Movie Gallery
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| File:MovieGallery.gif | |
| Company type | Public (Nasdaq: MOVI) |
|---|---|
| Industry | Retail (Department & Discount) |
| Founded | 1985 (Dothan, Alabama) |
| Headquarters | Dothan, Alabama |
Key people | Joe T. Malugen, CEO & Chairman |
| Products | VHS, DVD, and video game rentals and sales |
| Revenue |  $2.6 billion USD (2005) |
Number of employees | 45,000 |
| Website | Movie Gallery Corporate Information |
Movie Gallery (Nasdaq: MOVI) 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.
History
Movie Gallery
Movie Gallery was created in 1985 by Joe Malugen and Harrison Parrish in Dothan, Alabama. Through a subsidiary called MGA, INC the two began opening 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, and 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]
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 videogames 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 near by.
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 age 16 or older. The types of bed can vary from location to location, though the company recently introduced a Movie Gallery branded bed in new stores.
Adult
Movie Gallery carries adult product in some of its stores including both rental, previously viewed, and new sell thru product. Only in certain stores is this product is kept in a sealed area, requiring customers to go into a special "adult room" in order to see the product, but all stores do at least have the covers blocked out. Some stores also provide Black Bags in which customers can place adult product in order 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 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 underaged 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 (this 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 100 Movie Gallery stores carry the product. [3]
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]
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 guest loyalty. These units, similar to what some large grocery store chains have adopted, allow guests to check out their own movies and concessions. There are 3 guest facing terminals and one master terminal enabling the Hollywood employee to help 3 guests 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.[5]
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. [6]
Movie Beam
MovieBeam is a set top service currently offered in larger cities in which customers can download movies to a set top box. Most movies expire 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 must be purchased by consumers for the service. Most major movie studios provide New Release content to the service. [7]
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. Employees of Hollywood Video are expected to adhere to the mission statement, "Hollywood is dedicated to exceptional guest experiences delivered with genuine warmth and friendliness." As of July 23, 2007, Hollywood Video and Game Crazy partners are expected to adhere to the E4 Program. The four "E"s are Engage, Entertain, Everyone, Every Time. This is a 100% compliance policy which directs every Hollywood Video partner to ask every guest if they would like concessions, an MVP, additional rentals or purchases, and a Play Guard with every rental. The consequences of not following this policy are a written warning and then termination.[citation needed]
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)[8].
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 this 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 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. [9]
Movie Gallery today
Today, Movie Gallery operates about 2,400 Movie Gallery and 2,000 Hollywood Video locations in the United States. As of December 31, 2006, 634 of the Hollywood locations include GameCrazy departments[1], 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.
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.
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 [10]. 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) [11].
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.
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 Vidoe'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)
July 1st, 2007 the company defaulted on its first lien lenders. Another delay another default.
SEPT. 4 2007, 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. (http://www.videobusiness.com/article/CA6475126.html?nid=2705)
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. [12]
Game Crazy / Game Zone
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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% bonus 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- however, this seems to be little more than an advertising gimmick as 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.
Movie Gallery Features, Policies, and Promotions
Movie Gallery stores vary in terms of rental days and rates.
- The majority of stores offer a 5 night rental period.
- Some stores offer a 7 night rental period and others offer a 1 night period with an option to increase to a 5 or 7 night period for a fee.
- All rentals are due back by close of business on due date. Items dropped in the overnight box after close are checked in the following morning after opening.
- E4 - Engage and Entertain Everyone, Everytime
In an effort to focus on and increase customer service within stores, all associates within Movie Gallery (and related stores) are to follow the E4 policy. If executed properly, every customer is to be greeted on the sales floor and offered assistance, as well as being told about any specials within the store, instead of making them wait in line and then be told about special offers. Likewise, special offers that can be taken advantage of at the counter area are also to be introduced to customers to ensure they receive the best value possible. While this policy has been in place at all Movie Gallery branded stores for some time, it has only recently been extended to the Hollywood Video and Game Crazy brands.
