Blockbuster of a settlement

Video rental giant offers $500 million out of court to offset inflated late fees

CASE CLOSED Adrienne Allred, who frequents the Blockbuster on Mangrove Avenue in Chico, says she’d welcome the coupons the corporation has offered movie renters as part of the settlement of a case accusing it of unfair late fees.

CASE CLOSED Adrienne Allred, who frequents the Blockbuster on Mangrove Avenue in Chico, says she’d welcome the coupons the corporation has offered movie renters as part of the settlement of a case accusing it of unfair late fees.

Photo By Tom Angel

Back by noon: About 19 percent of Blockbuster’s revenue comes from its late or, as the company now calls them, “extended viewing” fees.

If you’re a Blockbuster Video customer, you might want to pause the next time you rent and read each of those many receipts the clerk hands you along with the “these are due back” instructions. Otherwise you won’t know about a recent out-of-court settlement between the video rental giant and a Texas attorney who filed a class action lawsuit against Blockbuster. There’s a possibility that you may be eligible for a share of store coupons good toward a future rental.

Blockbuster has proposed issuing coupons as compensation in a $500 million settlement of Kim Ann Scott vs. Blockbuster, Inc. The suit charges Blockbuster has charged inflated overdue rental fees to 40 million customers since 1992.

Filed in Jefferson County District Court in Beaumont, Texas, the suit charges that Blockbuster, the largest video rental chain in the United States, has an unfair “extended viewing policy” and unfair non-return fees.

If the settlement is approved in December, Blockbuster customers who paid late fees between April 1, 1999, and April 1, 2001 can receive up to $18 in coupons, including certificates for free “Blockbuster favorites” rentals, $1-off coupons and rent-one-get-one-free rental coupons.

To qualify for coupons, customers must return claim forms before Dec. 15. Claim forms are available at local branches and at; just click on the button reading EVF Litigation.

After the coupons are disbursed, they must be redeemed between Jan. 15 and May 15, 2002.

The plaintiffs’ lawyers, Buchanan, Burke & Tinney, argued that Blockbuster’s late-fee policy was not made clear enough to customers, so Blockbuster has also agreed to give verbal reminders and stamp the customers’ return dates on their receipts.

The lawyers will receive $9.25 million in cash in return for their services in the lawsuit.

“Blockbuster has not admitted to doing anything wrong; it is a business decision to settle this case and move on,” said Blake Lugash, the corporate spokesperson for Blockbuster.

However, late fees or, as Blockbuster likes to put it, the cost of “extended viewing,” has accounted for 19 percent of the company’s earnings in past years, according to the Forbes Web site.

In Chico, Wendy Holmes, 24, said she just heard from a friend about the lawsuit against Blockbuster and was glad to hear it. She said she is an avid movie buff and used to rent two to three movies a week at Blockbuster but stopped after being mischarged for late fees.

Holmes said she was a Blockbuster customer for a few years when she started using her MCI World Com coupons for one free rental. But, every time she used a coupon she was charged late fees even though she had returned the videos on time.

“I’m pretty anal about time, so I always return my movies back on time,” she said. “But every time I used one of those coupons, I got a late fee. I even returned a movie on the same day I rented it and still got a late fee.”

Holmes said one time she returned a video at 10 a.m., but when she went to rent again that night she had a late fee again.

"[Blockbuster] said the movie wasn’t checked in until 2 p.m., so it was almost as if they hadn’t checked the box on time,” she said.

Blockbuster now has signs on their return boxes saying that the boxes will be checked at the noon check-in time by a manager.

Because there was no way to prove she had returned the videos on time, Holmes just paid the fees. About a month ago she stopped going to Blockbuster and is now a frequent renter at All the Best Video, she said.

“I haven’t had any problems at All the Best, and I think they have better deals, like their five favorites for five days,” she said. “But sometimes [All the Best] is out of new movies because they don’t have as many copies, so I just wait instead of going back to Blockbuster.”

Holmes said she wouldn’t even go back to Blockbuster to get settlement coupons because she has no guarantee that they won’t charge her late fees again.

"[Blockbuster’s] movies are so overpriced already, so giving me a coupon for a dollar off is just making it the same price as All the Best, so, no thanks, I’ll just stay where I am.”

All the Best’s main owner, Dan Jenks, said he disagrees with the lawsuit against Blockbuster and thinks customers should be charged late fees when they keep rented merchandise longer than the agreed rental time.

“In other words, I agree with Blockbuster,” he said. “Blockbuster has a right to charge late fees; otherwise people could just take a movie and keep it to share with their family and friends.”

Jenks said the problem most people have with Blockbuster’s charging late fees, versus a smaller chain’s doing it, is that Blockbuster is not losing revenue when a movie isn’t returned on time because it has an unlimited amount of videos available from the studio. Blockbuster revenue-shares its videos with the major studios instead of buying them outright, unlike smaller video chains like All the Best, which have to buy each copy for between $40 and $70.

“When a customer fails to bring a video back to me, I’m out of money because I don’t have an over-abundance of copies to replace it,” he said.

Jenks said Blockbuster has had several lawsuits against it but has never lost—only settled out of court.

But despite all the recent lawsuits against Blockbuster, customers seem to be unaware of the current lawsuit and what they will be entitled to if the settlement is approved.

Adrienne Allred, 23, said she had heard about the lawsuit but didn’t know much about it.

“I didn’t really pay much attention to the receipt they gave me about the lawsuit, but maybe I should have because I’ve paid a lot of late fees,” she said, as she returned a copy of Me, Myself, and Irene.

Allred said she thinks turning movies in late is a result of her own negligence, but she thinks it is a cop-out when Blockbuster says it’s three-day rental and yet it has to be in by noon on the third day.

She said she felt coupons would be an adequate compensation for over-charging because she would be spending money on renting anyway.

Jamie Byers and her family have been sporadic customers of Blockbuster for five years. She said she had no idea about the lawsuit and that as family they may have received a receipt telling them about the lawsuit, but she’s never seen one herself. Byers also admitted she has a hard time getting videos back by the noon return time.

“I only let the kids get one red [new-release] movie, because they tend to be overdue, so we usually get five-day rentals,” she said. “We’ve had more problems with the three-day rental and having to return movies in at noon than we did getting them back by midnight. I don’t know if that was [Blockbusters'] motivation.”

Rental prices have been creeping up slowly, but when you have a family of five it’s too expensive to go to the movie theater, so you still come out ahead renting, even with late-fee charges, Byers said.

Paul Robertson, a teacher in Gridley returning DVDs to the Blockbuster on Mangrove Avenue, said he didn’t think the lawsuit and giving customers coupons is going to have much impact on Blockbuster.

“If they give away free coupons, they’re still getting you in the door, and that will help them offset their losses," Robertson said. "If they gave a coupon to the grocery store, that might be different."