Shareholder Pressure Mounts to Bring Back Late Fees

By Davis Freeberg

If there is one issue that has plauged Blockbuster more then anything, it is the topic of late fees. Customers hated them, but investors loved them and shareholders are starting to go public about their desire to see the fees reimplemented. This type of thinking would provide a short term boast for the stock, but would be a devasting blow to Blockbuster’s long term prospects. For years, Blockbuster had the muscle to force these fees on their customers without having to worry about how popular they would be, but with the emergence of Netflix, Blockbuster has been forced to change the way that they do business. As soon as they did away with program, problems immedietely cropped up. Shortly after launching their $50 million campaign, they were sued for false advertising. Then it turns out that a lot of their franchisees didn’t want to cut 15% of their revenue just because corporate decided that they had to end the late fees. Now with their online service stalling, we are begining to see shareholder dissent emerge.

Cutting lates fees has hurt Blockbuster’s bottom line and has been discussed on every conference call for the last year. It has been a big distraction for the company and has shifted focus away from growth initives. Shareholder activist Carl Ichan, thought that ending the program was a huge mistake for the company. Bringing back the fees would be a PR nightmare for the company and while some might feel that a short term cash boast would benefit the company, I think that it would only drive more people to Netflix’s monthly payment business model.