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Movie Gallery, Inc.

Type	Public
Founded	1985
Headquarters	Dothan, Alabama
Key people	Neil Subin Chairman of the Board of Directors, CJ "Gabe" Gabriel Chief Executive Officer
Industry	Retail
Products	VHS, DVD, Blu-Ray and video game rentals and sales
Revenue	$2.54 billion USD (2006)
Net income	-$25.1 million USD (2006)
Employees	45,000
Subsidiaries	Movie Gallery, Hollywood Entertainment, Game Crazy, Reel.com, VHQ
Website	Movie Gallery Corporate Information

Movie Gallery, Inc., headquartered 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 2200 stores in North America, operating mainly under the Movie Gallery, "Game Crazy", and Hollywood Video brands. The company recently emerged from bankruptcy on May 20, 2008.

History

Movie Gallery

Please wikify this section. Help improve this article by adding relevant internal links. (January 2008)

Movie Gallery was formed in 1985 by Joe Malugen and Harrison Parrish in Dothan, Alabama . Through its wholly-owned subsidiary, M.G.A., the Company's founders began operating video specialty stores in southern Alabama and the Florida panhandle, and franchising the Movie Gallery store concept. By June 1987 the Company owned five stores and had a franchise operation of 45 stores. In 1988, the Company began to consolidate the franchisees into company owned stores. By 1992, The Company had a total of 37 stores and annual revenues of $6 million.

In August 1994, the Company completed an initial public offering of its stock. With the proceeds from this offering, the Company began to quickly complete acquisitions of various video chains, primarily in the southeast. In early 1995, the Company raised additional public funds and continued the acquisition and development of stores. By the middle of 1996, only 22 months after beginning its aggressive expansion strategy, Movie Gallery had grown to over 850 stores through over 100 separate acquisitions.

In 1999, Movie Gallery announced plans to build 100 new stores. The Company completed an 88-store acquisition of Blowout Entertainment in May, and ended the year with more than 950 locations in 31 states.

In 2000, Movie Gallery again set its goal at opening 100 new stores and relocating 25. This goal was met and surpassed.

The Company moved forward with its largest single-chain acquisition to date, expanding its base of stores by 30%, in late December 2001. This addition of Video Update stores to the Movie Gallery family launched the Company's international presence with 100 retail locations in Canada .

Following the completion of the Video Update acquisition, Movie Gallery continued to execute an aggressive growth strategy. Movie Gallery achieved the 2,000 store mark in 2003.

In 2005, the Company completed the largest acquisition to date with the Hollywood Entertainment merger. This combination of companies increased the store total to 4,700 with revenues in excess of $2.5 billion. In addition, Movie Gallery strengthened its presence with 61 new stores in Western Canada with the acquisition of VHQ Entertainment.

In 2007 the Company filed for Chapter 11 bankruptcy protection under the U.S. Bankruptcy Code. Through the restructuring Movie Gallery effectively addressed its financial and operational challenges and laid a strong foundation for profitability and future success. The Company now has a stronger balance sheet, cash to fund operations and a streamlined store portfolio.

The Company emerged from Chapter 11 in 2008 and appointed a new chief executive officer, C.J. Gabriel, Jr.

Tanning

Tanning can be found in about 70 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 Video 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.

Retail Merchandising Units

In 2006 Hollywood Video started placing Retail Merchandising 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.^[1] As of mid-2008, most of these locations are being sold off and/or closed.

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.^[1] As of June 2008 Movie Beam was sold to an outside investors group for approximately $2 million as part of the companies restructuring. All in-store kiosks for the service have been removed as well.

Hollywood Video

Hollywood Video logo.

A typical Hollywood Video store

Hollywood Video store in Laredo, Texas

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.

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).^[2]

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.

The take over, and the failed attempts to integrate the brands, resulted in Movie Gallery filing bankruptcy in 2007, though the company recently emerged from this with plans to completely integrate the brands into one company, as opposed to separate operational teams. It is believed that issues within the industry was the main reason for the co-branding failing, though operational issues in running the units separately, including cost issues, also added to this.

Movie Gallery today

Today, Movie Gallery operates about 1,700 Movie Gallery and 1,300 Hollywood Video locations in the United States. ^[3] and there are around 10 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.

References

External links

• Movie Gallery Homepage
• Hollywood Video Homepage
• Game Crazy Homepage
• MovieBeam homepage
• Reel.com Homepage

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