Movie Gallery Plans Online Video Rentals

Movie Gallery—owners of Hollywood Video and Game Crazy stores—have announced they plan to launch an online video rental service in mid-to-late 2007. They plan to get their foot in the door via a low-priced “friends and family” program available to existing customers; the company sees the service as a compliment to its existing retail operations (like Blockbuster) rather than a standalone operation (like iTunes or Netflix).

Movie Gallery recently acquired MovieBeam, a digital video on demand service which broadcasts movies to set-top boxes using bandwidth available behind public airwaves. Despite early backing from industry heavyweights, MovieBeam never took off in the marketplace and Movie Gallery was able to pick up the business for a scant $10 million.

“While we firmly believe that our retail brick and mortar stores will remain the foundation of our business, over the past three years we have been diligently pursuing alternative delivery platforms to further complement our base business,” said Joe Malugen, Movie Gallery Chairman, President, and CEO, in a statement. “After considerable research and testing, we believe that we can enter into the online space in a cost-effective manner without spending significant resources on advertising to acquire new customers. Our goal is to increase customer satisfaction and retention by providing consumers with the benefits of greater choice and convenience.”

Movie Gallery also announced it is expanding its movie kiosk program, which put movie vending machines in malls, supermarkets, and high traffic areas. Movie Gallery currently operates about 74 kiosks under its Hollywood Video brand and plans to set up as many as 200 more during 2007.

It’s not clear how the MovieBeam acquisition will factor into Movie Gallery’s online plans; if we had to guess, we’d say Movie Gallery will ditch the comparatively low bandwidth over-the-air transmission methodology which relies on a custom set-top box for a system which relies on customers’ existing home broadband connection and Windows Media for video-on-demand and faster downloads. Perhaps MovieBeam’s backend systems will help Movie Gallery jump into that space more quickly.

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