Home Media Magazine - March 16-22, 2009 - (Page 6) NEWS www.homemediamagazine.com Closed Circuit Circuit City finally expires: 1949 – 2009 By Erik Gruenwedel RETAIL Bankrupt Circuit City Stores March 9 officially closed the doors on its 567 retail locations after 60 years of business. The Richmond, Va.-based No. 2 consumer electronics retailer, which ceased operations Jan. 16, has been under the direction of liquidators seeking to sell $1.7 billion worth of product, including more than $50 million in DVDs. In total Circuit City owes more than $650 million to its biggest unsecured creditors, which include CE manufacturers and Hollywood studios. 30 YEARS OF NEWS MARCH I 1992 Recession Forces Closures This isn’t the first time. The 1990-91 recession likely contributed to the consolidation of video stores, moving from about 30,000 stores in 1989 to 28,000 by the end of 1991. “The people who closed down really deserved to,” said Rick Greeder, a video store owner at the time. “They weren’t running their businesses properly, and they never educated themselves to the changing market.” – Billy Gil Banks and lending organizations will be the first to recoup what will likely be pennies on their loan dollars, say experts. The chain’s Canadian operations are reportedly being purchased by Bell Canada. Hilco Merchant Resources, one of the liquidators involved in the clearance sales, said it hoped to acquire the Circuit City brand name and Web properties. Opinions on why Circuit City failed run the gamut, including ignoring the rising threat from upstart Best Buy in the 1990s to eliminating its household appliance business in 2000. One major public snafu occurred in 2007 when it terminated 3,400 skilled sales personnel and then offered their jobs back at lower wages. While the company reported seven consecutive losing quarters, CEO Philip Schoonover earned millions in compensation. “Every time there was a crossroads … they almost always did the wrong thing,” Stephen Baker, VP of industry analysis with The NPD Group, told The Associated Press. “When you make that many mistakes, eventually you end up at the edge of a cliff.” Ironically, CEO James Marcum in a statement thanked staffers for their hard work during the “difficult time.” BRIEFS I IMAGE GETS FINAL $200K, NYX MERGER ON AGAIN Image Entertainment March 7 said it received the final $200,000 of the $2.3 business interruption fee from Nyx Acquisitions, indicating the planned $100 million merger agreement was back on and – Erik Gruenwedel no longer in breach. rocketed and the stock fell. At issue: concerns whether Blockbuster can refinance long-term debt obligations that come due this year, including a $200 million credit revolver that matures in August. “Bankruptcy wipes out shareholders ,and a 40-cent share price tells you people are fearful,” said Michael Pachter, analyst with Wedbush Morgan Securities in Los Angeles. “They have to show us a path for debt repayment or refinancing.” Fellow analyst Edward Woo said the company had to continue generating enough revenue to pay down debt. Indeed, Blockbuster issued a report stating that domestic same-store sales were up 4.4% in the fourth quarter ended Jan. 4. The company reports financial re– Erik Gruenwedel sults March 19. Icahn Terminates Lionsgate Talks 50% in the past six months, repurchasBy Erik Gruenwedel illionaire investor Carl Icahn ing undervalued stock at a premium March 11 reportedly ended might be considered an investment in discussions with Lionsgate self-preservation, said analysts. Icahn had partnered with Lionsaimed at securing seats on the Santa Monica, Calif.-based mini-major’s gate’s largest individual investor, Mark Rachesky, whose board. MHR Fund Management Media reports said Icahn, owns more than 19.4% of who owns 14.5% of LionsLionsgate, in an attempt to gate’s shares, and the studio wrest board seats and excould not come to a resoluert greater influence on the tion over issues involving a studio’s operations. standstill agreement. Icahn representatives ocPublic companies often Icahn cupy board seats at Blockemploy a standstill agreement as a hostile takeover defense. buster and Time Warner, among In some cases the target firm is will- other companies. Analysts say Icahn’s actions were ing to purchase the potential raider’s shares at a premium price, thereby typical of his operational style that enacting a standstill or eliminating both supports current management while at the same time turning the any takeover chance. With Lionsgate’s shares down nearly screws on them. I TRANS WORLD INVESTOR UPS HIS COMPANY STAKE Entertainment retail may be under siege by the recession, but that didn’t stop Trans World Entertainment Corp.’s single largest investor from acquiring 200,000 additional shares. Lloyd