MGI Opens Slow, Pledges Better Ending

DOTHAN, AL-Mediocre theater, good weather and an added pinch of daylight were among the incongruous ingredients conspiring against Movie Gallery Inc. in the first quarter of FY 2007, as North America’s second largest video rental company saw revenues fall 6.7%, from $694 million to $648 million, primarily on dour same-store sales. Despite the difficult beginning, management remained upbeat during a Friday conference call, with CEO Joseph Malugen insisting that “we are on the right track to deliver renewed growth” in the evolving visual entertainment sector.

A good portion of the future is based on delivery of movies and their ilk in direct contrast to the industry’s bricks-and-mortar legacy, Malugen acceded, and Movie Gallery officials made it clear they will succeed “no matter what method the consumer chooses.” Trailing only Blockbuster in the video rental business, the company has more than 4,500 retail units in the US and Canada through the Movie Gallery, Hollywood Video and Game Crazy brands, but emerging technology is requiring participants to stay nimble. “We are implementing long-term strategies that we believe are important for the business,” Malugen said.

That pledge was underscored by the first quarter acquisition of MovieBeam, a former rival that gives Movie Gallery proprietary technology allowing movies to be downloaded directly to one’s home via a special box. Monikered as the “True Choice” program, the concept is being rolled out in four markets this month on a test basis. Customers will be able to receive up to 10 new movies each week, many in high-definition, and 100 movies can be stored on the box. Consumers can also buy movies and DVD’s, with Movie Gallery using the mail once the item is ordered via the box or on the Internet.