Movie Gallery To Offer Online Rentals; Plans Further Digital Investments

Hoping to stanch further revenue slides, video rental chain Movie Gallery plans to start an online DVD rental service later this year after a long stretch of customer defections to Netflix and Blockbuster, according to Reuters. After releasing fairly disappointing earnings results on Friday, Movie Gallery, which also owns rental franchises Hollywood Video and Game Crazy, has initiated a series of moves to regain its footing.
For 4Q, Movie Gallery’s total revenues were $663.3 million, a slight drop of 1.9 percent from $676.4 million in 4Q05. Same-store total revenues for the quarter fell 2.9 percent year-over-year. But the most difficult financial problem Movie Gallery had been wrestling with all year was its $1.1 billion in debt stemming from its purchase of Hollywood Video two years ago. It recently refinanced its senior secured credit facility to save more than $6 million of interest payments annually.
Making a greater attempt to meet customers demand for more digital services, as we reported earlier this month, Movie Gallery paid under $10 million for VOD service Moviebeam, which was spun off from Disney last year. In its earnings release, Movie Gallery touched on the purchase as part of a series of moves it plans to make similar investments to get itself back on track. As if it needed further proof of the need to offer more digital services, Reuters adds that the company learned from a customer survey that about 10 percent of Hollywood Video customers and about 2 percent of Movie Gallery customers were renting new releases from its stores, but finding older films through the online DVD rental services.
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Movie Gallery Acquires Heavily Funded MovieBeam For Less Than $10 Million