I've been a Netflix user for over 3 years. I used to live in an apartment complex where I think our regular mailman caught on to the fact that he could pick up some free DVDs if he just grabbed those pretty red mailers.
I'm not accusing the US Postal Service of illegal activities here...this is just my guess! I guess it's possible that the post office's sorting machines weren't dealing well with the NF mailers, but I never had any problem receiving new discs from them!
About every third DVD never got back to Netflix. I reported them as "I returned the DVD but Netflix hasn't received it". In most cases, Netflix will acknowledge the lost disc and send the next one in your queue right away. After about 8 or 9 of these over a period of 6 or 8 weeks, my account was frozen and I had to call. I spoke with customer service and explained that I was sending them back, but they weren't getting them. Customer service said "okay" and opened my account back up.
After we moved, my "lost" disc problem ended. When I check my account, it still says that I have several discs that were never returned, but I've spoken with Netflix customer service and they said that I would not be charged for them.
So, I think you're best bet is to report them as "lost in the mail", unless you want to be 100% honest and possibly be charged for them. I would imagine that these type of expenses are built into their operating costs and are acceptable up to a point.
