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Waiting Out the No-Late-Fees Deal

13 Feb, 2005 By: Kurt Indvik

It remains to be seen if it really is “the end of late fees” as we know it for Blockbuster. The groundbreaking marketing move by the chain is being met with skepticism by some competitors and customers, and now, it appears, by a number of states attorneys general who are looking into the program.

This week's Home Media Retailing cover stories delves into the challenge for Big Blue as it continues to promote its no-late-fees program.

An online poll conducted several weeks ago on this magazine's Web site indicated that a majority of rental dealers were not going to respond in-kind to Big Blue's “the end of late fees” program — at least, not right away. While about 25 percent of respondents said they would match Blockbuster's deal or create a comparable program, the other three quarters said they would not change their late fee policies or were going to wait and see what impact the chain's new program was going to have on their business before responding.

Many rentailers feel the way one dealer articulated in a posting on the Video Software Dealers Association discussion board, “When did it become taboo to get paid for services rendered?” The prevailing opinion is if customers were trained to look at “extended viewing fees” as paying extra for extra time with the product, they wouldn't feel the industry was punishing them unfairly for being “late.” And as consumers see rampant promotions for $5 DVDs (or lower), the perceived value of the product is diminished, further exacerbating the feeling that they're being ripped off for keeping something of minimal value a little longer.

Like it or not, Blockbuster's “end of late fees” program was a stroke of marketing chutzpah that will go a long way to elevating the chain's position in the eye of the public (and, oh yeah, make them look a little less rapacious to federal regulators considering Blockbuster's bid for Hollywoodr). That's not to say there won't be some backlash to the program if it comes to pass that Blockbuster has to enforce the small print in the deal for a larger than expected customer base.

Can the rental industry afford to continue to maintain that 10 percent or more of its revenue base through extended viewing fees (no matter how fairly applied), or has Blockbuster ruined it for everyone? At this point, it seems most rental dealers are still holding the line and asking for that extra amount from a customer who holds on to their property longer than agreed upon. And rentailers are reporting that some customers are leery about the whole program. But if Blockbuster manages to make the no late fee program work for the long run, then rentailers may be forced, eventually, to follow suit with something comparable.

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