- Membership -
Membership at all Movie Gallery stores is free. Customers must be 18 years old in order to open an account and provide a legal ID such as a drivers license, identification card, or Military card as well as a valid Credit card or a second form of identification such as College ID or utility bill (social security cards are not accepted as a form of either id). A valid phone number must be provided as well with New Members being called within 48 hours to be welcomed as a Movie Gallery customer and information verified. Members are required to abide by the Movie Gallery agreement policy which outlines the stores Extended Viewing Policy as well as the timeline in which rentals will be sold to customers if not returned (tanning customers have a separate policy and rules by which to abide), though no value is assigned to each item as it is sold at whatever the current preplayed price is at the time of sale and late fees must be paid on the item as well. Likewise, the company reserves the right to charge any on file credit cards for fees on the account and will turn delinquient accounts over to a collection agency and places a collection charge of $15 on such accounts.
- Courtesy Calls -
Any customers with overdue items will be called by an automated system to alert them of the item and remind the customer when the item is due back at the store to avoid any further extended viewing fees (which renew the item for the same amount of time and at the same price as the item was originally rented -- i.e. a 5 night rental at $4 is charged a $4 extended viewing and is checked out to the customer for 5 more days).
- Playguard -
Playguard protection is offered to all customers and covers all rental product. By purchasing Playguard for .25 per items, customers are not held accountable for any damage on product while in a customer's possession. While the protect does not cover stolen or lost items, a customer can bring back the remains of any rental and not be charged for the item. If a customer does not have the protection, they will be charged the full retail value of the item if it is damaged in any way. The retail value being whatever the "new" price of the item is listed at within the Movie Gallery system.Movie Gallery Promotions. 10% of the proceeds raised through Playguard go towards Movie Gallery's foundation, Starlight Starbright.
- Discount Rental Card -
All Movie Gallery stores offer discount rental cards. The cards are similar to a gift card, but are only good on Rental related fees such as checking out movies, late fees, and playguard. Customers who purchase the cards are given additional money on each card to use. Current cards are $25 for $30 in rental, $40 for $55, and $70 for $90. Most stores offer a hard plastic pink card similar to a normal gift card, though some states require a paper card to be offered that offers a set number of rentals for a certain price. If a card is not used within 1 year a monthly fee is deducted (excepted where prohibited).Movie Gallery Promotions
- Snack Attack -
All Movie Gallery stores (and Hollywood Videos) offer customers special concessions consisting of 2 candies, 2 sodas, and a tub of popcorn at a discounted rate. Larger bundles that include additional rentals or concessions are also available throughout the year such as Party Packs.
- Play. Now. Guarantee! -
Certain new release items are guaranteed to be in stock or the customer will be issued a raincheck for the item. The rainchecks can be used at a later time when the customer finds the item in stock.Movie Gallery Promotions
- Play On Promise -
Customers are guaranteed to like their rental or they can get another free up to 6 times a year. The Play On Promise replaced the companies Entertainment Guaranteed program. Any customer taking advantage of the program must tell the associate on duty when the return their movie and the credit can be placed on their account for future use with a policy reminder being printed for the customer as well as well as a coupon.Movie Gallery Promotions
- TAKE 5 -
Most Movie Gallery stores participate in a Take 5 program in which customers can rent 3 Gallery (catalog) rental and get 2 free. This offer works with any of the stores catalog titles, including Kids and Family titles.Movie Gallery Promotions
- Kids and Family -
Movie Gallery provides a special section in stores for Kids and Family videos. Any catalog product as well as select new release product in this section can be rented for .99 (1.99 in some stores).Movie Gallery Promotions
- FREE Gallery Weekend -
Occasionally Movie Gallery runs a special weekend event in which customers can receive 1 free gallery rental per day Friday - Sunday. Normal extended viewing fees apply to the rentals. (there are some locations that offer Free Gallery rentals everyday).Movie Gallery Promotions
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 before midnight, regardless of the time the store closes, which is generally between 10 pm and Midnight Sunday-Thursday, and Midnight Friday and Saturday; however, some stores stay open as late as 4 AM.
