Video rental - the law of fast-diminishing returns

By IRENE CHAPPLE

Movie videos are precious things.

They may be a cheap $29.95 at The Warehouse, but for video store owners the cassettes on which their livelihoods depend are pure gold.

They buy the cassettes for up to $150 each. New releases are hired for around $8.

When customers hold on to them - inadvertently or otherwise - the costs escalate.

Penalties exist to try to recover those costs but they go nowhere near matching the income lost when videos are not on the shelves.

The issue has been in the news over the past few days after Video Ezy Belmont owner Peter Robson entered a property to recover three videos which were long overdue.

Mr Robson had his "wrists slapped", will pay for security locks at the home and has waived the $99 overdue fines.

But he also received wide support.

Video store owners agree: the public undervalues their product.

Most store owners expect to write off thousands of dollars a year in lost income and stolen tapes. This cost is not worked into the fee for hiring tapes because it is not meant to happen.

And in a highly competitive market, passing such costs on to the public may not be an option.

Baycorp is asked to recover $600,000 a month for video store owners nationwide.

And the stakes have risen as video stores have branched into hiring out DVD players and PlayStations.

Blockhouse Bay United Video store owner/operator Harry Wadan last month lost a PlayStation and games worth about $1000. The thief then scouted several other video stores, taking games and equipment worth several thousand dollars, before heading to China, he says.

Mr Wadan does not expect to get the goods back.

The store has 20,000 members and about 4000 people hire videos and equipment every week.

Some of those people move flats and lose the videos, others may be staying in hotels and, on checking out, take the videos with them. Others simply forget to return them. It is an infuriating part of the business, he says.

He has written off $35,000 in the last eight years.

Mr Wadan does not have time to visit people's houses.

If the automated telephone reminders do not work, and the alternative number is invalid, the local constable is called in. But that is a last resort.



Danny Blakemore, who has worked in the business since 1983 and now manages Blockbuster Video in Newmarket, says the public perception is all wrong. Customers do not think they have to drop videos back on time.

Mr Blakemore offers a comparison: "If it was a hired BMW, and it was returned late, they'd have to pay straight-up."

Video tapes are not cheap, and have a limited life, he says.

While most of those who return tapes late, or lose them, have genuine reasons, the store nevertheless loses "megabucks" each year.

Video stores offer training for debt and goods recovery. Mr Blakemore has never visited a customer's house, but says personal contact is important. He phones debtors to remind them when videos are late.

As with most video store owners, his firm gives details of difficult or repeat offenders to Baycorp.

Video store owners are in an invidious situation, says Bryan Jones, general manager of Baycorp Collection services.

Customer information is often fallible and the propensity for people to give misinformation is high.

Baycorp takes a 15 to 22 per cent commission for any money recovered.

Mr Jones says he does not recommend court action for any sums under $250. Even so, he has been asked to go to court on behalf of people owed just $150.

Court action will usually be taken if DVDs or PlayStations are involved.

Six court cases a year would be a lot, he says.

Nana Matenga, of the District Court's civil jurisdiction, estimates 20 per cent of debt recovery claims are instigated by Baycorp.

The plaintiff pays $120 to file an ordinary claim, which then prompts a 30-day period in which a statement of defence can be received.

Around 75 per cent of statements are not defended, and the plaintiff then pays $40 to enter judgment by default.

Recovering the money is the next challenge. Assets such as cars can be seized, or a charging order placed over land.

Many debtors arrange payment after receipt of the statement of claim, when they realise the plaintiff is serious about recovering the money.

Another option is to file summary judgment proceedings, applicable when there is no defence to the charge. While this is often the situation in debt recovery, plaintiffs will pay more upfront - a filing cost of $220 - and then have to prepare an affidavit.

A court appearance is compulsory, while an ordinary claim can be discontinued.

And when chasing debt through the courts, the plaintiff is paying lawyers' fees and taking his or her skills from the business.

Ross Craig, of Craig Griffin and Lord, acts for video store owners. He queries the point of going to court and advises video store owners trying to recover small sums not to use a lawyer.

"You'd be crazy to get a lawyer involved," he says.

There may be a principle involved - but principles cost.

Common sense is the best approach, says Alec Waugh, chief executive of Business Information Service.

Use informal pressure on the debtor. If necessary, go to the person's house and bang on the door. Make it personal.

Show a copy of the invoice and, if the person is in financial strife, organise drip-feed payment.

If a small business is struggling with low-level debtors, the problem will be within its system, says Mr Waugh.

Glen Senior, who gives seminars advising small business and has written books on the subject, agrees.

Small business owners must ensure their credit systems are such that debtors are unlikely. Ensure the computer systems pick up defaulters and ban them from future business.

When defaults occur, write a letter. If that does not work, get a lawyer to write a letter. If the money is still not recovered and it is a minimal amount, let it go.

Mr Senior says Peter Robson overreacted. "He should have just had a beer instead."