History
In 1984, Mark Wattles left college and was struggling financially. Wattles' parents had given him and his wife a VCR, which they used as a form of low-cost entertainment. Wattles later said: "I thought, 'There must be other people in America in the same shoes. I think this would be a great business." In 1985, Wattles borrowed money so he could open Home Theater, a 500 square-foot video rental store with 300 films, located in downtown Portland, Oregon.[5] Three years later in 1988, Wattles formed Hollywood Entertainment and served as the company's president and chief executive. Hollywood Video stores later opened in Washington, California, Nevada, and Texas.[10]
In 1993, Hollywood, which operated 16 stores, became a public company.[11] As of 1994, the average Hollywood Video store was 7,500 square feet with 16,000 video tapes. In some instances, the company ordered up to 70 copies of a popular film for each store, while some stores stocked up to 200 copies of a single film. At that time, each store generated approximately $1 million (~$ in ), while 78 additional stores were planned to open in 1995.[10]
In January 1995, Blockbuster filed a $10 million lawsuit against Hollywood Entertainment for hiring five former Blockbuster employees. Blockbuster alleged that the employees knew some of the company's trade secrets, which could be used to aid Hollywood Entertainment. At the time, Hollywood Video had 117 stores, compared to Blockbuster's 2,800 stores.[12] Hollywood Video was ranked fourth in national sales. In May 1995, a judge ruled in favor of Hollywood Entertainment, stating that Blockbuster had failed to demonstrate irreparable harm as a result of the hiring.[13]
In June 1995, Hollywood Entertainment had 153 stores in 11 states. The company's locations included stores operating under the Video Park and Video Central names. That month, Hollywood Entertainment announced plans to triple the number of stores by late 1997.[14] In August 1995, Hollywood Entertainment purchased the 42-store Video Watch chain in the mid-western United States for $59 million (~$ in ). Video Watch was the last of four video rental chains that had been targeted by Hollywood Entertainment for purchase.[15] In November 1995, Hollywood Entertainment announced plans to open 90 stores in Michigan over the next three years. The company also planned to open more than 200 stores in 1996.[16]
In 1996, Hollywood decided to establish three regional offices, with one each in the Chicago, Houston, and San Francisco Bay Areas.[11] Julie Wainwright became president and CEO of Reel.com, replacing founder, Stuart Skorman. After 27 months, in July 1998, CEO Mark Wattles announced Hollywood had purchased Reel.com "in a deal valued at $100 million",[17] which included $30 million (~$ in ) in cash to Reel's stockholders; Reel.com was to continue operating independently, and led by its CEO Julie Wainwright,[18] then Wainwright then left the organization to be replaced by Jeff Jordan.
Merger with Movie Gallery, Inc., and bankruptcy
Hollywood Video was the target of a hostile takeover attempt, initially announced at the end of December 2004 by competitor Blockbuster Video.[19] Blockbuster announced an exchange offer of $14.50 per share ($11.50 cash and $3.00 in Blockbuster shares). In response, Hollywood Video agreed to a buyout on January 10, 2005, by Movie Gallery, a smaller competitor. Movie Gallery paid $860 million, $13.25 per share, and the assumption of $380 million in debt. Stocks closed at $13.85 on January 10 after this news. Blockbuster then dropped its purchase plans, citing antitrust concerns.[7] Movie Gallery completed its purchase of Hollywood Video on April 27, 2005.[5][20] As a result of the merger, Hollywood Video would become a subsidiary of Movie Gallery and maintained its Oregon headquarters,[21]which Movie Gallery would eventually move into.
