Movie Gallery

Movie Gallery, Inc.
Company type	Public
Industry	Video rental
Founded	1985; 41 years ago in Dothan, Alabama, United States
Founder	Joe Malugen, Harrison Parrish
Defunct	August 8, 2010
Fate	Filed for Chapter 7 bankruptcy and liquidated
Headquarters	Wilsonville, United States
Area served	United States, Canada
Key people	C. J. Gabriel Jr. (CEO from 2008)
Products	Movie and video game rentals and retail (Blu-ray Discs, DVDs, VHS tapes, gaming software)

Movie Gallery, Inc. was a U.S.-based rental enterprise specializing in movies and video games, with its main office located in Wilsonville, Oregon. At its height, the company managed 4,749 outlets, ranking as the second largest video rental chain in the United States and Canada, trailing only Blockbuster Video. Its operations centered on renting and retailing Blu-ray Discs, DVDs, VHS tapes, and gaming software. Established in 1985 in Dothan, Alabama by entrepreneurs Joe Malugen and Harrison Parrish, the company shifted its headquarters to Wilsonville in 2009.

On April 30, 2010, Movie Gallery filed for Chapter 7 bankruptcy, initiating the process to liquidate all its stores. At that point, it maintained roughly 2,500 locations throughout North America under the banners Movie Gallery, Hollywood Video, and GameCrazy. The last outlets ceased operations by August 8, 2010.

In 2011, a local business owner independently revived three Movie Gallery stores in Northwest Arkansas after securing rights to the trademark within that region.

Movie Gallery concentrated its store placement primarily in rural areas, whereas its subsidiary Hollywood Video targeted competition with Blockbuster in metropolitan markets. This geographic segmentation was a central element of the company’s strategy to position itself competitively within the retail entertainment sector.

History

The origins of Movie Gallery trace back to 1985 when Joe Malugen and Harrison Parrish founded it in Dothan, Alabama. Through their subsidiary M.G.A., they managed specialty video stores and franchised the Movie Gallery brand throughout southern Alabama and the Florida panhandle. By June 1987, ownership included five company-operated stores plus 45 franchises. Starting in 1988, the firm began consolidating franchises into corporate-owned outlets. By 1992, Movie Gallery operated 37 stores generating annual revenues of $6 million.

The company went public with an initial public offering in August 1994, utilizing capital raised to acquire multiple video chains mainly located in the Southeastern U.S. Additional public financing secured early in 1995 accelerated expansion through acquisitions and new store openings. Within less than two years—by mid-1996—the store count surpassed 850 as a result of over 100 acquisitions.

In 1999, Movie Gallery aimed to launch 100 additional stores and acquired Blowout Entertainment’s portfolio of 88 locations, ending that year with more than 950 stores across 31 states. The following year saw the company exceed its target of opening over 100 new outlets while relocating another 25.

A significant milestone occurred in late 2001 when Movie Gallery acquired Video Update, adding about 100 stores in Canada and marking its first international expansion. This acquisition contributed to a nearly 50% increase in store numbers from 2001 to 2002, bringing total locations to approximately 1,678.

The company's largest growth phase came with the merger with Hollywood Entertainment in 2005, which expanded its footprint to roughly 4,700 stores and pushed revenues beyond $2.5 billion. Additionally, it entered Western Canada by acquiring VHQ Entertainment and establishing 61 new stores there.

Decline

Confronted with financial challenges, Movie Gallery announced plans to shutter approximately 520 stores out of around 4,500 locations in September 2007. The following month saw the company file for Chapter 11 bankruptcy protection. Subsequently, its stock value dropped below $1 per share and was removed from the NASDAQ exchange by November of that year.

In early 2008, further closures were planned: about 400 stores closed in February followed by another 160 in April amid bankruptcy restructuring efforts. The firm emerged from Chapter 11 protection in May 2008 and appointed C. J. Gabriel, Jr. as CEO; founder Joe Malugen remained on the board until July of that year. Later that year, corporate headquarters moved to Wilsonville, Oregon—the base for Hollywood Video operations. In January 2009, distribution functions at Wilsonville were consolidated with a facility located in Nashville, Tennessee.

By early 2009, Movie Gallery operated roughly 2,700 U.S.-based stores alongside approximately 1,300 Hollywood Video outlets plus over 260 Canadian locations under Movie Gallery and VHQ brands. Despite restructuring efforts, financial instability persisted; share prices plummeted from $1.25 in October to $0.05 by December of that year while many stores fell behind on rental payments.

In February 2010, plans were unveiled to close about 800 stores as preparations commenced for a second bankruptcy filing under Chapter 11 on February 3rd. By April of that year, all U.S.-based Hollywood Video, Movie Gallery, and GameCrazy locations filed for Chapter 7 liquidation; Canadian operations followed suit by June.

Complete closure of remaining U.S. outlets occurred on July 31, 2010 after final liquidation sales; Canadian stores shut down shortly thereafter. The contents of corporate headquarters were auctioned off during August 2010.

MovieBeam

MovieBeam operated as a set-top box service enabling users in select metropolitan areas to download films onto a dedicated device, with most content expiring within a 24-hour period. Established by Disney alongside other investors, its goal was to rival online movie download platforms. Customers purchased the set-top unit for $149.95. Despite collaborations with major film studios to provide recent releases, MovieBeam struggled to capture a significant market share and discontinued service on December 15, 2007. In June 2008, its trademarks and intellectual property were sold to external parties for approximately $2 million amid corporate restructuring, and all distribution kiosks were dismantled.

Hollywood Video

Hollywood Video, headquartered in Wilsonville, Oregon, was a rental chain specializing in DVDs and video games, founded in 1988 by Mark Wattles, a former CEO, along with his spouse. As the primary direct rival to Blockbuster Video, Hollywood Video was acquired by Movie Gallery in 2005. The subsidiary filed for bankruptcy in February 2010 and terminated operations three months thereafter.

Acquisition of Hollywood Video

At the end of 2004, Hollywood Video faced an unsolicited takeover bid from Blockbuster Video, which proposed $14.50 per share—comprising $11.50 in cash and $3.00 in Blockbuster stock. To counteract this offer, Hollywood Video consented to be purchased by the smaller competitor Movie Gallery on January 10, 2005. Movie Gallery paid $860 million ($13.25 per share) and assumed $380 million in liabilities. Following the acquisition announcement, Hollywood Video's shares closed at $13.85 each. Blockbuster withdrew its proposal due to antitrust issues. The acquisition was finalized on April 27, 2005.

Headquarters

Initially based in Dothan, Alabama, Movie Gallery operated from a location within Porter Square Mall. After the acquisition of Hollywood Video in 2005, the company expanded its footprint in Oregon by utilizing Hollywood Video's Wilsonville offices. Hollywood Video continued as a subsidiary under Movie Gallery with its headquarters remaining in Wilsonville.

Following Movie Gallery’s Chapter 11 bankruptcy filing in 2007 and subsequent reorganization in 2008 under new leadership led by CEO C. J. Gabriel—an Idaho resident without connections to Dothan—the corporate headquarters were relocated to Wilsonville that same year. The former Dothan facility was placed on the market for lease or sale. While maintaining a small operational presence in Dothan, the company centralized its activities in Oregon. This relocation marked a significant shift since decision-making authority had previously moved to Alabama after the 2005 acquisition of Hollywood Entertainment.

Movie Gallery’s assets were liquidated on August 17, 2010, through an auction held at its Wilsonville headquarters by Great American Group following the company’s Chapter 7 bankruptcy filing, bringing its business operations to a close.

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