Blockbuster's Backbreaker: No-Late-Fee Policy
By Karen Richardson for the Wall Street Journal, January 5, 2006
Some investors say Blockbuster Inc. should bring back the fees it charged customers for returning videos late, noting that those penalties generated a sizable and steady stream of revenue.
Blockbuster last year ditched the late fees in a concession to competition from video-by-mail chains such as Netflix Inc. that allow customers to keep movies for as long as they like after paying a flat monthly rate. [Late fees brought in] $250 million to $300 million a year for the Dallas-based company -- about 15% of annual revenue when the fees were still in place.
Now, with the company's finances in tatters and its stock price down more than 60% last year, some investors and analysts are arguing for a companywide return of the fees for tardy customers.
Blockbuster's shares have fallen about 47% since the start of 2001, with the sharpest decline over the past two years.
I'm pleased to see Blockbuster fail, it has been detestable since its inception.
Blockbuster has always charged as much as it imagines the traffic can bear. Its late fees were brutally high, and it raised the price of rentals substantially when it removed the fees. Did it think we wouldn't notice?
Blockbuster employees hereabouts are teenagers who don't give a damn. There is no avenue whatever for customer feedback to get to anybody who cares. If, in fact, there IS anybody who cares.
Worst of all, Blockbuster drove out the independent video stores in our area - stores which had knowledgeable and entertaining movie buffs behind the counter and which carried lots of old movies, foreign movies, documentaries, and other things I actually wanted to see.
Blockbuster has instead arrogantly stocked its stores with hundreds of copies of the most idiotic current releases, ignoring "long tail" customers altogether. It followed the old Henry Ford business model: "You can paint it any color, so long as it's black."
When I discovered Netflix a few years ago, I not only abandoned Blockbuster, I started cheering to see its stores empty. Will this be one small example of a chain which went down because the customer didn't matter at all?
UPDATE: Blog friend Judy adds:
After they sold Blockbuster, the men who initially started that company decided to get into the floral business. They bought out many long established shops all over the country, announcing a conglomerate that would greatly benefit the former owners, managers etc.
Guess what? Within 2-3 years many of those people had to go out of business. Some of them bought their businesses back, but others were virtually lost forever.
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