- Movie Value Pass or MVP
Hollywood Video, at the same time as competitor's movie passes, introduced a program called the "Movie Value Pass" which allows customers to rent unlimited amounts of movies. The pass allows customers to have up to three movies checked out for free at any one time. The major restrictions on the pass are that customers must wait an average of four to eight weeks for new releases to be added to the list of MVP available titles. Customers are also still limited to five day rentals and will pay late fees on their free rentals if they are not returned on time. "MVP Premium" was started in November 2005 that allows customers to rent any movie in the store for a maximum of fifty days. The difference between the two MVPs is that Premium costs either $24.99/month or $29.99/month in order to have either two or three free movies out at a time, respectively. With MVP Premium there are no late fees as long as the promotion is active on your account (maximum of fifty days before the movie is charged off, see below), and you are able to rent any movie in the store whether it is a new release or not. At the moment there is a sales promotion for the MVP program in which the MVP basic program is $9.99 for the first month, and the MVP Premium programs are $14.99 and $19.99 for the first month, respectively.
- Game Access Pass
A program, kind of like MVP, that works on game rentals. It allows the guest to take out one or two game rentals, depending on chosen program, and keep them for an 'unlimited' time. One game out is $19.99 while having two out is $34.99. These are basic fees charged to the guests credit/debit card every thirty days, unless the guest cancels. There is a cash option but requires a one time fee and it covers ninety days only.
- Trade-ins
Beginning in June of 2005, 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 were not accepted. Please note that all trade in product must be original package and be excellent working condition. Hollywood Video does not offer cash for Trade-ins but gives store credit, which goes on the required account. In June of 2006, Hollywood Video started carrying both full and widescreen copies of major titles to offer customers a choice, so now most DVDs can be traded in regardless of format.
- Playguard
In August of 2006 Hollywood Video began a new program called Play Guard which is essentially an insurance policy for your rentals. For a fee of twenty five cents per individual rental (DVD, VHS, Game) guests can purchase Play Guard to protect them from paying charges for an unfixable item (ie: Cracked, Broken or heavily/deeply scratched). In the past if a guest rented an item and they broke it, the guest was responsible for paying for the item at its previously viewed price. Now if they purchase Play Guard any item that is broken while in their possession may be returned without any obligation to pay for it. For its inaugural month all proceeds went directly to the Starlight Starbright Foundation, and from then on out 3% of the proceeds will go to the foundation.
- Guaranteed in Stock
On April 22, 2007 Hollywood Video announced that they will no longer have certain titles "Guaranteed In Stock". They are eliminating this program indefinitely in order to focus on having a wider collection of movies as well as more copies of titles as they are released.
- Membership Requirements
To sign up for an account, Hollywood Video requires that those wishing to become members must have a valid piece of government-issued photo identification. Also required is either a debit or credit card - in the event that an item is 50 days overdue, items will be charged off on the card. Movies are charged off at 12.99 for the film, and 37.00 for the late fee, totaling 49.99 plus tax. Games total out at 79.99 plus tax. If the customer does not have a debit or credit card, proof of auto registration or a utility bill from the last 45 days (that is not past due) with the same address as the I.D. shown may be used (although some stores now require that all customers have a debit or credit card on file). Customers must be at least 18 years of age and have a working telephone/cell phone number. At many stores, I.D. must be shown every time a customer wants to rent a movie or change information on their account. Some stores still enforce a policy of requiring only a membership card.
References
http://www.moviegallery.com/company/about.aspx http://phx.corporate-ir.net/phoenix.zhtml?c=85959&p=irol-newsArticle&ID=995847&highlight= http://phx.corporate-ir.net/phoenix.zhtml?c=85959&p=irol-newsArticle&ID=999296&highlight= http://www.afa.net http://phx.corporate-ir.net/phoenix.zhtml?c=85959&p=irol-irhome http://www.moviegallery.com/specials/ Movie Gallery Promotions