established pre-recorded media retailers falling

[cranrab]

the big names continue to take large hits.

Report: Tower Stops Paying Bills as Music Biz Suffers
Author: ERIK GRUENWEDEL
egruenwedel@questex.com
Posted: August 4, 2006
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Tower Records reportedly stopped paying outstanding invoices, prompting several major record labels and vendors to suspend shipments of product, including DVD.

Universal Music Group, Warner Music Group Corp. and EMI Group were among several vendors that had halted product shipments to West Sacramento, Calif.-based Tower, according to the Los Angeles Times.

Tower last week named investment consultant Joseph D’Amico as interim CEO, succeeding Allen Rodriguez, who left the company. D’Amico, who is a senior managing director with FTI Palladium Partners, has been instructed to help expedite the sale of Tower.

The retailer’s travails come on the heels of the lowest recorded weekly (ended July 25) sales of physical albums in 12 years, according to Nielsen SoundScan. CD sales have fallen almost 8% this year and when offset by sales increases of digital albums, overall music sales are down 0.7% for the year compared with last year.

During opening comments at last week’s National Association of Recording Merchandisers (NARM) confab in Kissimmee, Fla., president Jim Donio lamented an ever-changing entertainment retail landscape while reiterating that music retailers have to become more creative with their marketing and merchandising efforts to ensure their customer’s shopping experience gives them a desire to return.

“It pains us all when any independent store or chain location is shuttered, or when any label or distributor is forced to lay people off,” said Donio. “But what hurts just as much is when those who continue to not only survive, but thrive, are still written off as irrelevant.”

 

[cranrab]

Movie Gallery Debt = $1.2 Billion
Author: JESSICA WOLF
jwolf@questex.com
Posted: August 2, 2006
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No. 2 video rental chain Movie Gallery Inc. has been named one of 12 possible bond default companies by the Distressed Debt Securities Newsletter. Movie Gallery was carrying close to $1.2 billion in debt as of Jan. 1, 2006, according to the company’s annual report filed March 24 with the Securities and Exchange Commission.

Earlier that month, the company got some relief from its senior credit facility, which came with tight restrictions on Gallery’s ability to incur debt, pay dividends, redeem capital stock, make capital expenditures and make acquisitions.

The company can spend only $35 million in capital expenditures this year, and, subject to certain exceptions, $17.5 million in coming years, according to Movie Gallery’s first-quarter 10-K.

The company is expected to announce second-quarter results in the next two weeks.

The first quarter of 2006 was better than expected for Gallery, which has been beleaguered by its larger corporate structure and the droop of the overall rental market since the company’s September 2005 acquisition of Hollywood Entertainment Corp.

Movie Gallery earnings were $40.3 million for the first quarter, up from $18.4 million in the prior-year period. Revenue hit $694.4 million, up nearly three times the prior year’s $233.8 million. However, overall same-store revenue fell 6.5%, a drop executives attributed to a lack of strong $100 million titles in the video pipeline. That lack of good titles won’t pick up until September, Gallery execs said at the time.

Over the last year, Movie Gallery has whittled staff, shuttered redundant stores and plans to reduce overhead in remaining locations by subleasing space to outside retailers.

 

[Temujin]

This is the future. The entire entertainment industry needs to realize the in the next 20-50 years all media will be stored centrally either at home or by a content provider. People aren't going to need 100dvd's when they can have one hard drive networked to all the tv's in their house. Either the companies figure out the best way to get this digital information to consumers or they will fail and another company will. In today's world it's not the form of the media that makes money its the form of the transmission of media.

Basically the record store is already dead, the video store will be next and as soon as the speed of the internet and the availability of home media storage options becomes more mainstream dvd's, cd's and even video games will go the way of the 8-track.