Pratie Place extracts from a WSJ article on Blockbuster's recent financial woes:

Blockbuster last year ditched the late fees in a concession to competition from video-by-mail chains such as Netflix Inc. that allow customers to keep movies for as long as they like after paying a flat monthly rate. [Late fees brought in] $250 million to $300 million a year for the Dallas-based company -- about 15% of annual revenue when the fees were still in place.

Now, with the company's finances in tatters and its stock price down more than 60% last year, some investors and analysts are arguing for a companywide return of the fees for tardy customers.

I am of a mixed mind about this.

On one hand, it reminds me a bit of rebates in that it is backdoor income. It counts on people spending considerably more than they intend to in order to keep the situation afloat. From an ideological standpoint, I wish that they would charge whatever they need to just so that they can make their profit and so that people know how much they're going to pay going into it. Ahhhh... but would I pay twice as much to go to a place that charges less (or nothing) in the way of late fees? I might, but I would be in the minority, which reminds me of the other hand.

I was recently reminded of a fallacy that I see in the minds of many: that companies make a good profit on their main source of income and every other source of income is just ripping the consumer off. One example of this is a friend of mine who was recently complaining about paying $2 for a refillable softdrink when they knew that it was only costing the restaurant pennies. Or the assumption that cable/satellite companies are adding too many channels just so they can charge more. Gas stations are robbing their consumers and then overcharging for food items in the convenience stores. And, of course, the assumption that Blockbuster's seemingly exorbant late fees were just another revenue stream in their ocean of profits.

You ever see on television when a bunch of bored guys goad a somewhat gullible character into picking a fight with someone else? Or maybe you've seen this happen in real life. It's the ultimate pleasure. They get what they want (entertained) while they bear none of the rists should the goadee fail to lay a punch.

I've noticed that people often take this attitude with corporations. They harbor none of the risk, so they are unsurprisingly cavalier about how much a company might be hurt if they change their way of doing things. Restaurants, for instance, have one of the lowest margins of profit of any business. The $2 they're charging for a coke isn't just to make money, it's to make sure they don't lose money on all the things that the customer isn't paying for (the building, electricity bill, etc.). It is my contention that cable and satellite companies bundle channels because the marginal costs of additional channels are such that you wouldn't save more than a few dollars by giving up 2/3 of your channel line-up. Gas stations make most of their money in convenience stores, which is why you see a lot more convenience stores that don't sell gas than you do gas stations that don't have an attached convenience store.

The list goes on and on, but let's look for a moment at Blockbuster. For the record, I absolutely hate Blockbuster. I not only want to believe that they are liars and crooks, I actively do believe they are. I got burned by an Office Space DVD I rented a few years ago that ended up costing me $30. I know that accidentally forgetting to return it for a couple weeks did not cost them that much.

But lo and behold, they touch up their late fee policies and they're actually hurting. It's almost as if giving the customers what they want may not always be in the best interest of the company and even may not be fair to the company if they're losing money at the expense of their customer base. Imagine that.

My point here is not to defend a company that I detest. In fact, this isn't even about Blockbuster or the cable/satellite companies or gas stations or restaurants. It's to lay to rest the stupid notion that customers give anymore a rats patoot about the company than vice-versa, the stupid notion that the consumer wants to play fair and it's the companies that refuse to, and the stupid notion that the customers have any clue of how the businesses they swear up and down are ripping them off actually operate.