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In a move in what they say is to combat increased competition, Blockbuster has announced that it will no longer charge late fees beginning January 1, 2005, but don't think that you can keep that video or game forever. Instead of charging late fees, the customer will have a one-week grace period after a rental due date. If a movie or game is still not returned by the end of this week, the item will be automatically sold to the customer. The customer then has a month to return the item where a credit to his or her account will be given.
Blockbuster says it expects to make up the lost revenue from late fees (the company estimated it would have collected $250 million to $300 million in late fees in 2005 if they did not make the change) with an increase in store traffic, reduced promotional and marketing expenses and a greater focus on managing its operating expenses.
While at first glance it would appear that Blockbuster is losing a stream of income, this new system could be an even bigger cash cow depending on the price the charge for the sales. If the sale after one week is at full retail price, they have created a way to sell used rental items at full price instead of at a reduced discount price. If a significant number of people don't return the movies or games, this could create a substantial new income stream for the company.
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As with most money matters, not returning items by their due date will have significant negative consequences for your pocketbook. Take the "no late fee" announcement with a grain of salt.
Blockbuster says it expects to make up the lost revenue from late fees (the company estimated it would have collected $250 million to $300 million in late fees in 2005 if they did not make the change) with an increase in store traffic, reduced promotional and marketing expenses and a greater focus on managing its operating expenses.
While at first glance it would appear that Blockbuster is losing a stream of income, this new system could be an even bigger cash cow depending on the price the charge for the sales. If the sale after one week is at full retail price, they have created a way to sell used rental items at full price instead of at a reduced discount price. If a significant number of people don't return the movies or games, this could create a substantial new income stream for the company.
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As with most money matters, not returning items by their due date will have significant negative consequences for your pocketbook. Take the "no late fee" announcement with a grain of salt.
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