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DALLAS-With late fees set to go away in two weeks, Blockbuster customers should check the fine print at their local store before making a decision to procrastinate. The corporation’s announcement affects only the 4,500 owned locations while 1,100 franchisees are under no obligation to play.

The number of “participating” stores is still being tallied, Randy Hargrove, senior director of corporate communications for the Dallas-based Blockbuster Inc., tells GSR. And though franchisees are encouraged to participate in the new initiative, there’s no guarantee they will follow the parent’s lead to eliminate late fees and cut into the bottom line.

“Why should they,” Dennis B. McAlpine, a media analyst with the Scarsdale, NY-based McAlpine Associates LLC, says as a side note to a stinging stock analysis issued one day after the announcement. Three other Blockbuster analysts did not return telephone calls for comment about the corporate decision, a multi-pronged perk benefiting “procrastinating” customers and setting up the first major push to try to level the playing field as technological advances threaten to topple the video king from its throne with more consumers buying into Pay Per View and On Demand.

Regardless of how it’s sliced, diced and served, there is cause for concern, McAlpine says. Blockbuster, by its own admission, reaps $250 million to $300 million each year from late fees. Corporate chiefs say they will recoup the loss by increased foot traffic.

The decision to vacate the fee, McAlpine says, “is so obtuse. I have difficulty coming up with a logical reason.” His report, which made it to Blockbuster’s corporate office, says “we have the feeling that something must be missing from this news because what the company has said so far is not positive.” The upshot is McAlpine held firm to the “hold” he’s placed against Blockbuster stock and aired doubt that more customers will flock to Blockbuster because of the decision.

Hargrove says the decision resulted from market research in numerous cities that showed the elimination of late fees brought more traffic through store doors and was more favorably received than other test perks. The move isn’t necessarily aimed at driving more “movie pass” subscriptions, a ticket to unlimited movies and reserved pickup times that also picked up some buy-ins because late fees or “extended viewing” costs were eliminated. At last count, 8% of 20 million Blockbuster customers opt into one of its in-store or online subscription services, all aimed at staying one step ahead of the competition, whether it’s Comcast, DirectTV or Netflix.

“Whether someone is on or off the pass,” Hargrove says, “it’s really going to be a lifestyle decision.” Market research showed customers delayed returns, on average, just 1.5 days so the consensus is it won’t significantly impact store inventories. “We’re confident there is sufficient amount of product in our stores,” he stresses.

Customers of participating Blockbuster stores will still have due dates, but will get a one-week grace period for movie and game returns. Hargrove says telephone calls and postcards will be issued to malingerers. Then, it’s time to pay the piper by buying the product or returning it to the store. The deal includes a 30-day return policy for credit not cash.

McAlpine questions that tact too. “The other thing that is very interesting is the purchase price varies and depends on the date that it’s rented,” he says. “By the time two weeks has passed, some DVDs are cheaper.” In his opinion, depreciation on releases gives the clear advantage to Blockbuster and effectively could cost customers as much as $3 over retail after their two weeks have elapsed.

John Antioco, Blockbuster’s chairman and CEO, says the elimination of late fees not only makes the register experience more pleasant for workers and customers, but removes the most common complaint. “When Jay Leno or David Letterman talk about late fees, it’s Blockbuster they talk about and not our competitors,” he said during last week’s conference call to announce the decision. “It’s the best way to address the competition and build for the future…It’s bold action to deal with these competitive threats.”

How will customers know if their store is participating come Jan. 1 when the $50-million advertising and rollout plan goes into affect? “If a store is participating,” Hargrove says,” you’ll know.”

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