Movie Gallery
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| Movie Gallery, Inc. | |
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| Type | Public |
| Founded | 1985 (Dothan, Alabama) |
| Headquarters | Dothan, Alabama |
| Key people | Joe T. Malugen, CEO & Chairman |
| Industry | Retail (Department & Discount) |
| Products | VHS, DVD, and video game rentals and sales |
| Revenue |  $2.54 billion USD (2006) |
| Employees | 45,000 |
| Website | Movie Gallery Corporate Information |
Movie Gallery based in Dothan, Alabama, is the second largest movie and game rental company in the United States, behind Blockbuster Video. It rents and sells DVDs, movie videos, and video games. It has over 4,700 stores in North America, operating mainly under the Movie Gallery and Hollywood Video brands. The Hollywood Video brand is operated out of Wilsonville, Oregon.
Contents |
[edit] History
[edit] Movie Gallery
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Movie Gallery was created in 1985 by Joseph Kirk in Kissimmee, Fl. It was later sold to Joe Malugen and Harrison Parrish in Dothan, Alabama. Through a subsidiary called MGA, INC the two began opening additional stores in Alabama and the Florida panhandle, as well as franchising the brand. By 1987 the Movie Gallery owned five stores and 45 franchises. In 1988, a process began to purchase all franchised locations and make them corporately held stores. In 1992, the company owned 37 stores and reported revenues of $6 million. In a little known fact announced by Malugen at the Movie Gallery 2005 Manager's Conference, the company during this time had the opportunity to purchase a small company by the name of Blockbuster, but did not have the funding necessary and did not see much value in the company's assets .
In August 1994, the company completed an initial public offering of its stock. With the proceeds of this offering, the company began to aggressively acquire smaller chains, particularly in the southeast. By the middle of 1996, Movie Gallery had grown to over 850 stores via 100 separate acquisitions.
In 1999, Movie Gallery completed an 88-store acquisition of Blowout Entertainment (with several stores operated within Wal-Mart Supercenter stores) in May and ended the year with more than 950 locations in 31 states. This was also the beginning of the company announcing plans to open at least 100 stores within a year. The new openings would surpass 100 a year in 2000.
The company expanded itself by 30% in December of 2001 with the acquisition of the bankrupted Video Update stores. This included 100 locations in Canada, marking the companies first expansion outside of the US. As a result of continued acquisition, the company would increase to 2000 stores by 2003. Also during this time the company made the decision to rebrand ALL acquired stores as Movie Gallery and underwent an aggressive strategy to ensure all stores used Movie Gallery branded materials.
On April 27, 2005 Movie Gallery completed the largest acquisition in its history with its purchase of Hollywood Entertainment. This included the takeover of Hollywood Video retail stores, Game Crazy stores, and the REEL.com website. This was followed in June with the purchase of VHQ entertainment, one of the largest Canadian video rentailers, and adding 61 Canadian locations. While the VHQ purchase included its online rental service, this would shortly thereafter be sold.[1]
It was announced in March 2007 that the company had purchased MovieBeam, a movie download service owned by Disney, Cisco, and Intel for less than $10 million. Plans were announced to begin offering internet downloads through the service as well as further developments, though no specifics have yet been provided outside those involving the True Choice program (below). On May 11, 2007 the company announced plans to launch an online rental service called "True Choice". The focus will not be to compete with Netflix or Blockbuster Total Access, but to instead focus on providing customers with more buying options and a larger catalog of films. The service will be tested this summer before being rolled out nationwide. It was also announced that the company would include Moviebeam in a larger rollout in 2008.[2]
In October 2007, Movie Gallery filed for bankruptcy as a result of not being able to repay its loans from the purchase of Hollywood Video. Movie Gallery announced in October that it will close 500 stores under the Movie Gallery name while keeping all stores purchased under the Hollywood Video buyout open for business.[citation needed] In January 2008, Movie Gallery's stock was trading at four cents per share. They did cancelled all shares which left the stock as worthless.
