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Rentrak Gets Bullish On Game Rev-Sharing

5 Jun, 2002 By: Joan Villa

Distributor Rentrak will aggressively pursue revenue-sharing deals for video games and hopes to expand the number of studios offering DVD through its pay-per-transaction (PPT), chairman and CEO Paul Rosenbaum told investors on the company's fiscal-year earnings call.

“We believe the distribution of video games on a revenue-sharing basis to independent video retailers is a great opportunity, and we intend to go after that business aggressively,” Rosenbaum said.

The gaming industry may be failing to satisfy consumer demand, Rosenbaum added after the call. “Our data shows the rental of games doesn't adversely affect the sale of games,” he explained. “In addition, it helps the rental of movies because the kids will come in for games and the parents will leave with a movie.”

More studios may expand DVD revenue-sharing options for independent retailers if Blockbuster and large chains strike similar deals, Rosenbaum said.

MGM Home Entertainment recently expanded its DVD offerings through Rentrak, but so far only a handful of smaller suppliers offer the format through PPT.

Rosenbaum, who took over as CEO after mounting a lengthy proxy fight that unseated former chairman and CEO Ron Berger by shareholder vote in September 2000, said the parties have settled their legal actions. Terms were not disclosed but Berger agreed to drop his counterclaims seeking payment.

“While Rentrak and Berger disagreed on various business decisions made by Berger while he was CEO and by the prior board of directors while it was in control, Rentrak determined that there was a lack of evidence of misconduct by Berger,” a Rentrak statement said. “The parties agreed to dismiss their respective cases and to seek nothing further from the other in litigation.”

Rentrak reported record earnings of $9 million in its fiscal year ended March 31, compared with a net loss of $7.6 million last year. Overall revenues declined to $102.6 million, from $117.9 million in fiscal 2001. Rentrak's previous record earnings were $6.3 million in fiscal 1997.

While product shipments were up 13 percent in fiscal 2001 and 22 percent in the fourth quarter, Rentrak is receiving lower PPT revenue because each unit turns fewer times, Rosenbaum said.

Resolution of a payment dispute with Reel.com, a former customer of Rentrak's Internet fulfillment division 3PF, boosted fourth-quarter revenues by $1 million in after-tax earnings to $19.9 million. The figure is down from $24.5 million in the year-ago period.

Rentrak is also testing new transaction-processing software that analyzes sales data across a movie's life cycle, Rosenbaum said.

“We have the capability within the first seven days a movie comes out to project what it will do [on theatrical, video, pay-per-view and video-on-demand] based on comparable titles over the last several years,” he said.

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