Why Blockbuster Must Bring Back Late Fees

In the last couple of years, Blockbuster (BBI) has taken quite a pounding. While this is mainly due to the introduction of Netflix (NFLX), a large portion of its suffering can be attributed to its own mistakes.

Mistake #1: No more late fees. This has got to be one of the worst corporate decisions of all time. I’m amazed at a strategy that can reduce revenue and decrease the level of customer service at the same time. If you don’t know what I mean, go to Blockbuster on a Saturday night around 11PM and try to rent a new release. It won’t be there because people like me who used to always return their movies on time now take about a month to do so. I used to go on Saturday nights just to get the guaranteed-to-be-in-stock free coupons (further reducing the company’s revenue). Eventually I just stopped going because my coupons would expire in a month and I would never see the movie in stock. Anyways this late fee strategy doesn’t even compete with Netflix since the rentals are way more expensive. This brings me to mistake #2.

Mistake #2: Charging ridiculous prices for a rental. $4.49 is just too high. They are causing people who rent 4 movies a month to switch to the mailing option of $15.99. 2-way postage for 4 movies is about $2.72(Actually I’m not too sure about postage). So the company ends up with $13.27 or $3.32 per movie. The correct price for a rental shouldn’t be more than $3.73. I imagine the huge price increase can be attributed to mistake #1.

Blockbuster can easily correct these two mistakes.

They must bring back late fees. They can easily explain to customers that the no late fees thing was causing a large number of out of stocks. If customers are still unhappy they can probably be persuaded to use the $15.99 mailing option.

The benefits from this change will result in: increased revenues from late fees, less out of stocks, decreased inventory, more customers and happier customers. (Also, they’ll stop calling me when my movies are late. How annoying is that?)

They must reduce the rental price to $3.73. In order to compete effectively with the online market this price needs to go down. If they bring back late fees they will easily recoup the difference.

The benefits from this change will result in happier customers, more customers, more rentals and possibly more revenue in late fees.

Blockbuster is in a position which should make it easy for them to beat their competition. Today I'm launching the bring-back-late-fees campaign. So if anyone knows anyone that works at Blockbuster, would you please forward this to them.

Disclosure: Author holds a position in BBI

Comments

[DaVIdeoBiz:]

Blockbuster is single handley distoying the Video Rental Business. First by eleminating late fees and Secondly by have in store subscription plans at a cheap price. The main buffer for on line subscription customers not to abuse subscription plan usage is the mail. The most you can get and see is about 2 a week. Where a subplan customers in a REAL store can come 5 times a day and get the premium movies and cut into profits real fast..So not only does the industry leader need to bring back late fees they need to correct there sub plans by charging more money for plans that include new releases for the first thirty days...If i ran BlockBuster I could turn it around in a day and make it the cash cow it was when Mr. H was in charge!!!!!!!

2008 Feb 07 11:16 AM

[formerBBIuser:]

BBI's former late fees were the reason I went to Netflix. Not because there shouldn't be a latefee, but the way they charged for another entire 3 day rental if you were just 1 hr late in returning video. An email and telephone complaint to their management was effectively ignored, especially my recommendation that they charge for 1 late day at a reasonable price and not to make the hefty profits from consumer errors in returns. They made it clear to me that I was doing them a favor if late. To those of us on a budget, this was aggravating, embarrassing and costly. To them it was profit and too bad how you feel. With energy costs up, making 2 trips to stores now begins to make Netflix cheaper and acommodating.

2008 Feb 26 01:31 PM

[Rick Marshal:]

formerBBIuser, I totally agree with you except for the "too bad how you feel." part. If you re-read your post I think you'll agree this isn't the way you feel about other humans either. You are obviously pretty open-minded and have a good understanding of the emotions one might experience when renting a movie a BBI. My personal "pre-no-late-fee" customer service experience at blockbuster was crap. I feel that the "no-late-fee" was an attempt to compete with Netflix on an inappropriate level. It’s almost like U-haul lending you a truck for as long as you like in an attempt to compete with UPS. While U-haul and UPS accomplish the same objective to the customer, they are completely different companies. I know my example is way extreme. But if you reserve a truck a U-haul wouldn’t you like it to be there? Blockbuster and Netflix are competitors, but they need to maintain perspective. Grocery stores and restaurants on some level are also competitors. My point is late fees are necessary for Blockbuster. People understand why they need them and why the world is a better place when I can watch “No Country for Old Men” in 2008. I look forward to hearing from you.

2008 Mar 07 04:25 AM

[Rick Marshal:]

Looking over my post I realize my UPS\U-Haul analogy is pretty retarded. Looking for some help here, maybe UPS could offer a 3-shipments-a-week to a U-Haul 30-days late-is-okay counter offer? Maybe someone will come up with something good. -Latefeeguy

2008 Mar 07 05:03 AM

[Subzero215:]

I was told by a manager at blockbuster in NC that they are bringing back late fees next week.. and that the charges for rentals are going down.

With my school and work schedule the way it is I can only watch movies / return movies on certain days so i'd keep them for a month. So now with late fees back.. i'll be doing online only.. or completely skip blockbuster from now on.

2008 May 24 11:13 PM

[Subzero215:]

I've done some research and have seen that some stores have already done this.. and maybe it's going to be every blockbuster next week... im not really sure.
www.hackingnetflix.com...

2008 May 24 11:20 PM