Movie Gallery launches subscription plan
'PowerPlay' program eliminates due dates, late fees
By Danny King -- Video Business, 3/18/2009
MARCH 18 | Movie Gallery is launching an in-store subscription plan that the company is touting as a cheaper and better alternative to online-based subscription plans from competitors.
Movie Gallery's new PowerPlay program allows customers to rent movies and games at lower prices, generally with no due dates or late fees. The company is justifying the in-store only approach by quoting a company survey showing many customers prefer going to a store so they can rent a movie they want immediately, rather than waiting for whatever a DVD-by-mail service can send them from their queue.
The program offers customers the least expensive movie and game subscription rentals in the industry, the company said. Catalog titles, new releases, Blu-ray discs and videogame titles rent for $2, $3, $4 and $5, respectively, with four monthly rental plans ranging in price from $7.99, good for $8 worth of rentals, to $39.99 for unlimited rentals.
The plans are based on a point system. PowerPlay members not on the unlimited-rental plan may carry over the unused portion of their monthly points to the following month.
Other conditions apply; for example, game rentals are for five days only. Customers who keep a rental beyond the limit will be charged for each additional day.
The company also touted the plan's advantages over inexpensive kiosk rentals in the form of wider selection.
"Kiosks and online services have a place in our industry," said Clifford Torng, Movie Gallery's chief marketing officer. "But our new subscription service offers unprecedented pricing, convenience and selection that can only be delivered in-store."
The subscription plan is part of an effort to gain ground on both Blockbuster and Netflix as well as the growing kiosk business.
Blockbuster eliminated late fees for store rentals in 2005 by giving customers a one-week grace period and then charging the customer the purchase price of the title unless they returned it. The company's Total Access online rental program, started in 2006, didn't have late fees, because rented titles were simply counted against whatever monthly allotment the customer had as part of a particular subscription plan.
Netflix, which started its subscription service a decade ago, has never had late fees either, instead counting a rented title against the customer's monthly allotment.
Hollywood Video has tried in-store subscriptions previously, and Movie Gallery earlier had announced a plan to begin offering an online rental plan similar to Blockbuster and Netflix. But the chain's financial problems prevented it from pursuing that strategy.
Earlier this month, Movie Gallery CEO C.J. ‘Gabe’ Gabriel stepped down 10 months after being tapped to replace co-founder Joe Malugen as the company emerged from bankruptcy last year. Gabriel was replaced by Sherif Mityas, who joined the company as its chief operating officer in June.
Weighed down by debt from its $1.25 billion acquisition of Hollywood Video in 2005, Movie Gallery, whose eponymous and Hollywood Video chains make it the No. 2 U.S. movie-rental store operator behind Blockbuster, filed chapter 11 in October 2007 and emerged last May.
Since then, the company has tried to cut costs and improve its financial performance by boosting exposure of the Hollywood Video brand, while overhauling much of its leadership. Mityas joined the company last June while Lucinda “Cindy” Baier replaced Thomas Johnson Jr. as Movie Gallery’s chief financial officer in July. The following month, Malugen, who co-founded Movie Gallery in 1985, resigned from the company’s board of directors.
In January, Movie Gallery reported a net loss of $38.9 million on $555.7 million in sales for the three-month period ended April 6, the last period under which the company was still operating in chapter 11. The results had been delayed due mainly to matters related to the chain's bankruptcy.
