Hollywood Entertainment to Acquire Reel.com; Purchase of Leading
Video Retail Web Site Positions Hollywood for the Future
Business Wire - July 31, 1998 04:16
EMERYVILLE, Calif.--(BUSINESS WIRE)--July 31, 1998--
A conference call was held yesterday to discuss the acquisition of Reel.com by Hollywood Entertainment. The call was led by
Dave Wetherell, chairman and chief executive officer of CMG Information Services and Mark Wattles, chairman and chief
executive officer of Hollywood Entertainment. A replay of this call can be accessed by dialing 800/475-6701, access code
400665.
A conference call was held yesterday to discuss the acquisition of Reel.com by Hollywood Entertainment.
The call was led by Dave Wetherell, chairman and chief executive officer of CMG Information Services and Mark Wattles,
chairman and chief executive officer of Hollywood Entertainment. A replay of this call can be accessed by dialing
800/475-6701, access code 400665.
Hollywood Entertainment, Corp. (NASDAQ:HLYW), dba Hollywood Video, the second largest video rental chain in the
United States, announced today that it has signed a definitive agreement to acquire Reel.com, Inc. Reel.com operates the
leading video-only store on the Internet (www.reel.com), according to the 100hot list of top shopping sites for June 1998.
The company is changing the way film lovers buy movies by offering access to over 85,000 movie titles, proprietary movie
information, and recommendations that help customers discover movies they'll enjoy.
Terms of the Agreement
Pursuant to the terms of the Merger Agreement, the value of the deal is approximately $100 million. Hollywood Entertainment
will issue five million shares of restricted Hollywood Entertainment common stock and redeemable preferred stock, and $30.0
million in cash to stockholders of Reel.com. Closing of the transaction is expected within 30 days, subject to customary closing
conditions.
Mark Wattles, chairman and chief executive officer of Hollywood Entertainment commented, "This acquisition allows us to
leverage Hollywood's base of 25 million members, industry knowledge, and studio relationships to a new and rapidly growing
distribution channel.
"Because of the uniqueness of an individual customer's taste in movies, I believe the Internet together with the PC's information
processing capabilities is positioned to create a substantial increase in movie consumption through matching, collaborative
filtering, and customized recommendations.
"This transaction ideally positions us to be a leader in electronic commerce as well as the future of electronic distribution of
movies."
Internet investors invest $67.5 million in Hollywood
Separate and concurrent with the acquisition, a group of Reel.com's stockholders will purchase an additional five million shares
of restricted Hollywood Entertainment common stock at a price per share of $13.50, a discount of the public market price to
reflect the restricted nature of the investment.
The shares, together with the shares issued in the acquisition, will not be transferable for one year after closing. The shares have
certain piggyback registration rights one year after closing and certain registration rights two years after closing. The investment
group will be entitled to appoint two members to Hollywood Entertainment's board of directors.
The new members of Hollywood's board of directors will include Scott Beck, former chief executive officer of Boston Market
and previously vice chairman of Blockbuster Entertainment, and Dave Wetherell, chairman and chief executive officer of CMG
Information Services, Inc.
The investor group consists of CMG@Ventures, the strategic investment and business development unit of CMG Information
Services, Inc.(NASDAQ:CMGI); Intel Corp.; Paul Allen's Vulcan Ventures, Inc.; and Scott Beck.
"The combination of these two brands should increase the viability of purchasing entertainment via computer," said Avram
Miller, Intel corporate vice president and director, Business Development. "This, in turn, can help to bring new uses -- and new
users -- to PCs and the Internet."
Commenting on the acquisition, CMG's CEO David Wetherell said, "Hollywood Entertainment and Reel.com represent two
well-run, successful and complimentary companies -- one traditional and one virtual. By combining Hollywood Entertainment's
20 million customers with the largest video store on the Web, we're creating a new, more capable video powerhouse in the
fast-growing entertainment market."
