Movie Gallery files second bankruptcy in two years

Back to TopCommentsE-mailPrintBookmark and Share

Movie Gallery Inc., the second-largest company in the movie-rental business behind Blockbuster Inc., survived less than two years outside bankruptcy protection.

The Wilsonville, Oregon-based company filed a Chapter 11 petition again on Tuesday in Richmond, Va., where the prior reorganization concluded following a confirmed recovery plan in May 2007.

Movie Gallery is immediately closing 760 locations, leaving 1,906 in operation, but did not specify the locations of the closures. The chain operates 14 stores in central Indiana, according to its Web site. The company warned in a statement that it “anticipates” closing additional stores.

Revenue in 2009 declined by almost $550 million, to $1.4 billion. The operating loss in the fourth quarter of 2009 was $129 million. In the last quarter of 2008, the operating loss was $84.8 million.

Movie Gallery blamed the filing in part on competition from companies like Blockbuster, Netflix Inc. and Redbox Automated Retail LLC.

The largest unsecured creditors are affiliates of Warner Communications Inc., Sony Corp., Twentieth Century Fox Home Entertainment, Universal Studios Inc. and Viacom Inc., which are owed $9.5 million to $6.9 million each.

Movie Gallery is asking the bankruptcy court for authority to retain Gordon Brothers Retail Partners LLC as agent to help in closing 805 stores. If gross proceeds from the sale are less than $105 million, Gordon Brothers will pay Movie Gallery $100,000.

If gross proceeds are more than $110 million, the agent will receive a 2.5-percent commission for sales above $110 million.

The prior reorganization required only seven months in bankruptcy court. The previous plan, negotiated before the Chapter 11 filing, was financed in part by a $100 million secured loan.

The prior plan reduced liabilities $400 million by exchanging debt for stock. Other financing for the reorganization came from a $50 million equity rights offering.

Movie Gallery operates under the names Movie Gallery, Hollywood Video and Game Crazy. It had 3,490 stores before the prior bankruptcy. The all-time peak was 4,800 stores. The previous petition listed assets of $892 million against debt totaling $1.4 billion.


  • Let's toss some statistics about

    Is this for brick & mortar businesses (only)?

    Netflix knocked BlockBuster on its back end. BB couldn't even come up with an original business plan. So they duplicated Netflix's, and just charged $1 less. Then BB decided to make it do what it was originally supposed to do: address spontaneous requests; i.e., on demand, making it such that you could rent DVDs, via mail or stores.

    Now Netflix has taken another step: download to certain types of equipment. e.g. Do you have a PS/3? You can download to it.

    The biggest challenge to Netflix will be the TV service providers (DirecTV, cable, u-Verse, etc.)

    One of the current issues with cable (Comcast) is you can only rent something for forty-eight hours. They do (and will) emphasize, "play it as much as you want". Something Netflix already does - and more.

Post a comment to this story

We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
You are legally responsible for what you post and your anonymity is not guaranteed.
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by

facebook - twitter on Facebook & Twitter

Follow on TwitterFollow IBJ on Facebook:
Follow on TwitterFollow IBJ's Tweets on these topics:
Subscribe to IBJ
  1. By Mr. Lee's own admission, he basically ran pro-bono ads on the billboard. Paying advertisers didn't want ads on a controversial, ugly billboard that turned off customers. At least one of Mr. Lee's free advertisers dropped out early because they found that Mr. Lee's advertising was having negative impact. So Mr. Lee is disingenous to say the city now owes him for lost revenue. Mr. Lee quickly realized his monstrosity had a dim future and is trying to get the city to bail him out. And that's why the billboard came down so quickly.

  2. Merchants Square is back. The small strip center to the south of 116th is 100% leased, McAlister’s is doing well in the outlot building. The former O’Charleys is leased but is going through permitting with the State and the town of Carmel. Mac Grill is closing all of their Indy locations (not just Merchants) and this will allow for a new restaurant concept to backfill both of their locations. As for the north side of 116th a new dinner movie theater and brewery is under construction to fill most of the vacancy left by Hobby Lobby and Old Navy.

  3. Yes it does have an ethics commission which enforce the law which prohibits 12 specific items. google it

  4. Thanks for reading and replying. If you want to see the differentiation for research, speaking and consulting, check out the spreadsheet I linked to at the bottom of the post; it is broken out exactly that way. I can only include so much detail in a blog post before it becomes something other than a blog post.

  5. 1. There is no allegation of corruption, Marty, to imply otherwise if false. 2. Is the "State Rule" a law? I suspect not. 3. Is Mr. Woodruff obligated via an employment agreement (contractual obligation) to not work with the engineering firm? 4. In many states a right to earn a living will trump non-competes and other contractual obligations, does Mr. Woodruff's personal right to earn a living trump any contractual obligations that might or might not be out there. 5. Lawyers in state government routinely go work for law firms they were formally working with in their regulatory actions. You can see a steady stream to firms like B&D from state government. It would be interesting for IBJ to do a review of current lawyers and find out how their past decisions affected the law firms clients. Since there is a buffer between regulated company and the regulator working for a law firm technically is not in violation of ethics but you have to wonder if decisions were made in favor of certain firms and quid pro quo jobs resulted. Start with the DOI in this review. Very interesting.