Tuesday, December 14, 2004

There's no late fee except for the late fee

In the comments to yesterday's entry about Netflix, Levi directed me to to this story about Blockbuster's elimination of late fees. Tell me if something doesn't sound wrong with this:
DALLAS-- Blockbuster Inc., the nation's biggest movie rental company, says it will eliminate late fees on games and movies as of Jan. 1-- but if you keep them too long, you buy them.

Blockbuster announced Tuesday it will continue to set due dates, with one week for games and two days or one week for movies, but will give customers a one-week grace period at no additional charge, beginning New Year's Day.

"Doing away with late fees is the biggest and most important customer benefit we've ever offered in our company's history," John Antioco, Blockbuster Inc. chairman and chief executive, said in a prepared statement. "So as of the first of the year, if our customers need an extra day or two with their movies and games, they can take it."

However, renters who keep the movies or games past the grace period will automatically be charged for purchasing the DVD or tape, minus the rental fee, Blockbuster said.

Customers will still be allowed to return the movie or game over the next 30 days for a refund of the purchase price, but will be charged a "minimal" restocking fee, the company said.

If it walks like a duck and talks like a duck...

Sounds to me like a longer rental window, not an elimination of late fees. After all, what is a "'minimal' restocking fee" but a late charge under a different name?

Blockbuster executives must know that they're fighting for their company's survival at this point. The first major hit they took was DVDs being priced for sell-through rather than rental. I can't imagine that this so-called elimination of late fees is going to fool anybody. For example, I've had HEAVEN'S GATE from Netflix for about two months. (I've made abortive attempts to watch it but start getting drowsy early into its epic running time.) Under this new Blockbuster policy, I'd have already purchased it. If I did return it, I'd still end up paying an additional fee. This is better for the consumer how?

There is a way to beat Netflix at its own game, or at least improve upon it. Offering a "like it, buy it" program is one area where a theoretical Amazon.com DVD rental business could get a leg up on the competition. Netflix isn't set up for sales whereas Amazon already stocks DVDs for purchase. It wouldn't be hard for them to offer subscribers a discount on the purchase of a DVD they've rented. I want to say that Netflix offered something like this back in their early days--when you rented on a title-by-title basis rather than subscribing to a monthly plan--but maybe it was an idea that was floated to their customers instead of a reality.


  1. Anonymous11:25 AM

    Charles Odell here:

    Netflix did offer a "buy it, like it" program early on. (I bought Freeway that way.) They dropped it within a year, though -- I suspect it wasn't popular enough to justify the expense of keeping the regular DVD packaging.

  2. I thought that was the case, but I wasn't sure. My point with Amazon is that they could have parallel DVD rentals and sales rather than selling you the rental DVD, which is what it sounds like Netflix did. Since Netflix isn't oriented to sell, they'd be at a competitive disadvantage.

  3. Anonymous11:30 PM

    BF Bob TH here:

    I wonder what the cost is for 'buying' the late movie. Is it the MSRP for the movie or even Blockbuster's price on the rack? I seem to remember that rentals cost the dealer considerably more than a dvd licensed for home use only. Is that still the case?

  4. That's a good question. I would assume they'd be charging MSRP, which makes for a tidy profit on any title they may have rented many times. Unlike VHS prices, which were priced for rental, I would imagine Blockbuster is buying DVDs at a price similar to what regular consumers pay.

  5. Anonymous7:12 PM

    Bob in NM again, so here's where it gets really good. The 'No Late fee (except for the late fee)' is only at participating Blockbusters. According to the Albuquerque Journal, the stores here in New Mexico have pulled/never carried the promotion, claiming that they would have to raise rental rates in order to make it happen. In other words, There's no late fee, except for the late fee, unless it's there always was a late fee. The NM advertising association predicts a pretty strong backlash against local Blockbusters because of this.