Movie Gallery
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Movie Gallery (NASDAQ: [MOVI]
History
Movie Gallery
Movie Gallery was established in 1985 in Dothan, Alabama by Joe Malugen and Harrison Parish. Movie Gallery focused on rural and secondary markets, areas that were typically underserved by other video retailers, notably Blockbuster Video. The company originally expanded through a franchising model, but all of these franchisees were eventually repurchased by the company.After growing organically for the balance of the 1980s and the early-1990s, Movie Gallery began an aggressive growth campaign in the early and mid-1990s by consolidating the fragmented video retail market through the acquisition of individual video stores and small chains. The company also continued to open new stores.
By 1994, Movie Gallery owned and operated over 300 stores, and revenues were $12 million. The company went public in July 1994, and used the proceeds of the IPO (and subsequent secondary offerings) to continue its dramatic expansion. Ironically, two other video rental companies with 1994 IPOs, Hollywood Video and Moovies, would both eventually be acquired by Movie Gallery. By 1996, Movie Gallery owned and operated almost 900 stores. As Movie Gallery continued to expand and grow, it opened or acquired stores in most of the United States. In 2001, it acquired the assests of the bankrupt Video Update chain (which had previously bought out Moovies), a deal which also brought it its first stores in Canada [link]. In 2002, it took over Videoland stores in the northwest United States, and acquired the Canadian VHQ chain in 2005. These moves were dwarfed however by its decision to purchase Hollywood Video in early 2005. Revenues were $369 million for 2001, $729 million for 2004, and $1.63 billion in 2005 (including results from the Hollywood Video acquisition).
The American Family Association is currently boycotting Movie Gallery because it says that it is the largest distributor of pornography in America. It must be noted, however, that most of the units that rent pornographic material are independent or small-chain stores that rented it before acquisition by the company. Likewise, its Hollywood Video locations do not rent pornography at all.
Hollywood Video
Hollywood Video, operated from Wilsonville, Oregon, is a video tape, video game and DVD rental shop chain in the United States. Created in 1988 by former CEO Mark Wattles, it was the largest direct competitor of Blockbuster Video, until its purchase by Movie Gallery. It also operates Game Crazy departments within its stores (and a few free-standing locations), which are dedicated to buying, selling and trading video games and related items. Employees of Hollywood Video are expected to memorize and live by the mission statement, "Hollywood is dedicated to exceptional guest experiences delivered with genuine warmth and friendliness".
Purchase of Hollywood Video
Hollywood Video was the target of a hostile takeover attempt, initially announced at the end of December 2004 by competitor Blockbuster Video. In February 2005, Blockbuster announced an exchange offer of $14.50 per share ($11.50 cash and $3.00 in Blockbuster shares)[link].In order to create a stronger position against the hostile takeover, Hollywood Video agreed to a buyout on Monday, January 10, 2005 by its smaller competitor Movie Gallery. Movie Gallery paid $860 million, $13.25 per share, and the assumption of $380 million in debt. Stocks closed at $13.85 on January 10th after this news. Blockbuster then dropped its purchase plans, citing anti-trust concerns. Movie Gallery completed its purchase of Hollywood Video on April 27, 2005.
Movie Gallery today
Today, Movie Gallery operates about 2,400 Movie Gallery and 2,000 Hollywood Video locations in the United States. Approximately 650 of the Hollywood locations include Game Crazy departments, and there are around 20 separate Game Crazy stores. Canadian operations include over 200 "Movie Gallery" branded stores, as well as approximately 60 under the VHQ brand in western Canada. There are also 9 stores in Mexico.Financial and Operating information
The "Movie Gallery" and "Hollywood Video" brands target have quite different target markets (smaller rural vs. urban/suburban), store size (3000-4000 square feet vs. 4000-6000) and inventory (3000-15000 items vs. 25,000). For this reason Movie Gallery will be maintaining the Hollywood brand and store format, and the two brands currently maintain separate management operations teams. Game Crazy operations report through Hollywood managers at the regional level.The first year following the Hollywood purchase saw financial difficulties for Movie Gallery. The acquisition incurred significant debt obligations, and the company also pointed to a mature video store industry, lackluster performance of the new movie releases during the year, and various other factors. The company posted a net loss of over $500 million for 2005, mainly due to a number of one-time charges ("impairment of goodwill") relating to the valuation of the company. The stock price, which was in the $28 range in April 2005, and briefly touched over $34 later in the year, dropped precipitously in the following months, spending most of 2006 below $5. The company's financial situation also forced it to negotiate the relaxation of various terms in its debt arrangements [link]. In response, Movie Gallery has announced initiatives to reduce store sizes, sublease some existing space within stores, and reduce or eliminate new store openings (although the previously planned 140 new stores for 2006 are unaffected).
Game Crazy
To compete in a growing video game market, Hollywood Entertainment launched a store-within-a-store concept called Game Crazy which features the ability to buy, sell, and trade video games, systems, and accessories inside of Hollywood Video stores. Game Crazy offers gamers the ability to try any game before they choose to purchase or rent. Most Game Crazy stores do not sell computer games (except for exclusive, nationally high-demand titles) but offer a wide selection of older game systems and games, including NES, Sega Genesis, Super Nintendo, Dreamcast, and Nintendo 64 systems. However, the future of such older games at Game Crazy is in doubt, as buy-back prices at in line with supply and demand and the need to create space for next-gen systems is apparent. At certain locations within the country, GameCrazy does offer cash for trades.Hollywood Video features and policies
One of the primary features of Hollywood Video rentals is a universal returns system:- All rentals (DVD, VHS, and Games; New Release and Film Library) are five days, every day (some Hollywood Video locations do offer ten day rental on Game Vault game titles).
- Returns are always due at 11:59 p.m. (the closing time of most stores).
Beginning in 2004, Hollywood Video began accepting Trade-Ins to be sold as Previously Viewed. To trade in a movie, a valid membership is required. In addition, only titles and editions carried by Hollywood Video are acceptable for trade-in, therefore most Full-Screen DVDs are not accepted.
To sign up for an account, Hollywood Video requires that those wishing to become members must have a valid piece of government issued identification. Also required is either a debit or credit card - in the event that a movie is 60+ days overdue the balance will be charged to the card. If the customer does not have a debit or credit card, proof of auto insurance or a utility bill with the same address as the I.D. shown can be used. Customers must be at least 18 years of age (or legally emancipated) and have a working telephone number. I.D. must be shown every time a customer wants to rent a movie or change information on their account.
External links
- [Movie Gallery Homepage]
- [Hollywood Video Homepage]
- [Game Crazy Homepage]
- [VHQ Homepage]
- [Reel.com Homepage]
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