Home Media Magazine - October 21-27, 2007 - (Page 28)

NEWS Gallery Files Ch. 11 With Pre-Negotiated Plan Continued from page 1 www.homemediaretailing.com Paramount Home Entertainment for $11.1 million; Sony Pictures Home Entertainment for $10.9 million; 20th Century Fox Home Entertainment for $7.6 million; Warner Home Video for $6.9 million; Universal Studios Home Entertainment for $5 million; distributor VPD for $3.6 million; Lionsgate for $2.2 million; First Look Home Entertainment for $1 million; Starz/Anchor Bay Entertainment for $219,669 and Magnolia Home Entertainment for $161,491. As part of the purposed restructuring, Gallery entered into a financing deal with private equity firm Sopris Capital Advisors for $50 million in new capital in addition to the conversion of more than $70 million of second-lien (bond) debt. Gallery sought, and the court agreed, to Gallery borrowing up to $140 million under a debtor-in-possession financing deal with first-lien holders through Goldman Sachs Credit Partners. Separately, the bankruptcy court must approve whether Gallery can convert $325 million, 11% senior notes (bonds) and other unsecured debt into equity in a new restructured Gallery. The rental company’s $600 million in first-lien debt would remain while it seeks a revised interest rate for the $105 million of the remaining second-lien debt. Current common-stock holders would receive a 2% minority interest in the restructured company. “Movie Gallery needs to re-align its cost structure due to the ongoing changes in our industry,” Joe Malugen, chairman, president and CEO of Gallery, said in a statement. “Although the company has taken numerous steps to reduce its debt … these actions were not sufficient to offset the significant shift in our business and the cost of our substantial debt obligations.” Cost realignment apparently doesn’t apply to executive compensation. Thomas Johnson Jr., Gallery’s CFO since February, was given a renewed one-year $325,000 contract, excluding bonuses and stock options, just five days before the company filed for bankruptcy. Should Johnson, who was SVP of investor relations since 2004 prior to becoming CFO, be terminated without cause, he is entitled to receive one-and-a-half times his salary in severance in addition to all stock options. Independent media analyst Dennis McAlpine said prepackaged bankruptcy filings have become the norm among big businesses, often as an attempt to mitigate the stigma attached to bankruptcy. He believed the filing occurred largely due to certain creditors, including leaseholders at many of the 4,400 stores that refused to renegotiate the leases. Gallery last month said it would shutter 520 locations. Last week it said it would auction off the leases on 508 stores (shuttering the rest) in an attempt to generate $70 million in additional savings. The auction is slated for Nov. 15. Companies in bankruptcy reportedly have 210 days after the filing to either accept or reject current landlord lease agreements. “They obviously couldn’t get all leases closed that they wanted,” McAlpine said. He said the advantage to a prepackaged bankruptcy is that the company has lenders and a course of action lined up, reducing the burden on the court.“You’ve got [most of ] the creditors to agree what the debt restructuring will be, and the equity holders have agreed to whatever haircut they are going to take,” McAlpine said. He said pinning Gallery’s woes on the $1.1 billion purchase of Hollywood is only part of the picture. He said the industry’s shift toward online rentals caught Gallery unprepared. Gallery last week in a regulatory filing disclosed that its auditor was investigating whether the chain incorrectly accounted for a tax-deferred liability in the acquisition of Hollywood. In a statement, Gallery officials said any restatement of finances would not materially affect the company’s financial covenants and cash flow. ‘Transforming’ to HD DVD Peter Cullen, voice of Optimus Prime, (center), attended an exclusive press preview of Paramount Home Entertainment’s Transformers HD DVD special features, with presentations from the studio’s HD development team, including (L-R) Annie Kaprelian, Jeff Radoycis, Chris Saito and Bryan Ellenburg. Photo by: Jon Didier YouTube Has Copyright Filter Continued from page 1 Fox Adds Digital File to DVD Continued from page 1 to other devices and have a great experience there, as well,” said Mike Dunn, the division’s worldwide president. The summer theatrical blockbuster, the fourth in the “Die Hard” franchise, comes to DVD Nov. 20 after a box office run that yielded $134.4 million in domestic ticket receipts. The release precedes by nearly a month Warner Home Video’s Harry Potter and the Order of the Phoenix, which also will let DVD buyers download a copy of the movie to a PC or portable video device. The digital copy feature will be included on other select Fox DVDs down the road, although no other titles with the feature have been announced. The feature allows consumers to quickly and easily transfer the movie file to Windows-based computers or portable video players equipped with Microsoft Window’s PlaysForSure feature, available