Blockbuster to drop all late fees

[Guest JMT]

Blockbuster drops late fees

No. 1 video rental chain to give 1-week grace period; says increased business will offset lost fees.

December 14, 2004: 9:23 AM EST

NEW YORK (CNN/Money) - Blockbuster Inc. announced Tuesday it is abolishing late fees on all its video tapes, DVDs and video games as of Jan. 1.

The world's largest video rental company will still have due dates for their rental products -- one week for games and two days or one week for movies, depending on whether it's a new release.

But customers will be given a one-week grace period after that to return the product. After that grace period ends, the chain will automatically sell them the product, less the rental fee. If the customers don't want to purchase the movie or game, they can return the product within 30 days for a credit, less a restocking fee.

Blockbuster has been competing with the growth of by-mail rental services such as Netflix, which allow customers to keep movies as long as they want in return for a monthly fee. In August, Blockbuster started offering that kind of monthly rental service itself. It said Tuesday that service will continue in addition to this new individual rental policy.

"For the past year, the company has been testing a variety of rental options in markets across the U.S.," it said in its statement. "In no-late-fees test markets, the increased rental transactions and retail sales offset the lower level of revenues resulting from eliminating late fees."

It estimated that late fees would have contributed about $250 million to $300 million to revenue next year.

The company said it also plans to lower its ongoing marketing, operating and promotional costs after implementing the change.

The company said as a result of the move it expects operating income in 2005 to be flat compared with 2004 results after an estimated $50 million it will spend to market and implement the change to a no late fee system.

Blockbuster, which was spun off earlier this year by media conglomerate Viacom, is in the process of bidding for competitior Hollywood Entertainment, the No. 2 video rental chain. Hollywood Entertainment has entered into a merger agreement with buyout firm Leonard Green & Partners as well as Hollywood's top management to take the company private.

[ryan2772]

it's pretty funny that blockbuster has to re-invent itself. it's like a dinosaur, and it is quickly becoming extinct. pretty soon they'll just give people videos, and just flat-out hope that they'll make some kind of profit.

bye bye blockbuster.

[Guest swirlundergrounder]

When I used to worj in a porn store back in 1997 the main source of how the store made money was in late fees. People would rent videos for 6.99 an night. The video had to be back by 5pm the next day no matter what time you rented them the previous day before and the late fee was 8.99 per day over due. If you didn't return the video within 7 days we would automatically charge 100.00 on the renters credit card for the movie..How crazy is that???? The store made so much money since it was in the rich part of town...