[edit] Game Zone / Game Crazy
Both Movie Gallery and Hollywood Video brands have rolled out special store within store videogame areas. These areas are similar in nature to EB Games or Gamestop stops in both offers and designs, with Game Zones being within Movie Gallery, and Game Crazy being within Hollywood stores. While some stores operate these areas as completely separate brands (i.e. the Game Zone/Crazy has a separate manager and staff from the Hollywood or Movie Gallery stores itself), others have smaller versions of these concepts, with a focus remaining on the sell and trade in of video games and systems. However, the section is operated by the normal store employees and are smaller than "separately" operated divisions. It should also be noted that there are several Game Crazy locations that are operated as stand alone businesses with no Hollywood Video nearby.
[edit] Tanning
Tanning can be found in some Movie Gallery stores, with a particular focus in southern stores as well as the company owning Sun and Soul tanning in Alabama. The number of stores with Tanning has increased year to year, though at this time no Hollywood stores have seen tanning added. In order to open a tanning account, customers must be of age 16 or older. The types of bed can vary from location to location and many of the tanning stores have now been closed.
[edit] Adult
Movie Gallery carries adult-"Triple XXX Rated" products in many of its stores including both rental, previously viewed, and new products. Only in certain stores is this product kept in a sealed area, requiring customers to go into a special "adult room" in order to view the product. All stores do require the covers to be blocked out. Some stores also provide black bags in which customers can place adult product in to avoid any objectional material being viewed by other customers, though items must be checked out at the front counter. The stores with their own adult area run their own promotions separate from the main store. The company enforces a very rigid rental policy with adult product in which a customer must present their ID to show that they are of legal age (usually 18, though this can be 21 or older in some areas). Associates are also required to card anyone they believe to be underage that enters the room.
The American Family Association ran a newspaper campaign in 2005 via USA Today, the Washington Post, and Oregonian in an attempt to convince Hollywood Entertainment stock holders to vote against the buyout by Movie Gallery. These ads attempted to detail the negative impacts adult product could have on communities as well as suggesting that Movie Gallery would place adult product into Hollywood stores (which has not happened). It should also be noted that while the AFA ads suggest a large number of stores carry the product, in actuality less than 1000 Movie Gallery stores carry the product.[3]
[edit] Kiosks
Since 2005 the company has been placing movie rental Kiosks in Grocery stores. These Kiosks carry the Hollywood Video name and allow customers to rent movies with a valid credit card, usually for 1 day rentals. Extended viewing fees are charged to the customer's card. Kiosks have also been seen in front of high traffic stores to allow customers rentals after retail locations are closed.[4]
[edit] Self CheckOut
Since 2005 the company has been placing Self CheckOut systems in some of their Hollywood stores. The goal of the Self CheckOut system is to shorten wait-times and strengthen customer loyalty. Nonetheless, these units, similar to what some large grocery store chains have adopted, allow customers to check out their own movies and concessions, and would allow the company to reduce its workforce even further. There are 3 customer facing terminals and one master terminal enabling the Hollywood employee to help 3 customers at a time. As of July 2007 the Self CheckOut machines have been removed from test stores and the program has been put on indefinite hold.[4] As of mid-2008, this program has been scrapped as more and more Movie Gallery stores are closing.
[edit] Retail Merchandizing Units
In 2006 Hollywood Video started placing Retail Merchandizing Units (RMUs) in malls across the country. The RMU’s are mini stores that sell new and previously viewed movies. The goal is to give the company more visibility to the public and drive business to traditional brick and mortar stores by offering coupons with each sale. The company picks high traffic malls to accomplish this.[4] as of mid-2008, most of these locations are being sold off and/or closed.
