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Image Acquires Home Vision

2 Aug, 2005 By: Thomas K. Arnold

Image Entertainment Monday announced it has bought Home Vision Entertainment, a Chicago-based specialty supplier of independent and foreign films. In connection with the $8 million cash deal, Image also negotiated exclusive distribution rights to the prestigious Criterion Collection for the next five years.

Image, a Chatsworth, Calif.-based producer and distributor of home entertainment, has a domestic catalog of more than 2,800 exclusive DVDs and 175 CDs.

Also on Monday, Image lowered its first-quarter 2006 revenue guidance to between $18 million and $19 million for the quarter ending June 30. Previously the company had announced revenue guidance of between $19 million and $21 million. Image also said it is not adjusting previously announced annual revenue guidance of between $110 million and $120 million. An investor conference call will be held Aug. 11.

With the acquisition of all of the outstanding capital stock of Public Media Inc., Image becomes the new owner of Home Vision, with a library of more than 130 active titles, including The Day of the Dolphin, the 1973 film with George C. Scott, and the BBC productions of C.S. Lewis' classic The Chronicles of Narnia.

Image also becomes the sole retail source of titles from Criterion, the industry's major source of high-end special-edition DVDs. Criterion has about 280 active DVD titles in its library, mostly acclaimed classic and contemporary films, and releases three to four new titles a month.

Previously, Image shared distribution of Criterion titles with Home Vision, each servicing its own retail lists.

Image COO David Borshell noted that this is Image's first acquisition of an independent video company and the company's first acquisition since the 1999 purchase of online retailer DVD Planet.

“This is extremely important to Image in our strategy to grow the company,” Borshell said. “We are a public company, and people are always asking us how we can continue to grow revenue. Our infrastructure is really in a great position to add revenue like this, from external sources — and with very little expense.”

Image maintains a 76,000-square-foot distribution facility in Las Vegas and a sales force of 10 national sales representatives, not including support staff. Image plans to close Home Vision's Chicago headquarters and warehouse, laying off 40 of 45 employees and consolidating all of the company's operations into its own facilities in Chatsworth and Las Vegas.

Home Vision president and CEO Adrianne Furniss will stay on as a consultant for three years.

Borshell said that in calendar-year 2004, Home Vision generated net revenue of about $29 million from its exclusive titles as well as its co-distributed Criterion DVDs.

Now that the entire Criterion Collection is under Image's auspices, Borshell said, the company's marketing muscle can really kick in.

“With cohesive marketing, we certainly believe we can increase the revenue base,” he said. “In the past, because we only dealt with part of Criterion, their product didn't even flow through our marketing department because we only handled a subset. Now, all of a sudden because we are exclusive, our entire marketing department gets to step in and help build the brand.”

Criterion Collection CEO Jonathan Turell said he looks forward “to increased marketing and sales efforts with respect to our programming as a result of our new exclusive distribution agreement. Over the years, Image has been a very vocal supporter of ours, and they have a tremendous understanding of the Criterion Collection's importance in the DVD market.”

Borshell promises more acquisitions in the future. “We certainly believe this is a nice stepping stone for us in letting other companies know that Image is looking to grow its business,” he said. “And while we have openly talked about wanting to do acquisitions, it's always nice to get the first one under your belt.”

“The stage has been set to keep this growth engine running,” Image president and CEO Martin Greenwald said. “Now that the transaction has been concluded, we plan to intensify efforts to identify and pursue further opportunities. Our strategy is clear: to continue acquiring exclusive content for a broad range of current and future distribution channels.”

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