from such manufacturers as Archos, Toshiba, Samsung, RCA, Dell and Creative Labs. “The industry has sold nearly 12 billion DVDs to date, and the release of Live Free or Die Hard is the first one that allows consumers to move their content to other devices,” Dunn said. “With the myriad of viewing options available to consumers in our rapidly evolving digital world, a DVD with a digital copy offers a simple way for consumers to satisfy their growing desire to watch what they want, when they want and, most importantly, how and where they want.” To use the digital copy feature, consumers insert disc two of the Live Free or Die Hard DVD into their computer. A menu pops up, giving consumers the choice of either executing the digital copy application or launching the DVD special features. If the digital copy application is selected, the computer will verify the proper requirements and ask the consumer to enter a 16-digit serial code, found inside the DVD case. After selecting a destination — either the computer hard drive or a connected PlaysForSure video player — the transfer begins and after about five minutes the program is ready for playback. “We’re looking at this as giving the consumer a whole other experience, with an emphasis on choice and ease of use,” Dunn said. “There’s downloading, which takes 45 minutes to an hour, and managed copy, which I never liked because it involves moving the movie off the disc and onto something else, which also takes forever. With digital copy, the file is formatted to go across and onto your computer and mobile device, so it’s already a small file — a rocket file that plays beautifully.” Mike Fricklas, general counsel for Viacom, which sued Google for $1 billion in March for allowing more than 160,000 unauthorized videos on YouTube, told The Associated Press that he was unsure whether the filter technology would have any affect on the lawsuit. “We are delighted that Google appears to be stepping up to its responsibility to end the practice of infringement,” he said. According to the AP, Time Warner and Walt Disney were two of nine content providers to participate in tests of the new system. YouTube is asking other content providers to participate. “We really need the content community to work with us,” YouTube product manager David King told the AP. “We need them to help us help them.” Earlier this month, Peter Chernin, president and COO of News Corp., owner of 20th Century Fox Home Entertainment and MySpace, criticized Google for not being more proactive in removing copyrighted material from YouTube. “YouTube is not dangerous to us at all, with the exception that copyright-violated content is made available there,” he said. “I do believe YouTube could do a much more aggressive job taking down content that is copyright violated.” Sony Cuts $100 Off 80GB PS3 Continued from page 1 with a free Spider-Man 3 Blu-ray Disc beginning Nov. 2. The key difference between these two models, besides the price, is that the $400 model will not be backward compatible with PlayStation 2 games and will include only two (instead of four) USB ports. “We’re pleased to offer the consumer a lower price point without sacrificing the core technology components that make PS3 the most advanced high-definition entertainment system available,” said Jack Tretton, president and CEO of Sony Computer Entertainment America. “Every PS3 comes with a Blu-ray drive, HDMI output, an integrated Wi-fi connection, cell broadband engine and a built-in hard-drive.” EB Games, the largest independent video game retailer, is promoting the new 80GB PS3 online and in store. The retailer also is still selling the older 20GB PS3 for $450 and the 60GB PS3 for $500. Both of these models were discontinued months ago by Sony, but due to sluggish sales are still readily available at many retailers. Retailers are actively promoting the new PS3 price, as well as the availability of five free Blu-ray Disc movies with any hardware purchase until Jan. 31, 2008. Sony’s PS3 has been plagued by expensive hardware and a lack of killer app games, although new games shipping this fall such as the just-released Heavenly Sword and the upcoming Ratchet & Clank Future, Uncharted and Eye of Judgment — all Sony exclusives — are expected to entice more gamers to upgrade. HOME MEDIA MAGAZINE (ISSN 1934-9882) is published 51 times per year (weekly except 3 issues in December) by Questex Media Group, Inc., 306 West Michigan Street, Suite 200, Duluth, MN 55802. Subscription rates: $49.99 for one year in the United States and Possessions; $79.99 for one year in Canada and Mexico; all other countries $99.99 for one year (by surface mail). Add $75 annually for air-expedited service. Single copies (prepaid only): $6.99 in the United States, $8.99 in Canada and Mexico, $13.99 all other countries. 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Table of Contents Feed for the Digital Edition of Home Media Magazine - October 21-27, 2007

Contents News TV DVD Going Green Reviews Pipeline Research Top 20 DVD Sellers Top 20 Rentals and Top 10 Charts Just Announced

Home Media Magazine - October 21-27, 2007

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