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Technology Stocks : GTIS - Will it be a Phoenix or not ? -- Ignore unavailable to you. Want to Upgrade?

To: Coy Lynn Gullett who wrote (1061)	11/1/1997 1:27:00 AM
From: Coy Lynn Gullett	Read Replies (1) \| Respond to of 2319

GTIS negotiating with foreign affiliates By Aaron Ricadela New York Seeking new revenue sources as its mass-merchant distribution business wanes, GT Interactive Software will announce affiliated-label agreements within 30 days with as many as four overseas software developers. GTIS president and chief executive officer Ronald Chaimowitz, speaking yesterday at investment research firm Gerard Klauer Mattison's 1997 Toy and Interactive Entertainment Conference here, said GTIS is negotiating with European and Japanese entertainment software developers about programs to sell and distribute their titles in the United States. The company will likely reach agreements with three or four publishers that would like to use GTIS's sales force and distribution system to grab more U.S. shelf space, he said. Chaimowitz declined to name the companies. Under an affiliated-label program, a company agrees to handle sales and distribution for the affiliate's titles in return for a fee. The fee typically ranges between 15 percent and 20 percent of the title's revenue, but it is sometimes as high as 25 percent, according to one entertainment software executive. From that fee, the publisher must fund overhead, including its sales force; take on the affiliate's cost of goods sold, typically about $400,000 for a 100,000-unit run of a title; and realize a profit, the executive said. Software giants CUC Software, Broderbund Software and Electronic Arts, among others, have strong affiliated-label programs that mine smaller development houses for content they believe will produce a "hit" title. The agreements will mark the first time in GT's four-year history that it has taken on affiliated labels. The company has distributed titles for an array of publishers to mass-merchants, including Wal-Mart and Target. But as publishers Electronic Arts, CUC Software and LucasArts Entertainment moved toward direct sales of their software lines to Wal-Mart, Chaimowitz has said GTIS will need to generate more revenue from publishing than from distribution. Yesterday, he said the affiliated-label programs would prove "a significant source of cash flow and revenue." GTIS plans to sell and distribute titles for its affiliates to more than 20,000 storefronts, including those operated by CompUSA, Computer City and Best Buy, a company spokeswoman said. GTIS chief operating officer David Chemerow said the company will use the same warehouses for the affiliated-label programs that it uses for mass-merchant distribution. One industry analyst was skeptical, arguing that revenues from the titles wouldn't offset the programs' cost. "I'd rather store furniture in the warehouses," he said. Coy