Since the dawn of the home-video era in the 1980s, as the proliferation of VCRs and DVD players spread to the point where just about every American home was equipped with one, Blockbuster was, well, a blockbuster. The company dominated its sector of the economy, gobbling up competitors and forcing many mom-and-pop video rental stores out of business.
Those days are long gone.
On the heels of a disastrous fourth quarter and the announcement that the chain would beclosing hundreds of stores, Blockbuster’s latest move to curb its heavy bloodletting could easily be interpreted as an act of desperation: It’s going to start charging late fees again on rentals, something the company hasn’t done since 2005. At the time, Blockbuster claimed that dropping late fees would cost them $250-$300 million per year in lost revenue. Clearly, the company misses that annual infusion of cash.
Here’s how the new late-fee structure breaks down:
• Starting this week, customers will be charged $5 for a five-day movie rental. Previously, customers were allowed to keep each rental for seven days.
• If the customer returns the movie late, they’ll be charged $1 per day until it’s returned, up to a maximum of 10 days.
• If the customer still hasn’t returned the movie by the 15th day, they’ll be charged the full price of the DVD, which could range from $29.99 on the high end for newly released Blu-ray discs, to just a few bucks on the low end for a DVD on the clearance rack.
|Blockbuster is changing its late-fee policy.|
• If the movie is returned within 30 days, the customer will receive a store credit equal to the price of the movie they were charged for, minus $10 in late fees. So if the customer was charged $19.99 for a replacement DVD, they’ll have $9.99 credited to their Blockbuster account.
While saying that the move was a necessary one in order to remain competitive with Netflix and Redbox, Blockbuster spokesperson Michelle Metzger tried to downplay its significance, saying the new fee policy is not all that different from others in the industry, and would ultimately make for a more enjoyable customer experience.
“We think this is very forgiving. You have 45 days to bring it back. It’s similar to what Redbox does,” she said. “This is an incentive to get movies back faster so others can rent them and to get the customer back into the store faster.”
Currently, Netflix customers pay flat monthly fees that range from $8.99 to $16.99 to receive movies through the mail or via the Internet. There are no late fees, but customers are charged $14 if they lose a DVD. Redbox, which dispenses movies through its more than 22,000 vending machine-like kiosks across the country, charges a flat fee of $1 per day. For lost DVDs, Redbox charges its customers $25.
Whether or not the reinstatement of late fees helps to revitalize Blockbuster financially remains to be seen. Industry analysts have been pronouncing the company all but deadfor some time, and yet it has managed to survive, barely. Blockbuster is still alive and kicking, and that certainly counts for something.