I’ve seen a lot of interesting ways for companies to make money, but my jaw just about hit the floor when I read a complaint on the Consumerist this morning that said Hollywood Video has begun implementing a .25 insurance charge against defective DVDs that won’t play. What blows my mind here is that if I go to just about any business in the US and buy a product and it ends up not working, you can always take it back and exchange it. Even at Blockbuster Video, they’ll give you another copy of the movie if you get a damaged disc. Does this mean that if you don’t pay their .25 tax that they won’t give you a refund on defective products they sell you? The whole policy sounds pretty funny money to me.
In looking through my Netflix history, I’ve had a damaged disc rate of about 3%. Now I rent a lot of movies, so this means that every couple of months I’ll hit a dud. When I do, I tell Netflix, they immedietely send out another disc and while annoying, I get to watch my movie with minimal effort on my part. I don’t know Hollywood Video’s damaged rate, but if you assume a 3% rate and you pay $3 a rental, then insurance would theorhetically break even around .09 a disc. For a customer to breakeven paying .25 per disc, they would need to experience a failure rate of over 8%, which if that’s the case, I’m not sure I’d be renting from Hollywood Video to begin with.
In all fairness to Movie Gallery, they are donating the proceeds from this scheme to charity, but that doesn’t mean their decision to not accept exchanges is right and the Consumerist rightly points out that Movie Gallery does receive the tax benefit of the donation (or at least they would if they made profits) This whole program sounds like another stupid tax to take money out of the pockets of hard working consumers and Hollywood Video should come up with a better way to deal with their defective products then making customers buy insurance. I’d rather see them raise prices by .25 and have the same return policies that most businesses have, then to resort to these types of shady tactics to help boost their revenues.
#1 by Bobby McGhee on July 21, 2006 - 7:44 pm
Then don’t purchase it.
This is a very common practice by companies (esp video rental) of charging DAMAGE PROTECTION (not “insurance”, as that is regulated by the government, nor is it a “tax”, as that is what is collected by the government), but rather a voluntary purchase to protect you from paying for a DVD that is damaged IN YOUR POSSESSION!!! IE, if it doesn’t work when you get it, you just take it back and tell them about it. However, if you have kids that like to break things or play frisbee with the discs, or a dog that likes to chew things, or are pretty much an airhead that drives off with stuff on top of the car (I have seen this more than a few times), this MIGHT be a good idea for you.
And, yes, it is incredibly profitable, but so are the “Protection plans” sold by Best Buy, Sams Club, etc. And Best Buy, especially, gives you the hard sell. If you don’t want to buy this protection, when the clerk ASKS you (no hard sell… if you are given a hard sell, it is being done wrong, and you should talk to the store manager), simply say “no”. It’s not that difficult, your parents should have said “no” to you a LOT growing up (although their not doing so would explain the “entitlement” attitude you are showing here), and that has been the basis of the drug control policy in the US for a generation. If just saying no is good enough for Nancy Reagan, it should help you get thru the check out process at your local video store.
And you want to complain about a company making a profit on selling your so-called “insurance”, why not start with Best Buy, which gives you a hard-sell, or better yet, attack State Farm, which really does make a profit selling insurance. HOW DARE THEY!!!!
Just furtuer proof that a little knowledge is a dangerous thing.
#2 by Trevor Yale on January 8, 2007 - 3:32 pm
“Movie Gallery Wants You To Buy Insurance For Their Defective Products”
Umm…no actually the insurance is in case anything happens to the disc while it is in YOUR posession. Do your research before slamming a company………
#3 by davis freeberg on January 8, 2007 - 4:47 pm
Trevor – If you’ll note the date of this post, you’ll notice that this was written way before any details about the program were publically available, so research wasn’t really something one could do a lot of. Having said that though, it’s problematic to say that the insurance is only for when it’s in your possession because many times, you don’t know if a disc is bad until you take it home. If I rent a bad disc and then take it back, how is Movie Gallery to know whether or not it became defective in my possession or if it was a bum disc to begin wiht? If the insurance only applies to discs that the dog chews up and are obviously destroyed, then I question the ethics of how this program is being marketed. On the other hand, if Movie Gallery doesn’t allow people to take scratched discs back, then there is a real issue here for customers who get defective products to begin with. I’ve had plenty of times where a movie would skip midway through the film, is Movie Gallery going to watch every DVD completely through before renting to customers? I doubt it. My fear is that customers are buying the insurance because they believe they might be at risk if it turns out defective and something doesn’t sit right about that. I have a funny feeling that if customers knew that this was only for completely obliterated discs, then they’d be much less likely to purchase the insurance. In all of my years of renting, I’ve never destroyed a movie, but plenty have had scratches. I’m sorry if you feel like I’m slamming your company, but it’s hard to see the justification for the policy.
#4 by crazy guy on July 18, 2007 - 4:16 pm
It clearly states on everything I’ve seen in the Hollywood Video stores in my area that it is a damage waiver – not insurance. It’s not insuring the disc against working or not (there can be software and firmware issues not related to scratches that could cause that). It’s a damage waiver – waiving your responsibility against damages that you will cause on the disc. That could be dropping it in the toilet, running it over with your car, the kids tearing it up, etc. My local store has always taken back anything that skips – that’s the nature of DVD. This is just like a damage waiver on a rental car – Enterprise is going to let the normal wear and tear go but not the big dents, etc.
#5 by John on November 13, 2007 - 7:14 pm
My dog DID chew through a disk, and THAT .25 cents saved me 20$
I am glad someone looks out for their customers!
