Blockbuster has filed Chapter 11. This is barely news, because we have all been seeing this coming for a couple of years. The reasons for the bankruptcy are fairly obvious: debt, outdated business model, alienated customers, constantly shifting pricing structures, unpredictable rental policy changes, tainted brand, etc. The question should not be, "Why did Blockbuster go Chapter 11?" but "How did Blockbuster stay out of Chapter 11 for so long?"
Now, what does all of this mean for you? If you are a common shareholder, you are probably about to get screwed and lose your investment. If you are a customer, things are less certain. Chapter 11 is a reorganization status. Blockbuster is not shutting down at the moment, but the company is likely to spend the coming months trying to restructure their organization into a profitable business. Look for a lot of store closings, changes in policies, changes in pricing, changes in store inventory, and changes in ways of doing business. (Wow! That sounds like business as usual for Blockbuster.) Maybe these changes will benefit the customers. Maybe the changes will be a big headache for customers. The good news is that you have choices. If Blockbuster changes in ways you do not like, just go somewhere else.
This Chapter 11 filing gives Blockbuster one last chance to get things right. If Blockbuster can take advantage of this opportunity, they might be able to figure out a way to please customers while being profitable. If Blockbuster cannot figure out how to rehabilitate their business model, then the eventual end of Blockbuster in inevitable. We will just have to wait and see.
Showing posts with label pricing structure. Show all posts
Showing posts with label pricing structure. Show all posts
12/22/2008
The Brazen Return of Blockbuster Late Fees
If you have visited a Blockbuster store in the last few days, you have probably noticed that Blockbuster has managed to eliminate the seven-day return grace period and slip late fees back onto the menu. The fees are not called late fees, but that is what they are. At Blockbuster stores, you now have the option of renting videos on a daily or weekly basis. (Although, it should be pointed out that Blockbuster thinks a week is five days.)
The daily rentals are less expensive than the weekly rentals, but both rates come with extra charges for each day the renter keeps a DVD beyond its return date. The weekly rate gives the renter a few extra days to return a DVD, but since it costs a couple of dollars more, choosing the weekly rate is effectively the same thing as choosing to prepay late fees at a discounted rate.
This most recent pricing structure is essentially a return to Blockbuster’s original pricing structure where customers rented videos for short time periods and then paid late fees when the videos were not returned by the deadline. The only significant difference is that the new structure effectively allows customers to pay their late fees in advance. The old late fee structure is one of the main things that customers used to hate about Blockbuster. It seems that this new structure also has the potential for angering customers who are not diligent about returning videos on time.
The good news is that Blockbuster’s new pricing structure is fair, in that it allows customers who wish to rent DVDs for only one night to do so at a lower price while still allowing others to pay more to keep DVDs for days. The bad news is this structure presents a significant problem for Blockbuster. A few years ago, Blockbuster spent a lot of time and money bragging about the end of late fees. If late fees were so awful a few years ago, how are they perfectly fine now? Certainly, many customers are going to see through this hypocrisy.
Another problem with this new pricing structure is that it reveals a considerable problem at Blockbuster. Blockbuster has made several major changes to their pricing and policies over the last five years, and they can just not seem to find a structure that is both attractive to customers and also profitable. Furthermore, the frequent changes at Blockbuster make rental prices and policies seem arbitrary and capricious. At some point, Blockbuster’s customers are likely to get fed up with all of the changes and seek out more stable and consistent alternatives for video rental.
The daily rentals are less expensive than the weekly rentals, but both rates come with extra charges for each day the renter keeps a DVD beyond its return date. The weekly rate gives the renter a few extra days to return a DVD, but since it costs a couple of dollars more, choosing the weekly rate is effectively the same thing as choosing to prepay late fees at a discounted rate.
This most recent pricing structure is essentially a return to Blockbuster’s original pricing structure where customers rented videos for short time periods and then paid late fees when the videos were not returned by the deadline. The only significant difference is that the new structure effectively allows customers to pay their late fees in advance. The old late fee structure is one of the main things that customers used to hate about Blockbuster. It seems that this new structure also has the potential for angering customers who are not diligent about returning videos on time.
The good news is that Blockbuster’s new pricing structure is fair, in that it allows customers who wish to rent DVDs for only one night to do so at a lower price while still allowing others to pay more to keep DVDs for days. The bad news is this structure presents a significant problem for Blockbuster. A few years ago, Blockbuster spent a lot of time and money bragging about the end of late fees. If late fees were so awful a few years ago, how are they perfectly fine now? Certainly, many customers are going to see through this hypocrisy.
Another problem with this new pricing structure is that it reveals a considerable problem at Blockbuster. Blockbuster has made several major changes to their pricing and policies over the last five years, and they can just not seem to find a structure that is both attractive to customers and also profitable. Furthermore, the frequent changes at Blockbuster make rental prices and policies seem arbitrary and capricious. At some point, Blockbuster’s customers are likely to get fed up with all of the changes and seek out more stable and consistent alternatives for video rental.
8/03/2007
Blockbuster’s Not So Total Access
Blockbuster Online is changing their pricing structure. The most significant feature of this new structure is placing strict limits on free in-store exchanges for online subscribers.
Under the new plan, regular Total Access subscribers will be limited to five free in-store exchanges per month. Once the subscriber reaches the allowance for the month, the subscriber can then pay a discounted price for each additional in-store exchange. (This is unconfirmed, but it appears additional in-store exchanges will cost approximately $1.99 per DVD.)
Those Blockbuster customers wishing to have unlimited free in-store exchanges will need to subscribe to Total Access Premium. The Premium plan is an additional $7 per month.
What do you think about this new Blockbuster pricing structure? How does the new structure affect you? If you are an existing Blockbuster Online subscriber, did Blockbuster automatically grandfather you into Total Access Premium, or did you get downgraded to a lesser plan like Total Access?
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