Hollywood Video Dodges Taxes On Your DVD Dime

Despite what Hollywood Video would like you to believe, there’s very few CDs or DVDs that can’t actually be repaired to good as new. A good rule of thumb is that if you can hold a DVD up to the light and you can’t see light actually coming through the scratches and gouges, that DVD can be fixed.

Nevertheless, Hollywood Video would like you to believe that broken discs happen all the time, so they’re instituting a 25 cent insurance policy on every rental. That’s a bit ridiculous in and of itself — how many times do you really need to rent out a disc before you get a return on your $20 investment, oh massive corporation? — but Bob W. wrote us in explaining a more interesting take on the entire thing.

Bob’s theory? The insurance program is giving all proceeds to Starlight, a charity that gives kids games to play. And there’s the rub: you’re financing their tax deduction by paying for a completely unnecessary bit of protection.

Maybe we should all start deducting our Hollywood Video rentals on our tax forms. Bob’s email after the jump.

First off, I recently discovered your truly excellent site, but I’ve yet to really get a feel for the ground you cover, so if what follows is not in your domain, forgive me.

Hollywood video is starting a program August 1st in which you as a renter will be asked to add an extra .25 for each movie you rent as a kind of insurance in case it is damaged beyond repair while in your possession. Signage around the store will alarm you that ‘Accidents Do Happen!’, in which case, if you don’t buy this 25-cent protection you’ll be liable for the full purchase price of the disc.

I work at the store level at a Hollywood Video, and I can assure, you, in the several years I’ve worked for the company, I can think of only two rentals that were returned damaged beyond repair. In both cases that damage was intentional and malicious. In every other case, it’s normal wear and tear that can easily be fixed with the disc-repair machine each store is provided with. Many times, damaged discs are not noticed by the employees, and the disc is put back onto the shelf, at which point someone else rents it and soon returns it for an exchange. My point is this ‘service’ is not needed. Period. It’s simply a doomed-to-fail idea meant to squeeze a few extra dollars out of the ever-declining customer base.

That’s not what bugs me, though.

To encourage people to get this disc insurance, 100% of the funds generated by this new program between August 1-31st will be donated to Hollywood’s children’s charity, the Starlight Starbright foundation ( http://www.starlight.org). After August 31st, an unspecified portion will be donated from the disc insurance proceeds. Starlight is a nice little charity that gives children in the hospitals movies to watch and games to play.

It’s also a 501(c)3 organization.

I suspect Hollywood Video, or rather it’s new parent company Movie Gallery, will be making a massive tax-deductible donation to their charity and next year will take advantage of the tax benefits of said donation, all paid for by their customers.

This is simply a theory of mine, but in line with the new corporate thuggery that’s taken hold of Hollywood lately. I lack the time, knowledge, and job security to really dig into this. I’m not even sure if it’s unethical, but it certainly seems to be an abuse of a non-profit charity for a cash-strapped corporation’s financial gain. If there’s any way for The Consumerist to investigate this, alarm people to this possible tax-scam, anything at all, I’d appreciate it.

I’m currently employed at a Hollywood Video, happily in fact, so I’d like to stay anonymous if this is something you feel like going with. If you need any more information about the program, the charity, or myself, feel free to reply to this email address.


Edit Your Comment

  1. 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.

  2. Hooray4Zoidberg says:

    Is this HollyWood Video’s attempt to commit suicide? They are already far behind Blockbuster in the storefront rental market. With online rental companies gaining more and more popularity and providing cheaper rental prices, it doesn’t take a genius to realize that this isn’t the best time to indtroduce new fees to your customers. Why give them yet another reason to look elsewhere?

  3. Felix says:

    So when a large corporation gives money to charity, that’s “corporate thuggery”? I don’t get it. Surely ALL corporate donations to charity are paid for, ultimately, by that corporation’s customers? Should we therefore tar all corporrate donations as “thuggery”?

  4. ExVee says:

    It’s probably also worth mentioning just for clarity that the investment on the part of the rental places is generally higher than the retail of the disc or VHS. In basically all cases, the stores, or more to the point the parent company has to pay a licensing fee to be able to rent the video through its locations. These fees vary by, among other things, the number of copies being licensed. So even over hundreds of stores, the actual cost of a single disc to the store is surprisingly high. Now, it’s no question that when you dig down to the base of it, this is a pretty scummy action on the part of the company, and actually a bit worse that they’re covering it with a charity donation that ends up benefitting them, especially later when the donated portion ends up as one half of one cent from each insurance fee. Anyway, my point is that if you have to use Hollywood Video, be aware that if you decline the insurance there’s every chance a manager will decide to stick you with an $85 replacement charge after you return it and he or she just happens to discover fatal damage, rather than the $20 you’d otherwise expect…

  5. TedSez says:

    If a video store pays a license fee for a DVD, it’s paying for the right to rent out that DVD, not for the physical disc itself. I imagine that they have a deal with the manufacturers in which replacing a broken disc is actually quite cheap.

  6. AcilletaM says:

    Let’s face it, we finance all companies’ charitable tax deductions. I doubt very many corporations reduce their profit out of the sheer goodness of their hearts rather than for tax breaks or good publicity.

    I think the crap thing here is how they are using the guise of charity to lull the herd into paying the fee.

  7. soccer says:

    I am a Store director for Hollywood Video that is next to a major college campus. I know in the grand scheme of things this seems like a rip off, the .25 “Play Gaurd”, but my store has on average 50-150 ” bad disks returned to us a semester. By bad I mean, Copied, broken, severely scratched – i.e. people taking a key to it.. etc.. or just giving false information and never returning the product. That also doesn’t include regular wear and tear. I also love getting Xbox 360 games back that are completely destroyed. I agree that the Charity plug is misleading and is cause for an uproar, but the program in its self can protect you as a consumer. If you have kids or rent games or still rent VHS this is a very low cost alternative to a $20 plus bill. Coming from someone who deals with this issues on a daily basis, I think .25 up front vs. being sent to collections for $20-$125 is a fair trade.

  8. Alexis2 says:

    Are they adding this protection to the rental fee without our knowledge or something? I rent from Hollywood Video and I’ve never been asked if I wanted the protection?*shrugs*

  9. drewdaro says:

    I too work at a Hollywood video, and think that the damage waiver/playguard is completely reasonable. It’s only 25 cents, a bit of change that can buy you a gum ball, and it’s not tacked onto your rental without your consent. It’s not as if there are Hollywood Video employees hiding in the shadows hoping to take that last quarter from you.

    As a cashier I ask people if they want this insurance all the time. I admit, that often people don’t need it, but that’s the point of insurance. If everyone paid 25 cents per rental and brought back the DVD’s beyond repair the company would go bankrupt. It’s true that people don’t break discs all the time, in the same sense that it’s true that people don’t get into car accidents every time they drive. This is the way insurance works.

    Besides, if I rent a $60 dollar XBOX 360 game I’ll get the insurance. Replacing an 360 game is pretty expensive. If I rent an older movie, let’s use Smoking Aces as an example, I’ll gladly forgo the damage waiver given the fact that it’s in the neighborhood of $10 dollars used.

    The simple fact of it all is that if you were to break a DVD without the disc insurance, you would have to go find a suitable replacement. It’s not that expensive, especially if you buy one of Hollywood Video’s previously viewed movies (plug). But you’re not going to have to pay some predetermined amount that the company demands. You break our DVD, you buy us a replacement, even stevens.

    Quit you’re griping. Sheesh.