All Movie Gallery Stores Closing

RICHMOND, Va. (AP) -- Movie Gallery Inc., the owner of struggling movie rental chain Hollywood Video, is planning to close its remaining stores and liquidate as consumers are increasingly getting movies through the mail, vending machines and high-speed Internet connections.

The No. 2 rental chain behind Blockbuster Inc. filed a notice with the U.S. Bankruptcy Court for the Eastern District of Virginia in Richmond late last week that it will terminate its business operations after defaulting on a loan from one of its creditors.

An agreement filed with the court said the move to close more than 1,900 remaining stores is in the "best interests" of the company and its creditors. The agreement does not specify a time line. It must be approved by a bankruptcy judge.

Phone calls to Movie Gallery and an attorney representing the company were not immediately returned.

The company, based in Wilsonville, Ore., filed for Chapter 11 bankruptcy in February, buckling under the competitive pressure from movies-by-mail service Netflix Inc., DVD kiosk company Redbox and delivery of movies and TV shows over the Internet.

The bankruptcy filing does not include Movie Gallery's Canadian operations.

It was the second trip through bankruptcy court in just three years for Movie Gallery.

The company first landed in bankruptcy court in October 2007, unable to sustain the debt it took on in its $850 million acquisition of rival Hollywood Entertainment Corp. in 2005. Movie Gallery agreed to assume about $350 million of Hollywood Entertainment's debt as a part of the deal.

The acquisition made Movie Gallery the second-largest rental chain in the country but it has been forced to close more than 2,400 of its stores in the past three years, according to court filings. It had since announced plans to close more stores as part of its restructuring.

Despite moving to shut down unprofitable locations, the company said it continued to see "significant" losses in 2009. Annual revenue fell $546.3 million, or 28 percent, to $1.4 billion.

In a court filing, Movie Gallery Chief Restructuring Officer Steve Moore said the company was facing "looming defaults" on its loan agreements. The company listed debts of between $500 million and $1 billion, compared with assets of between $10 million and $50 million.

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  • by Neo Location: Reality on May 10, 2010 at 07:39 PM
    Who didn't see this coming?? The disappearance of brick and morter movie rental stores has been a forgone conclusion for a long time now. My question is, why were they still trying?
  • by Anonymous on May 10, 2010 at 07:26 PM
    Not Sad, just part of the business. It's the future and those that don't plan, get buried. $5 per rental vs. $20 per month for approx. 15 movies per month. You do the math.
  • by C on May 10, 2010 at 04:33 PM
    I'd say these are pretty much the same reasons so many music stores have vanished. This is one of the dark sides of the internet...while it's certainly helped business as a whole,businesses such as these are destroyed by it. Sad.

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