In a poor economy, Blockbuster resorts to defrauding customers

It's a wonder that Blockbuster still exists. Between Netflix and free online movies, the store has become obsolete. I have one on my block that I haven't set foot inside of in years. I was fed up with their poor selection, $5 rental fees and outrageous late fees. Even now, whenever I walk by the store it is always empty.

Blockbuster, we know you've been hurting. But really, did you have to start defrauding customers? The video rental chain agreed yesterday to pay $300,000 in a lawsuit brought by the district attorneys of Los Angeles and San Diego counties. "The judgment is an important step toward pricing accuracy and fairness in the marketplace," said District Attorney Steve Cooley in a statement. "Consumers should be able to rely on the accuracy of the prices charged at the check stand."

It took a five-year investigation to fault Blockbuster with unfair business practices in both counties. Blockbuster was found guilty of charging customers higher than the advertised prices on scanned items. Blockbuster owes $237,750 in penalties, and $62,250 in costs, and is further prohibited from charging amounts greater than the advertised prices.

It's clear that Blockbuster has been hurt by customer's easy access to quality movies. But they've done little to update their model. Meanwhile they still pay billions in real estate while the money flows out of their stores. Last year alone, they lost $374 million on revenue of $5.3 billion.

Here are a few more reasons why Blockbuster doesn't have long to live.

Their selection is lackluster. While they claim to have over 90,000, Netflix has 100,000 titles. While that 10,000 may not seem like a whole lot in the scheme of things, it certainly makes a difference when you're looking for special interest films, a rare documentary, or a singular foreign flick. Plus, Netflix has 12,000 movies you can watch instantly.

Having been hit hard, Blockbuster completely copied Netflix's model, but poorly. They copy their renting models and price structures. Netflix even sued Blockbuster in 2006, for going too far in mimicking their patented queue which priorities which films customers want to watch first. But customers aren't buying it. In the first quarter, Blockbuster stock was down 28% to $0.82, meanwhile Netflix, with 10.3 million subscribers and growing, was up 4.8% to $38.86.

Around the same time Blockbuster announced they were doing away with late fees, a multi-million dollar business for them, in order to compete with Netflix. And then they silently reintroduced them. Called "restocking fees" Blockbuster gives you a seven day grace period for your film, and after a week they charge fees deducted from the cost of the film. After 30 days you have to pay the full price of the film.

It's unclear whether the defrauding practice was specific to blockbusters in Los Angeles and San Diego, or if chains nationwide were in the habit of marking up movie prices. Have you ever been overcharged by Blockbuster? Let us know below. In the meantime, don't forget to double-check your receipt.
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