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Blockbuster Fights Back

29 Aug, 2005 By: Erik Gruenwedel

Blockbuster Inc., reeling from a disastrous second quarter and soft rental market, will increase by $3 the two-titles-out in-store Movie Pass subscription to $27.99 at select stores beginning Sept. 6. The move follows a similar price increase for Blockbuster Online earlier this month.

Blockbuster spokesperson Randy Hargrove downplayed the increase, saying the company continually evaluates its numerous pricing plans.

“Even though we are adjusting the price on Movie Pass, we still think it offers a terrific value for our customers,” Hargrove said.

The No. 1 video rental company also would appear to be jettisoning VHS despite claims to the contrary. Calls to random Blockbuster stores across the country revealed little or no VHS product available — except for select children's and Spanish titles — and a consensus the format was all but history.

“It's definitely phasing out,” said an employee at a Michigan Blockbuster. “It's basically down to kids' stuff.”

“Yeah, we carry a few [VHS],” said another Blockbuster staffer at a store in Orange County, Calif. “Well, wait … not that many. Actually, they are pretty much gone.”Hargrove denied Blockbuster was exiting the VHS rental business. He said the company continued to determine product mix as well as format mixes in each store based on customer preferences.

The elimination of late fees cost Blockbuster 15 percent in rental revenue in the second quarter, according to a company filing — a fact that prompted scuttlebutt regarding possible reinstatement of late fees at select stores.

About 515 franchise stores in the United States participated in the “end of late fees” program as of the second quarter, according to company filings.

Blockbuster, which reported $9 million in quarterly revenue from related sales and restocking fees of nonreturned rental product following expiration of the 30-day return period, expects a surge of in-store and online rental comps beginning in the fourth quarter.

Hargrove said the company had no plans to alter the “end of late fees” program, which he said in the first six months of the year had increased rental activity among active members.

“Half of our franchise stores participate [in the ‘no late fees' program], and that has been consistent since we launched the program,” Hargrove said. “For the other half, it is up to them whether they want to participate or not. They are independent business people doing what they think is right for their business and their customers.”

Rival Movie Gallery, which continues to charge late fees, has avoided the media backlash directed at Blockbuster's use of the issue as a marketing ploy largely due to its No. 2 status, said retail analyst Dennis McAlpine with McAlpine Associates.

“I never heard anyone say Movie Gallery gouges the public because they charge late fees,” said McAlpine. “[Blockbuster was] damned if they did and damned if they didn't.”

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