesn't turn a profit. During 2017, the U.S. Postal Service operated at a $2.7 billion deficit--the 11th year in a row it's been underwater by at least 10 figures.

$3,554,946.95.

So, the lawsuit. Instead of using the real Statue of Liberty, the postal service accidentally used an image of the replica of the statue from the New York-New York hotel in Las Vegas. 

A court found that it owes the artist behind the replica about $3.5 million for copyright infringement. And the detail I think needs a little more examination has to do exactly with how the court computed the $3,554,946.95 in damages. 

It based that number largely on a 5 percent royalty against $70.9 million worth of Forever stamps that the postal service says it sold, but that it doesn't expect customers will every use--a concept called breakage, or retention.

Maybe "breakage" strikes a chord with you. I'm sure I've bought a fair number of stamps over the course of my life that I didn't wind up actually using----they get lost, or stuffed in drawers. 

A significant number wind up in stamp collections. 

But I hadn't imagined the scope. That $70.9 million is a pretty big number and it amounts to maybe 2.6 percent of the 2017 USPS deficit. 

"Pure profit."

No, the numbers don't line up precisely; we're talking about breakage numbers from around 2012 and 2013, against deficit numbers from 2017. But they're close enough to consider.

Moreover, breakage number seems to be assumed in part of the postal service's planning, because the agency "employs a firm called Synovate to track and calculate how many stamps will not be used to send mail," according to the court decision in this case. 

This is because "stamps retained by collectors or otherwise never redeemed represent virtually pure profit for USPS."

Plus, the 3.24 percent breakage rate for Statute of Liberty Forever stamps "is not high," the court found, although it represented "a high degree of profitability since the volume of [these kinds of] stamps is very high."

The mailbox business.

I wrote a book about Harvard Business School and entrepreneurship. One of the professors there used an example of what he called a perfect business: a post office box to which people sent you checks each month, without ever asking why.

The idea was that such a thing could never exist, but you'd try to judge the model of whatever entrepreneurial plan you came up with against that fictional ideal.

The things is, the postal service here seems like it has some piece of that kind of business. 

If I came to you and said I wanted to start a company where I could do almost $71 million in sales----but would legally never be called on to deliver the service I was selling, that would be a pretty interesting business.

There's more to it than that, I'm sure. But I can't help wondering: Is that kind of advantage scattered all across the agency? 

And if so, what do we have to do to find a way to make the USPS run in the black?

Published on: Jul 9, 2018
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