Miller, who reportedly owns 5.6 million shares, or 18% of Trans World’s stock, bought 200,000 shares for 62 cents each, or $124,000, according to a March 6 regulatory filing. Miller said his purchase was for investment purposes only and not meant as a shot across the bow to rattle – Erik Gruenwedel management. I AMAZON BRINGS BACK OUT-OF-PRINT MUSIC Amazon.com’s CreateSpace disc-ondemand service has added more than 20 out-of-print record labels, accounting for more than 1,000 out-of-print music titles, as part of its “Back from the Vault” pro– Billy Gil gram. Doug Creutz, analyst with Cowen & Co. in New York, said Icahn was “clearly seeking a larger say” in the mini-major’s direction. “[This] is understandable given his increasing financial stake,” Creutz wrote in a research note. David Miller, analyst with Caris & Co. in Los Angeles, didn’t dispute Icahn was looking for board representation. He did say the ongoing scuttlebutt concerning tensions between the investor and Lionsgate was grist for the media. “That’s what the media wants to write about,” Miller said. “It’s the sexy story.” Lionsgate lost more than $94 million in the most recent quarter. Representatives from Lionsgate and Icahn’s office were not immediately available for comment. I BORDERS CUTS 742 JOBS Borders Group announced March 5 that it was slashing 742 positions, or less than 3% of its workforce. No changes were made at the company’s general manager levels, Borders reported, but cuts were made to sales and inventory managers, and training and merchandise supervisors. Sixty-three jobs were eliminated in Borders’ Waldenbooks specialty retail segment. – Chris Tribbey MPAA: RealNetworks ‘Destroyed’ RealDVD Data By Erik Gruenwedel LEGAL The Motion Picture Association of America (MPAA) said RealNetworks has deliberately stonewalled evidence gathering and destroyed documents vital to an ongoing copyright infringement lawsuit against the software company’s RealDVD program. RealDVD allows users to burn copy-protected DVD movies, including antipiracy controls, to a PC. In a Feb. 25 court filing, the MPAA said attempts to track down information about RealDVD had proved challenging, with computer files and notebooks containing the data “nowhere to be found.” “The evidence here is that Real actively destroyed documents,” the MPAA said in the filing. “This leads to a presumption of bad faith.” RealNetworks countered March 2 I OBAMA GIVES BROWN DVDS, BRITISH PRESS FUMES President Barack Obama caused an uproar in the British press when it was reported March 6 that visiting Prime Minister Gordon Brown received a set of classic DVD movies on his official visit to the White House during the week. Visiting dignitaries often are fetted with state dinners and typically come bearing unique gifts, which in Brown’s case included an ornamental penholder made from the timbers of a Victorian anti-slave ship and a first edition of the biography of Winston Churchill by Sir Martin Gilbert. Brown didn’t get a state dinner, but he did get Citizen Kane, Star Wars and The Godfather, among other titles. – Erik Gruenwedel saying it had maintained records of all documents relevant to the case, totaling more than 240,000 pages to date. The Seattle-based software company Sept. 30, 2008, filed a preemptive federal lawsuit in San Francisco against the major studios and DVD Copy Control Association (CCA) seeking court approval for RealDVD. The studios, in turn, filed a countersuit in Los Angeles seeking a temporary injunc- tion, which they received Oct. 8. The studios said that despite a CCA license, RealDVD’s digital rights management (DRM) safeguard could not differentiate a store-bought movie DVD from a rental DVD, thereby opening the door to a practice called “rent, rip and return.” RealNetworks said its software had appropriate encryption safeguards to prevent against the copying of rental DVDs. I ANALYSTS PONDER BLOCKBUSTER BANKRUPTCY Analysts continue to worry whether Blockbuster Inc. can bounce back from the March 3 bankruptcy false alarm that sent its stock freefalling. When Blockbuster announced it had retained Kirkland & Ellis LLP, a firm that specializes in bankruptcy, speculation it would file for Chapter 11 protection sky- PEOPLE I SHOUT! FACTORY UPS DRESSLER Shout! Factory has promoted Derek Dressler to VP of A&R and comedy for Shout! Factory and imprint Majordomo. Dressler will manage development of audio releases and original comedy properties. He has been with Shout! Factory since 2004, has overseen such comedy projects as Jeffrey Ross No Offense: Live From New Jersey and is – Billy Gil handling the upcoming Stella live-performance DVD. Home Media Magazine March 16–22, 2009 http://www.homemediamagazine.com
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