Unique Competitive Business Leverage
With its acquisition of Reel.com, Hollywood Entertainment expects to obtain a significant competitive advantage in the
fast-growing interactive home entertainment market. The combination will uniquely position Hollywood Entertainment for the
future transition from today's e-commerce model using physical distribution to e-commerce through electronic distribution.
In order to maintain its unique culture that is ideally suited to capitalize on the opportunity of the Internet, Reel.com will continue
to operate with its own independent management headed by the current chief executive officer Julie Wainwright, who will
report to Mark Wattles chairman and chief executive officer of Hollywood Entertainment.
Reel.com will focus on increasing its sales via the Net through continuing the rapid acquisition of new customers by leveraging
Hollywood Entertainment's 25 million members, which is growing at a rate of approximately 500,000 new members per month.
Hollywood's members will be directed to Reel.com's Web site via in-store promotions, in-store kiosks, and co-op advertising,
among other traffic building vehicles. Reel.com will build relationships with its new customers using its proprietary editorial
content, movie matching, and recommendation capabilities to help them discover movies either to purchase or rent from the
Web site or store.
Julie Wainwright, chief executive officer of Reel.com, stated, "We are extremely pleased with the combination. We expect that
teaming up with Hollywood Entertainment and leveraging their more than 1,000 store base should help fuel our already
explosive growth by driving traffic to the site, and expanding awareness."
About Hollywood Video
Hollywood Video is the second largest video store chain in the United States, with over 1,000 superstores in 43 states.
Hollywood Video superstores average approximately 7,500 square feet and typically carry approximately 10,000 titles and
16,000 videocassettes.
According to video industry analysts at Paul Kagan Associates, Inc., Hollywood Entertainment operates the highest volume
stores in the country. The company opened 121 new stores in 1995, 250 new stores in 1996, 356 new stores in 1997, and
plans to continue adding approximately one store per day in 1998.
About Reel.com
Reel.com (www.reel.com) is the leading Web-based movie store offering 85,000 VHS titles for sale, over 1,200 DVD titles
for sale, and 35,000 video titles for rent. Reel.com is backed by investors including CMG@Ventures, Intel Corp., and Vulcan
Ventures. Reel.com also features proprietary editorial content to help customers select movies.
The staff of writers for the site include film school graduates, video store veterans, screen writers, and scores of other film
experts. Reel.com's current Internet partners include @Home Network, Celebsite, E! Online, Film.com, Mr. Showbiz, Planet
Hollywood, Turner Home Entertainment, TV Guide Entertainment, WebTV Networks and Yahoo!
Reel.com also operates a physical store in Berkeley, Calif., offering a selection of 35,000 videos.
About Investor Group
The investor group consists of CMG Information Service, Inc., Intel, Vulcan Ventures, and Scott Beck. CMG Information
Service, Inc. is an Internet incubator and Internet investment company which operates direct marketing companies along with
Internet companies and venture funds focused on the Internet.
Intel is the world's leading supplier of microprocessors used in personal computers. Over 80% of the personal computers in
use around the world today are based on Intel Architecture microprocessors.
Vulcan Ventures Inc. of Bellevue, Washington is Paul G. Allen's investment vehicle focused on companies which offer
products, services or technologies that fit his wired world strategy. Paul Allen co-founded Microsoft Corporation. Scott Beck
is the former vice chairman of Blockbuster Entertainment, and also the former chief executive officer of Boston Chicken.
Disclaimer
Certain matters discussed within this press release may constitute forward-looking statements within the meaning of the federal
securities law. Although Hollywood Entertainment, Inc. believes the statements are based on reasonable assumptions, there can
be no assurance that these expectations will be attained. Actual results and timing of certain events could differ materially from
those projected in or contemplated by the forward-looking statements due to a number of factors, including, without limitation,
industry trends, merchandise trends, competition, and the ability to obtain financing, as well as other risks outlined from
time-to-time in the filings of Hollywood Entertainment, Inc. with the Securities and Exchange Commission.
inteview on CNBC just went quite well, they are expanding a store a day, wants to be leader in on-demand video in the future. SR |