#6 by Davis on January 4, 2008 - 11:02 pm
I seem to be having trackback issues with this template, but Melanie has some good commentary on this issue on her Daily Guilt Blog.
http://www.dailyguilt.com/2007/03/29/why-girls-shouldnt-rent-video-games/
Understandably, she also doesn’t see much value in buying insurance for rentals.
#7 by Tricia on July 14, 2008 - 6:40 pm
This is a WAY old post, but I’m just coming across it now. I work for Movie Gallery as a store manager in Minnesota. The .25 “damage waiver” is called Playguard. It simply protects you from having to buy a disc should it come back scratched, damaged, or broken in any way. We do check EVERY movie before we check it in from the previous renter, so we know how it goes out. It is in no way a “Scam”. We are simply trying to help out our customers. I have loyal customers who buy it every visit. They do not want to take the risk that their kid or dog is going to ruin it, or that even themselves will not.
#8 by Richard on October 21, 2008 - 2:08 am
OK, here’s another take. Off topic to some extent, but I am fascinated that no one seems to notice this…
I’ve been a netflix customer for 5 years. Lately, I’ve found that (especially older titles) movies are increasing in their ratio of damaged to playable. It used to be that maybe once per month I’d get a damaged dvd, but now it’s up to about 3. Please follow…
I am on the “two at a time” plan. When I report my movie as damaged, I don’t get that movie replaced in addition to the “two at a time”, rather it replaces the next movie in my queue. So, those three movies per month are three LESS movies I get to watch in that given month.
Here’s a situational example. Let’s say the top 4 movies in my netflix queue are Married With Children – Season 5. I receive dvd’s #1 and #2 on Monday. I watch #1 on Monday and return it Tuesday. On Tuesday I find out that dvd #2 is damaged half way through. I report it immediately to Netflix. They send out the replacement on Wednesday as per their policy. The also send out my next movie in my queue, which is Married With Children DVD #3. So (let’s say) Thursday I receive DVD #2 and DVD #3 when I should actually be (if the DVD wasn’t damaged) getting DVD’s #3 and #4.
Sounds petty doesn’t it? Not when it happens anywhere from 3-6 times per month. Multiply that by how many customers Netflix has that reports a damaged DVD and I bet that the figue would be quite large.
So in essence, I am getting less but paying the same per month due to no fault of my own (on top of the fact that how irritated I am to have to wait several days to finish watching a movie in the first place).
I understand that it’s a risk I take by agreeing to rent movies through the mail… but think about how much money Netflix saves by not sending out the damaged dvd, separate from the “limit” of how many movies you can have out at a time. Over the course of a year, that’s a lot of money we’re paying over what we should.
Here’s the simple solution in a perfect world. Regardless of how many movies you can have out at a time… if you receive a damaged dvd, it should be replaced as soon as possible and you will receive the next movies in your queue as if the “damaged” dvd never happened (instead of waiting for the same movie “again”). Or, they could charge you less at the end of the month because for every damaged dvd you received over that month, you received one less movie than you should have.
It’s almost criminal based on how many customers Netflix has and having no real competition that they can get away with this. Add up the postage and the fact that you are still paying the same amount each month and that’s a lot of money for Netflix to keep for themselves.
If it hit them in the pocket book… maybe they’d have more incentive to be sure that damaged dvd’s are a minimal problem. Maybe they’d invent some kind of technology that automatically loads returned dvd’s and scans them for errors before they go back out into circulation.
It’s to the point now, that when I receive a damaged dvd, that I don’t even report it. Manny times they have to send the title from a further location and it can take up to a week or so for delivery and because it takes the place of one of the dvd’s you can have out at a time, it’s not froogle to report it at all.
Why am I the only one (and I’ve searched google pretty good) that seems to see the “problem” with this policy?
As long as you’re paying a “set amount” per month and you receive a defective item due to no fault of your own, it should come off of your bill or the replacement should not count against the limit of how many you can have out at a time.
Geesh.
#9 by Richard on October 21, 2008 - 2:16 am
If there are any attorney’s out there that want to start a class action loss-suit, here’s a really easy one. (referring to my post above) Please advertise this issue and you’d have hundreds of thousands of examples and quite a large amount of money to collect for Netflix charging for items (or items per month) not received, essentially.
If the owner of the site wants to use my email as a contact, I hereby give permission to do so if any attorneys want to hear more about this.
Yeah, I’m starting a campaign, dammit.
#10 by Davis Freeberg on October 21, 2008 - 4:50 am
My understanding is that Netflix has a fail rate of approximately 5%. Some of the more popular series like the Soprano’s tend to fail at a higher rate because of higher usage, but considering how fragile DVDs actually are, 5% isn’t all that bad. In the past Netflix has said that they get about 20 – 25 turns out of a DVD before it goes bust which would also support this 5% number.
I think the point to take away from my post is that at Movie Gallery, they would have charged you the full price for the defective DVD while at Netflix, they replace it for free. Imagine how upset you’d be if it cost you $19.99 everytime your Married w/ Children’s disc failed to play. It’s a bit of a hassle to have to wait for the replacement disc in the mail, but if you’re renting 6.5 movies per month (approx average rate for Netflix customers), then it’s something that should affect you less then once per quarter. While it’s no doubt frustrating to have to wait for the replacement disc, if the issue really matters to you, I’m sure that you could call Netflix support and they’d send out the next disc in your queue.
Ultimately, Netflix doesn’t make money off of the failed discs because it causes higher churn, it means they have to buy another DVD and they pay for postage again. I feel pretty confident that this is a problem that they put a lot of resources towards minimizing.