[edit] Movie Beam
MovieBeam was a set top service currently offered in larger cities in which customers could download movies to a set top box. Most movies expired within 24 hours. The company was originally founded by Disney and other investors as an alternative to online movie downloads. A special set top box had to be purchased by consumers for the service. Most major movie studios provided New Release content to the service. MovieBeam was shut down on December 15, 2007.[4]
[edit] Hollywood Video
Hollywood Video, operated from Wilsonville, Oregon, is a DVD and video game rental shop chain in the United States. Started in 1988 by former CEO Mark Wattles and his wife, it was the largest direct competitor of Blockbuster Video until it was purchased 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.
[edit] 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).[5]
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 10 after these news. Blockbuster then dropped its purchase plans, citing anti-trust concerns. Movie Gallery completed its purchase of Hollywood Video on April 27, 2005.
Since the purchase, Movie Gallery's stock has dropped to its lowest value in over a decade and has had difficulty meeting Wall Street expectations. While originally leaving both brands as separate as possible, the company announced that Jeff Stubbs, the then Vice President of Movie Gallery, would take control of ALL operations of both brands effective May 2007 as the President of both brands. It was also announced that the Movie Gallery marketing department would assume control over both brands' related activities and operational procedures in general would also be taken over by Movie Gallery management.[6] The purchase of Hollywood Video has been seen by most as a huge failure and is killing the company off at a rapid rate.
[edit] Movie Gallery today
Today, Movie Gallery operates about 1,200 Movie Gallery and 1,000 Hollywood Video locations in the United States. [7] 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. The company has closed all 9 Mexico stores, removing all operations from the country. No reason for this has been given, though exchange rates and revenue issues are believed to be the cause.
[edit] Financial and Operating Information
The "Movie Gallery" and "Hollywood Video" brands target quite different markets (smaller rural vs. urban/suburban), store size (3000-4000 square feet vs. 4000-6000) and inventory (3000-15000 items vs. 25,000). Steps are currently being taken to sublease excess space in stores of both brands to help reduce store sizes. However, many store are being closed due to exstreme heavy debt and no profit for almost two years.
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.[8] 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).
Due to a major refinancing of the companies credit in February 2007, new stores have been announced for opening in 2007, as well a new initiative that include the creation of the True Choice online rental service and purchase of Movie Beam. The new terms also result in a savings of several million. The company has also announced changes to the operations area focusing on the Movie Gallery management teams taking over much operational control of Hollywood Video. These include the placement of Jeffery Stubbs as the operation President over both companies, as well as the marketing department now taking control of the Hollywood brand as well. It was also announced by Movie Gallery in Q1 financials that the Game Crazy brand was the only brand to show an increase in same store sales (26% growth)[9]
In August and September, the company announced difficulties meeting provisions within its loan agreements and entered into Forbearance agreements with lenders to avoid loan defaults. The company likewise announced being open to possibly be sold or merging with other companies, or selling off portions of the company. As of mid-2208, many stores are being closed and shut down at a rapid rate with the company liquidating many assets.
An article in Video Business magazine also helped pin point issues within the company, showing the growth patterns of each brand. While the Movie Gallery branded stores saw small growth of between 3-5% most quarters, Hollywood Video stores saw substantial losses of up to 15%. The reason for this difference is considered to be the increased competition from Online competitors and many of Hollywood Video's urban customers adopting this route, where as the rural markets covered by Movie Gallery stores are adopting these new rental methods at a much slower rate. Game Crazy locations continue to see upward gains of up to 26%. [videobusiness.com)
2007-07-01, the company defaulted on its first lien lenders. Another delay another default.
2007-09-04, In the continuing saga of Movie Gallery delaying its day of reckoning as it runs up against various deadlines for rectifying its financial crisis, the company issued good news and bad news. The good news is Movie Gallery was able to make another forbearance agreement with a creditor. The bad news: It is in default on another credit facility.
