Movie Gallery

The company began having financial difficulties and announced the closure of 520 stores in September 2007.[7] At the time Movie Gallery had about 4,500 locations.[7] The next month, the company filed for Chapter 11 bankruptcy protection under the U.S. Bankruptcy Code.[8][9] Because of these troubles, the stock price dropped below $1 per share and was removed from listing on the NASDAQ stock exchange in November 2007.[10]

An additional 400 stores were scheduled to close during the bankruptcy reorganization.[11] Movie Gallery emerged from Chapter 11 in May 2008[8] and appointed C. J. Gabriel, Jr. as the new chief executive officer. Founder and former CEO Joe Malugen continued to serve on the Movie Gallery Board of Directors until leaving on July 30, 2008.[12] The company relocated its headquarters to Wilsonville, Oregon, (home of the Hollywood Video subsidiary) in late 2008.[13][14][15] In January 2009, they closed their Wilsonville distribution center.[15]

In early 2009, Movie Gallery operated about 2,700 locations and 1,300 Hollywood Video locations in the United States.[16] Canadian operations included over 200 "Movie Gallery" branded stores, as well as approximately 60 under the VHQ brand in western Canada. In 2009 Movie Gallery closed its Wilsonville, Oregon distribution facility, merging it with one in Nashville, Tennessee.[17]

The Chapter 11 reorganization plan failed to solve all of the company's problems; Movie Gallery's stock fell from $1.25 at close in October 2009 to $0.05 a share at close on December 3, 2009,[18] and many locations fell behind on rent.[19] On February 1, 2010, stores received a report stating that about 800 stores were to be shut down. The company hired the law firm of Sonnenschein, Nath & Rosenthal to prepare for a second filing of bankruptcy,[20] and on February 3, 2010, they again filed for Chapter 11 bankruptcy protection. During a company-wide conference call on April 30, 2010, it was announced that all U.S. Hollywood Video, Movie Gallery, and Game Crazy stores would file for Chapter 7 bankruptcy in May 2010.[2] On June 8, 2010, the company's Canadian stores also entered liquidation.[2]

The last US Movie Gallery and Hollywood Video locations closed on July 31, 2010, and the liquidation sale was completed. The remaining Canadian stores closed during the week of August 8. The contents of the company's headquarters were auctioned off in August 2010.[21]

MovieBeam was a set-top service offered in larger cities in which customers could download movies to a set-top box. Most movies expired within 24 hours of downloading. The company was founded by Disney and other investors as an alternative to online movie downloads. A special set-top box had to be purchased by consumers for the service at a retail price of $149.95. Most major movie studios provided new release content to the service. However, MovieBeam failed to gain any serious traction in the marketplace. MovieBeam was shut down on December 15, 2007.[22] As of June 2008 the remnants of MovieBeam, including its trademarks and other intellectual properties, were sold to an outside investors group for approximately $2 million as part of the company's restructuring. All in-store kiosks for the service were then removed as well.

A typical Hollywood Video store

Hollywood Video, a subsidiary of Movie Gallery, Inc., operated from Wilsonville, Oregon, as a DVD and video game rental shop chain in the United States. It was started in 1988 by former CEO Mark Wattles and his wife. The chain was the largest direct competitor of Blockbuster Video until it was purchased by Movie Gallery in 2005. Hollywood Video declared bankruptcy in February 2010 and announced that it would shut down three months later.[23]

Hollywood Video was the target of a hostile takeover attempt, initially announced at the end of December 2004 by competitor Blockbuster Video. In February 2005, Blockbuster announced an exchange offer of $14.50 per share ($11.50 cash and $3.00 in Blockbuster shares).

In order to create a stronger position against the hostile takeover, Hollywood Video agreed to a buyout on Monday, January 10, 2005, by its smaller competitor Movie Gallery. 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 the news. Blockbuster then dropped its purchase plans, citing anti-trust concerns. Movie Gallery completed its purchase of Hollywood Video on April 27, 2005.