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UPDATE: Rentrak on Several Different Tracks

15 Aug, 2002 By: Joan Villa


Rentrak Corp. will provide DVD revenue-sharing from major studios to its 6,000 independent retail accounts by the end of the year, predicted chairman and CEO Paul Rosenbaum on an earnings call.

Building on its data collection capability, the pay-per-transaction distributor also is wooing movie studios as clients for a new real-time tracking service that gathers and breaks down box office receipts by zip code and other demographic data. This “Entertainment Essentials” software has been developed over the past two years at a cost of more than $1.8 million and was recently tested in movie chains across the country, Rosenbaum said.

The new system would compete with tracking currently provided by Nielsen EDI, he added. Nielsen announced last week it has signed a multiyear deal with Warner Bros. to report overnight ticket sales through its own Web-based application, but Rosenbaum said that deal will not impact Rentrak's rollout.

“It's not a factor one way or another in terms of where we're going on this program,” he insisted. “We have been in a test case with various studios over the last four months. They have seen the product, and I certainly believe we'll be going into negotiation with those studios. We expect to sign our first clients by the end of the second quarter, which means September.”

Rentrak also is pursuing video game revenue-sharing deals that follow the trend forged by major retailers such as Blockbuster and Hollywood Video to provide copy depth for popular platforms such as Xbox and GameCube.

“We have to go out to software publishers and distributors and prove to them, as we did to the studios, that our systems are accurate, quick and reliable,” Rosenbaum said. “There's no guarantee on video games, but no other company is in a position to offer that to independent retailers.”

On the DVD side, Rosenbaum also expects recently publicized revenue-sharing deals between major studios and key retailers to quickly filter down to Rentrak.

“If they offer it to everyone else, they're going to offer it to us too, so I believe we're going to have three or four DVD deals in the near future simply based on what's going on in the marketplace today,” he said.

Video analyst Dennis McAlpine of New York-based McAlpine Associates agreed that studios may sign with Rentrak since they're offering revenue-sharing to large chains, although terms could be different.

“Most of the retail outlets, Hollywood and Blockbuster, are saying they got enough of a split to make no difference between buying it as opposed to revenue-sharing it,” he noted. If Rentrak can't negotiate similar favorable terms, “there's not enough incentive to retail stores to go away from buying it,” he added.

Rentrak's bigger hurdle may be with game companies that have no history with the distributor, he warned. Rentrak also will face the challenge of signing up significant numbers of retailers to participate in games revenue-sharing, he added.

“Some retailers are going to be forced to put in video games and move some of the rest aside just to be competitive with the Movie Gallery, Hollywood or Blockbuster down the street,” he said.

For the fiscal first quarter ended June 30, Rentrak boosted consolidated quarterly revenue by 8.3 percent, to $22.4 million, and earned $309,517, or 3 cents per diluted share, versus a net loss of $1.9 million in the year-ago quarter. Revenue growth was fueled by 42 percent higher unit shipments of VHS and DVD, but the increase was offset by lower rental transactions on those units, the company reported.

For the full year, Rentrak expects consolidated revenue from continuing operations to grow 5 percent to 10 percent, to between $100 million and $105 million, and a modest profit for Web fulfillment division 3PF. As of Aug. 9, the company has bought back 586,300 shares as part of a previously announced 750,000-share stock repurchase program.

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