It's coming soon to a Blockbuster store near you -- the elimination of late fees on all movie and video game rentals.

The company said it plans to get rid of late fees on March 31 in Canada. In the U.S., the new policy takes effect on January 1.

Under the new rental terms, movie and video-game rentals will still have a due date, but there's a one-week grace period on top of that.

But there's a catch. If a customer hasn't returned the rental a week after the due date, they own it. Blockbuster will charge customers' accounts accordingly (the sale price of the item, minus the rental fee).

If a customer decides not to buy the movie or game they've rented after all, there's an additional 30-day grace period. Blockbuster says customers can return a rental after 30 days, and get a refund. But, they will be charged with a small restocking fee. In the U.S., that fee will be $1.25.

"We are always trying to provide customers with more," Blockbuster Canada President David Stewart told the Canadian Press. "The discontinuing of extended viewing fees represents another way for us to do just that."

The company's chairman John Antioco hailed the elimination of late fees as "the biggest and most important customer benefit we've ever offered in our company's history."

Analysts say Blockbuster's announcement has more to do with survival than a concern for customers.

"The percentage of Canadians renting VHS or DVDs was 75 per cent in 2000, that's down to 58 per cent this year," says Solution Research Group's Kaan Yigit.

Cheap DVD prices are also tempting people to buy their entertainment rather than renting it. There's also growing competition from websites that rent DVDs through the mail. And satellite and digital television services are making an impact, too.

Investors are eyeing Blockbuster's move with trepidation. The new policy is set to wipe out $250-$300 million of Blockbuster Inc.'s operating income. The company also said Tuesday that it expects more softness in the entertainment rental industry.

But Blockbuster also said it expects the loss in revenue will be countered by increased store traffic, decreased promotional activity and tighter cost control.