No More Late Fees!
 

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 (Research) has been competing with the growth of by-mail rental services such as Netflix (Research), 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.

Analysts surveyed by earnings tracker First Call had forecast that the company would earn 73 cents a share in 2004 and 67 cents a share in 2005. That works out to about a $6.5 million drop in forecasted earnings between the two years.

Blockbuster, which was spun off earlier this year by media conglomerate Viacom (Research), is in the process of bidding for competitior Hollywood Entertainment (Research), 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.

Blockbuster is offering $11.50 a share for Hollywood, or about $700 million, and it has said it would be willing to raise its bid subject to a review of company financial information.

Leonard Green and Partners is offering $10.25 a share for the company. Movie Gallery (Research), the No. 3 video rental chain, is also involved in the bidding.

YAY!

COOL but I no longer patronize them. :(
Come on Hollywood Video, jump on the bandwagon!!! :D

Hollywood is cheap for a reason - their selection of PS2 and nintendo games suck. The selection of movies might be better though...

We rarely go into Blockbuster anymore--- a new Hollywood video opened not too far from my home, seems to be the new place to go!

Hollywood has a longer rental period. I got hip to them in college when they opened up by my job plus they had better movie treats. :D

one of the guys in our colony works at Hollywood, so we go in and get his employee rental rate. :D

thats awesome not having to worry about late fees, I also rarely go to Blockbuster anymore

The way they're marketing this is so crazy. Sure, no late fees, we just automatically charge your credit card after 1 week. How much do they charge for that used DVD/VHS/game? They aren't mentioning that. So, you get a weeks rental or you pay for the whole thing? That's better than paying an extra dollar? What if they're charges put you over a credit limit and then your credit card adds on a service fee and then ups your interest rate and your credit report is affected for being over the limit? What if the credit card they have on file for you is actually your debit VISA and it causes you to overdraw on your account? What if they screw up (as we know they can do) and don't check it in right and one of those events happen? Are they going to credit you for the overage fees too?

The whole thing sounds shady to me! Why not give me a call to see why I haven't returned it? The only time I've been more than a day late with a video or library book was because it had fallen under the seat of my car and I didn't realize it. This way, by the time you realize that you lost it, you're screwed.

Dee

For all you Hollywood folks -- Blockbuster is "in the talks" of acquiring Hollywood Video ;)

I'm not saying it will happen, but it's a possibility :)

So is Movie Gallery. I know that because I work there. I hope that we get Hollywood, because then I would get a raise. :)

There is a Blockbuster near me, I have one of those "value" memberships, I rent a lot of movies. $19.99 for the month and you can rent unlimited movies (2 per trip), keep them as long as you want, no late fees ever, I go to BB probably 3-4X a week.