The latest forbearance agreement, made Aug. 31, is with Sopris Capital Advisors, the holder of the majority of Movie Gallery’s 11% senior notes due in 2012. Sopris has agreed to forbear taking action on Movie Gallery’s default until Sept. 30, unless certain conditions occur before then, such as a bankruptcy-related default. Movie Gallery earlier had extended its forbearance agreement with some first lien lenders until Sept. 30 as well. Movie Gallery also announced it notified the agent for its second lien credit facility that it is in default on that loan. The company said it is “in discussions with its second lien lenders regarding the current situation. Movie Gallery was required to notify its first lien lenders of this latest default.[10]
On September 26th, 2007, Movie Gallery announced that they will be closing 520 stores, equaling 12% of their stores, in an effort to stave off debt, conserve cash, and appease debt holders.[11] On 2007-10-10, details of an anticipated bankruptcy filing were reported with shareholders receiving only 5% of what was left of the company.[12]
On October 16 2007, the company declared Chapter 11 bankruptcy for its US operations (Canadian operations were not affected). The purpose of this filing was to begin a major restructuring of the company. Current plans for this includes the company auctioning off the leases of 502 of the previously announced 520 store closures for an expected $70 million and the closure of up to 1000 Hollywood Video locations. First Day motions that have been approved for the filing includes the company being allowed to continue day to day operations, including associate/partner benefits and pay, all store customer loyalty programs such as Gift Cards, Discount Rental Cards, and MVP program; and a $150 million debtor in possession (DIP) financing facility. Sopris Capital Advisors LLC, a private investment, will be the partner working with Movie Gallery during the restructuring, in exchange for reducing debt by $400 million. [1]. Movie Gallery now only has about 1,200 Movie Gallery stores left with massive store closings occuring on a constant basis.
[edit] Game Crazy / Game Zone
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It has been suggested that this article or section be merged with GameCrazy. (Discuss) |
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, while Movie Gallery launched a similar initiative called Game Zone. Game Crazy/Zone offers gamers the ability to try any game before they choose to purchase or rent. Most of these locations offer all newer platform games, both in brand new and used conditions, as well as some stores offering older systems and games for sale, ranging from the NES to the more recent Dreamcast. At certain locations within the country, Game Crazy/Zone does offer cash for trades. Game Crazy also offers "wishlist" and "special order" features. Wishlists merely hold the next copy traded in at that store, which is automatically flagged by the POS system. Special orders have copies shipped in from other stores (for an extra $6 fee) to allow customers to request copies of games that may not be in stock. They also offer the MVP customer membership. For $20 for the first year then $15 every year thereafter customers get a 10% discount on used games and an extra 10% on trade-ins, and a free magazine subscription. Game Crazy MVP accounts are separate from Movie Gallery/Hollywood MVP accounts.
In 2004, Game Crazy started the Asylum program for frequent customers who have MVP accounts. The inclusion to Asylum is a company decision, and a customer can not request to join. The only requirement to be accepted into Asylum seems to be accumulating a certain amount of "points" by purchasing "high ranked," games. It offers an online message board, chatroom, and contests exclusive to members. Asylum is hyped as being a "secretive" club, taking quotes from the movie Fight Club to push its image of being private- Asylum is not in any way a secret to Game Crazy employees or most customers. In addition, an Asylum page link exists in plain sight on the Game Crazy homepage although a password and I.D. number is required to get any farther into the sister site.
Game Crazy was originally only operated out of Hollywood Video locations, but has since expanded into several standalone stores.
[edit] References
- ^ Movie Gallery - About Movie Gallery
- ^ Advertisement
- ^ AFA - American Family Association - Promoting Traditional Family Values
- ^ a b c d Movie Gallery Inc - Investor Relations Home
- ^ Press Releases
- ^ Movie Gallery Inc - News Release
- ^ http://www.investor.reuters.wallst.com/stocks/company-profile.asp?rpc=66&ticker=MOVI.O
- ^ "Movie Gallery Announces Amendment to Senior Credit Facility".
- ^ "Movie Gallery Reports Results for the 2007 First Quarter".
- ^ "Another delay, another default for Movie Gallery".
- ^ "Movie Gallery to shut 520 stores".
- ^ "Movie Gallery Shareholders May Get 5% in Bankruptcy, People Say", Bloomberg. Retrieved on 2007-10-11.
