Netflix would never send a collections letter
Last week I received a collections letter; alarmed, I opened it and to my surprise it was from Blockbuster.
I have always been extremely careful to pay bills in full and on time, and I can only remember receiving one other true “collections letter” which was simply due to a mix-up over charges that was quickly remediated. So the receipt of this letter was so offensive that it tempts me to terminate my account with Blockbuster.
Blockbuster claimed I owed $16.23 on my account with them. Whether this was in late charges, or one of those fees related to “we guess you’re buying the movie since you didn’t return it promptly”, I’m not sure. Blockbuster’s payment terms have always been confusing to me. In fact, a couple of years ago shortly after implementation of Blockbuster’s current late fee policy, an employee even discouraged me from paying off a small balance during a visit to a store, saying instead “don’t worry about it, just pay next time you come in”.
What we see here, really, is a business model gone awry. It was widely reported last week that Blockbuster has recently announced they will be closing 960 stores; this move comes as no surprise to the industry as it simply proves what many have known for a while — that the bricks-and-mortar video rental business is in steep decline with heavy competition from mail-based and kiosk-based video rental companies. And this article pegs the market share of the various types of companies operating in the video rental space as follows: “[video rental kiosks] now comprise 19 percent of all video rentals nationwide, with subscription services such as Netflix accounting for 36 percent and brick-and-mortar stores like Blockbuster and Hollywood Video 45 percent”.
This would have been unthinkable several years ago, but the reality of CONVENIENCE and LOW COST demonstrated by Netflix and their sub-$10/month plans, along with the popular, $1 movie kiosk RedBox (owned by Coinstar, Inc.) has won out in the long run.
It is interesting how often the most convenient product also turns out to be the least expensive. Why? Because new products and services often make use of new or innovative technology (online movie selection in the case of NetFlix) or new distribution channels (online movie viewing for TiVo, NetFlix and others). As a result, they avoid “legacy costs” such as the pricy rental of a physical storefront, employees that may stand idle for 40% of the time when not helping customers, etc. Along with that, a savvy pricing and payment collections model (recurring, inexpensive credit card charges for Netflix, or the swiping of a credit card in a RedBox machine) ensures that customers will not be bothered with collection letters that accuse you of committing a financial sin due to a delay in returning a movie to that physical store much out of your way.
It should be obvious Blockbuster won no points whatsoever from me with their collection letter. If anything, they furthered my preference for the Netflix service we subscribe to as a family. Who wants to deal with a company that is unclear on what they will charge you and when they will require it to be paid? This is where business finance meets personal finance. The fact of the matter is, I wouldn’t mind a bit if Blockbuster asked me during my next store visit (if and when that ever occurs again) to give them my credit card or debit card number so they could automatically take care of miscellaneous balances, etc. when I racked up late fees. I wouldn’t mind a bit.
Anything is better than being threatened with a collections letter from a collections agency, when you’ve received nothing from Blockbuster stating you have a balance due, and when store employees in the past have actually discouraged you from paying off your balance.
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