Blockbuster is ending late fees? Kind of

• January 10, 2005
• James Skemp
• article

Somewhat major news is the fact that Blockbuster™, the popular video and game rental store, is ending late fees. While it’s certainly interesting news, reading up on this you’ll find that Blockbuster™ hasn’t really ended late fees, rather they have changed them in order to make more money[1].

For those of us new to late fees, these are basically fees imposed by a rental agency for not returning the rented items by the due date. Honestly, this makes a lot of sense. For example, imagine that you were in the business of renting movies. Now let’s say you get some of the new releases in store. It’s highly likely[2] that a number of people will want to rent these movies so that they can watch them. But what if people rent them and keep them for a couple of weeks? Not only does this stop you from renting the movies to other people, it also stops other people from being able to watch the movies.

Late fees are an attempt to remind people of this, or to at least give them some reason to not return their movies late. Unfortunately, or fortunately, people still return movies and games late and end up having to pay late fees.

The rules, however, have changed, for Blockbuster™ is advertising “The end of late fees. The start of more.™” In other words, late fees will no longer be charged, and Blockbuster™ will be giving you more (movies, games, online rental, etcetera – more services, not more fees).

Yet, you have to read further into this – you can’t let the catchy selling phrase get you. From their FAQs, we find the following information[3].

The end of late fees means that “For any reason, if you are unable to return the movies or games by their due date, you won't be charged additional fees for keeping them an extra day or two.” So if you’re a little late, you won’t be charged.  But what about if you are really late? “If you still have a movie or game seven (7) days after the due date shown on your receipt, we will convert your rental to a sale. The movie or game will be sold to you at the selling price in effect at the time of rental, which is either the retail price, or, when available, at the previously-rented selling price, less the initial rental fee you paid.”

Okay, so what have we learned? If you’re a couple of days late with your rental, you’re okay, but if you’re late for a week or more, you don’t have to worry about late fees because you now own the item. But wait, you can return the purchase, if you so desire. “We will gladly let you return the movie or game within 30 days of the sale. If the selling price has been charged to your credit card, we will credit the amount charged to your credit card when you instruct us to do so in person (otherwise we will place this amount on your BLOCKBUSTER membership account). If this amount has been charged to your membership account, we will remove the balance. However, in both instances you will be charged a restocking fee plus applicable taxes.”

What’s this restocking fee? Luckily the FAQ4 foresaw this question and supplied an answer5. “BLOCKBUSTER incurs processing, administrative and other costs when we have to convert rental product to a sale, as well as when you return the product after that sale. The restocking fee helps to cover that cost.” Does anyone else think that the ‘restocking fee’ is pretty much a ‘late fee’? I wouldn’t expect it too much, if people didn’t justify late fees by saying that they also include something of a restocking fee.

Is Blockbuster™’s move a good one for consumers? Yes. Despite the fact that after a week you’ll have purchased the rental, most people return items quite that late, usually it’s just a couple of days. So long as the ‘restocking fee’ isn’t more than the ‘late fee’ used to be, this isn’t too terrible either. The problem is any potential charge to a credit card – neglecting to have this taken care of quickly can result in some problems for the majority of the United States, since the majority have some level of credit card debt. Again, this is assuming that people don’t return the movie in less than a week. Also, this is one week after the rental was due, not one week after you rented it. So, you really have over a week to return the rental.

To conclude, for most people, Blockbuster™’s move is going to be a good one for it. Problems may exist in that the purpose of late fees – to get movies back in time – is no longer at the forefront. This means that some rentals may be hard to get a hold of, especially if people decide that they’ll just rent the item from Blockbuster™ and keep it, instead of going to the store to buy it (especially if the item is hard to get). However, knowing Blockbuster™, I’m sure they’ll purchase plenty of each item.

New Jersey

On February 18, 2005, the Associated Press released a news item on Yahoo! News. This article was seen by Gavin Schmitt and posted in his Live Journal on February 19th. On the 23rd of that same month, I noticed the link to this article.

It’s great to see that someone in New Jersey (State Attorney General Peter C. Harvey was mentioned in the article) also picked up on what I detail above, namely that there are indeed late fees. From this AP article, I found that the restocking fee is $1.25, which is certainly less than their old late fees, but a fee nonetheless.

Even more interesting, which I did not know, is that only about one-half of the Blockbuster stores are participating in this program. Interesting that some of these same stores, as the stories tells, still put up “The end of late fees” signs…

It’s refreshing to see that New Jersey stands up for it’s consumers – which is, after all, everyone who purchases anything, and hence most of the people of New Jersey and the United States – against deceitful business practices, whether intentional or not. This last point should be stressed. By no means do I believe Blockbuster had solely deceitful intentions behind its move.

However, when I read that, as mentioned above, “Harvey, however, said some stores displayed signs touting "The end of late fees" but were not participating.”, I do feel a bit insecure.

Notes:

1. This sounds completely capitalistic, but I suppose it really isn’t quite that bad. To a certain extent, their reworking is quite kind, but nonetheless could be quite dangerous.
2. For whatever reason6.
3. http://www.blockbuster.com/corporate/displayFAQDetails.action?faqId=1090566, visited January 10th 2005, and December 27th 2004 – both dates had the same information.
4. That’s Frequently Asked Questions.
5. If you answer a question that you think a lot of people are going to ask, does that mean that you can still call the question ‘frequently asked’? I’m a philosopher, but I don’t know if I can answer that question at this time…
6. Sorry, that’s rude of me to say. There are a number of good movies being released every year.

Created: January 10th 2005
Modified: February 23rd 2005