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Second Studio Signs Rev-Share Deal With Rentrak

13 Feb, 2003 By: Joan Villa

Rentrak has signed a second revenue-sharing deal with a major studio that allows retailers to combine DVD and VHS units in what the pay-per-transaction (PPT) distributor hopes will become a trend this year.

“Studio executives appear to be giving serious reconsideration to the option of revenue-sharing on DVD,” said Rentrak chairman and CEO Paul Rosenbaum. He declined to name the new studio, other than to say it is one that already provides VHS revenue-sharing through Rentrak.

A source familiar with the deal said 20th Century Fox Home Entertainment signed with Rentrak and will immediately begin offering output revenue-sharing terms with the flexibility to combine DVD and VHS units under a single goal. Other sources say Buena Vista Home Entertainment and Universal Studios Home Entertainment are considering similar deals.

Rentrak has offered for about a year a DVD-VHS revenue-sharing plan from MGM Home Entertainment that has been popular with independent retailers.

Rentrak has also more than doubled the number of video game publishers offering revenue-sharing on games in the last three months, Rosenbaum said. Between six and 15 titles are released monthly on PlayStation 2, Xbox and GameCube formats, including 3DO's High Heat Baseball 2004 and Sammy Studio's Guilty Gear X2 for PlayStation 2, he said.

“We have met with virtually every third-party game publisher and are currently in negotiations with an additional 10 publishers that we expect to sign in the next 60 days,” he said. “We're optimistic that our new release video game titles we're able to offer will double in the next quarter.”

Even so, video game revenues won't have a “significant positive impact” on the company's bottom line until the second quarter of 2004, Rosenbaum said.

However, video game income combined with anticipated revenues from Rentrak's box office reporting system, Entertainment Essentials, is expected to provide “solid earning potential in fiscal year '04 that should more than offset revenue and earnings declines we expect in the VHS revenue-share business,” Rosenbaum said.

For fiscal 2003 third quarter ended Dec. 31, Rentrak reported revenues of $21.3 million, down from $24.3 million in the year-ago quarter, and a consolidated net loss of $299,195 or 3 cents per share. In fiscal 2002's third quarter, Rentrak reported net income of $2.34 million or 24 cents a share, including an after-tax gain of approximately $1.5 million or 15 cents per diluted share related to the sale of its interest in a Japanese joint venture.

For the company's core entertainment operations that include VHS revenue-sharing, revenues declined 17 percent to $15.5 million, as competition from sellthrough box office hits during the quarter resulted in fewer rental transactions. In addition, revenues dropped from the auditing services Rentrak provides to studios to monitor their direct revenue-sharing programs with major retailers, Rosenbaum said.

“As expected, the limited selection and appeal of rental titles during the holiday season resulted in an 11.3 percent decline in unit shipments of VHS and DVD titles to independent video retailers compared with last year's third quarter,” he reported.

3PF.com Inc., Rentrak's fulfillment subsidiary, generated third quarter revenues of $6.3 million and a net loss of $181,000, compared to year-ago revenues of $6.4 million and net income of 503,000.The division is “positioned” to be profitable with the addition of seven new customers in the fourth quarter, he added.

As of Feb. 11 the company has purchased a total 697,800 shares of stock as part of a 750,000-share repurchase program authorized by the board of directors in April 2001, Rosenbaum said.

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