AfterDawn: News

Movie Gallery forced to close over 500 stores

In an effort to stay in business, the large movie rental chain Movie Gallery has confirmed that it will be closing over 500 of its brick and mortar stores around the US.

Although bankruptcy has been widely feared for the company, CEO Joe Malugen hopes the move will bring the company back to financial health.



“Closing these stores was a difficult, but necessary decision to help protect the future of this company,” he said. “These stores are being closed after evaluating a number of factors, including store profits and the terms of the leases at each location. This action will allow us to focus our resources on the approximate 4,000 stores that have a stronger operating performance and prospects for future growth.”

Movie Gallery did not go into details about how many employees would be laid off or be transferred to other Hollywood Video or Movie Gallery locations and also did not go into whether customer's accounts would be transferred to nearby locations.

Movie Gallery has seen its stock plummet in recent months mainly due to losing market share after the introduction of "Total Access" by its main rival, Blockbuster.

Source:
VideoBusiness

Written by: Andre Yoskowitz @ 25 Sep 2007 14:34

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• 11 comments

• xhardc0re

  overpriced...feel no reason to shop there anyway

  25.9.2007 17:21 #1

• ker7099

  And their recent price increases don't help expel that feeling. On the other hand for me, it is sad to hear because Hollywood Video was my first job and the store I started at is one of them they are closing.

  25.9.2007 17:26 #2

• jookycola

  i always just assumed eventually Netflix would either buy or join with Hollywood Video and offer their own total access type of deal. Guess not. I prefer Hollywood over Blockbuster, but I guess that explains why recently 2 of them in my area closed.

  25.9.2007 20:42 #3

• ker7099

  Movie Gallery keeps telling us they are going to start their own mail service but so far.....nothing. Here in Louisville it's the dvd kiosk at McDonald's and Kroger's that's killing the video stores.

  26.9.2007 03:19 #4

• georgeluv

  hear that?
  
  ...
  
  its the sound of the consumers forcing change, it sounds good doesnt it?

  26.9.2007 07:12 #5

• georgeluv

  double posted

  26.9.2007 07:12 #6

• SProdigy

  Originally posted by georgeluv: hear that?
  
  ...
  
  its the sound of the consumers forcing change, it sounds good doesnt it?No, it's the fact that DVD killed VHS off. DVD did damage to both rental chains and Pay-Per-View at the same time. Studios used to charge Hollywood and others are large amount of money (sometimes in upwards of $100 per VHS tape) and the chains would exclusively have the "home market" cornered for a few months until the same movie were released on VHS for sale. You could rent the movie for $2-$3.
  
  Fast forward to present day, and DVD's are released with the same street date to retailers and rental chains. Costs of operation for the rental chains rose, thus did the price of renting a DVD. Most of the general public would much rather buy the movie for a little more than double what it would cost to rent it, plus not have the hassle of late fees, which was at one time up to 30% of yearly revenue for a rental chain.
  
  "Previously Viewed" movies, also once a highly profitable revenue stream, has hit a brick wall. How do you price a "PV" to make profit, when you charge $5 a rental, and a brand new copy can be had for $15-$20? Keep in mind, the rental stores are trying to cover any type of loss from the original purchase of the movie from their vendor, especially if it was a stinker.
  
  Enter the internet, downloading, DVD burners, Public Library systems DVD kiosks, and Netflix: all of them have had a giant impact on the brick-and-mortar rental stores. Gone are the large revenues from late charges, PV sales, and a large portion of revenue. I would speculate that growth in this industry has dropped, and rental revenues are falling.
  
  Movie Gallery did this to themselves for the most part. I live in the Midwest US, and we have a lot of Movie Gallerys that are nearly built on top of Hollywood Stores. They need to cut the fat before they even get close to digging out of this hole they put themselves into.
  
  Now that I've drawn a picture of what happened to the video rental industry, we can make comparisons as to why the MPAA and RIAA do what they do, because they all know that they are in a dying business.

  26.9.2007 07:28 #7

• jookycola

  Originally posted by ker7099: Movie Gallery keeps telling us they are going to start their own mail service but so far.....nothing. Here in Louisville it's the dvd kiosk at McDonald's and Kroger's that's killing the video stores.That's funny you said this. After Netflix screwed me by throttling my account and the huge over pricing to rent a movie at Hollywood, i've found the Kroger Kiosks to be the best deal. Rent and either watch it then or burn it and watch it later. A buck a movie, and no throttling.

  26.9.2007 14:19 #8

• borhan9

  All this seems to be is down sizing.

  28.9.2007 22:14 #9

• exglrymgr

  My store was one of the first 70 stores in Canada to close. It did not surprise me at all. What with the 'insurance' that we always had to push (25 cents) as well as a number of other insane policies it is a wonder that customers didn't jump ship a long time ago. The last three months at my store made me feel like the Maytag repairman.
  
  Not to mention the fact that Malugen, the idiot, even said that the internet is just a passing fad.
  
  AND the fact that movie gallery will not advertise and PUTS ALL OF THE MARKETING STRESS on their store managers. We had to do neighborhood marketing in neighborhood markets that didn't even know about us. On our own time. Go figure. I have a family to feed and I found myself knocking on doors to generate business for very little return. And when my numbers didn't increase? MY fault.
  
  Joe (Malugen), listen to me. Television commercials, baby, you gotta spend money to gain money. Customer first baby, you gotta lose a little now in order to gain big later. But Joe you don't understand this at all. It is easier for you to close 520 + stores and wreck families and hire financial planners for undisclosed amounts than to hire a freaking ad agency that specializes in fixing idiotic companies like this one that you almost drove into the ground. These stores not only represent your workers but every promise you made to we, your managers, that Movie Gallery had no intention of closing stores.
  
  People, if you and I ran our households like the way this mealy-mouthed financial mutant runs Movie Gallery, we would go to jail.
  
  And the extensions? Just goes to show you. If you owe creditors a thousand dollars and can't pay, they will take your blood if they have to. If you owe creditors a billion dollars, they will stick with you and you have a friend for life.
  
  Nuff said.

  3.10.2007 00:27 #10

• joe5454us

  Movie Gallery in Vermilion Ohio is rude and not a pleasure trip to shop at, best wishes, if they close.

  4.10.2007 19:01 #11