Variety is running a story suggesting that Blockbuster may be in financial trouble. Here are a few bits from the story:

# The end of late fees is coming back to haunt Blockbuster in a big way, and that's making the Hollywood studios very nervous. Eliminating late fees has thrown Blockbuster into such a cash crunch that studios have taken extraordinary steps to make sure they get paid for their big fall DVD releases.
# ...one studio successfully demanded Blockbuster pay cash up front on Thursday and began shipping product Friday.
# [Dropping late fees] That strategy is expected to cost the chain about $400million in revenue this year.
# Meanwhile, the retailer has been taking urgent meetings with studios and other product suppliers in the past couple of weeks, appealing for extended payment terms beyond the typical 60 days and making deals to ensure it will be able to offer the biggest titles of the fall to its customers.

I was in a Blockbuster franchise a couple of weeks ago, and they made it clear that they had discontinued the "No Late Fees" campaign. Made it clear with as much visibility as the "No Late Fees" campaign was announced, as well as having the cashier make sure to get verbal confirmation that we understood.

This has been a very expensive idea for Blockbuster, but I'm not sure if they can be blamed. They took off, and dominated the rental market, with a couple of really good ideas -- the pay-per-rental model, etc. Unfortunately, they honned their skills as a storefront operation that they were already too committed when the next shop with a couple of really good ideas (NetFlix) showed up.

More than Amazon versus Barnes & Noble, this is the big B2C "Bricks versus Clicks" battle. Except everyone knows that NetFlix won; even if Blockbuster Online improves and wins all the marketshare, NetFlix as a model won. The major-chain video store model is more dead than the major-chain book seller...

...unless they start putting mini-Starbucks in the stores...

or, more realistically, if they could change their stores into on-demand movie theatres. DVD is killing the multiplex theatres. But imagine if you could go to a video store, and rent a small theater with a big screen. Not everyone has a home theatre, and certainly not as nicely appointed as this could be...

Hacking NetFlix : Variety: Studios Stew over Blockbuster Woes