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RETAILERS AWAIT RENTRAK DIRECTION

PORTLAND, Ore. -- Supermarket retailers signed with Rentrak in revenue-share contracts can only wait and see the outcome of the distributor's future course in the wake of the company's recent management shakeup.Rentrak Corp., based here, the pioneering proponent of revenue sharing in the home video market, underwent a directorship change at its Annual Shareowners Meeting on September 19.On that date

PORTLAND, Ore. -- Supermarket retailers signed with Rentrak in revenue-share contracts can only wait and see the outcome of the distributor's future course in the wake of the company's recent management shakeup.

Rentrak Corp., based here, the pioneering proponent of revenue sharing in the home video market, underwent a directorship change at its Annual Shareowners Meeting on September 19.

On that date stockholders elected to the board five new members. All were nominees of the Committee for the Achievement of Rentrak Excellence (CARE), a group of Rentrak shareowners who, since their May filing with the Securities & Exchange Commission, have been the subject of intense media scrutiny in their campaign for company control.

CARE leader Paul A. Rosenbaum was elected Ron Berger's replacement as chairman of the board and will also serve as interim CEO. Also elected to the board were Cecil D. Andrus, George H. Kuper, Joon S. Moon, and James G. Petcoff. A statement from Rosenbaum added that "F. Kim Cox, Rentrak's president, will continue in his operational leadership role and ensure continuity for employees, customers, and suppliers."

Rentrak founder Ron Berger, the company's largest stockholder, had resigned as CEO not long before the meeting, citing in a company release that "it is obvious that I have become a lightning rod for the opposition in the proxy contest."

Berger, often reported to be a controversial figure, has had an undeniable impact on home video. "Ron Berger is a real statesman and one of the founding partners with suppliers, distribution, and the whole industry," said Bo Andersen, president, Video Software Dealers Association, Encino, Calif. "He has done a huge service to the industry over the years. He has been very important to us and we hope he will be back soon."

Another insider added to Berger's portrait. "A lot of people didn't have a high opinion of Ron Berger," said one Rentrak source. "He controlled Rentrak with an iron hand; the board did what he wanted."

The reasons behind this departure and subsequent management change are topics of speculation. "Ron Berger has done a lot of good for the industry," said one long-term observer, "but now other, more powerful forces -- the studios -- have come to the fore. And maybe now it's time for a new direction."

Others have similar assessments. "Look at the vision that Ron Berger brought," said Andersen. "Rentrak was the year-after-year test of revenue sharing. But it's not likely to be the future model." Andersen said he believes the use of revenue share, especially through alternative sources, has the potential to "outstrip Rentrak."

Another problematic issue for the company has been the onslaught of studio buying programs. "Rentrak had a competitive advantage two years ago when there weren't buying programs," said a Rentrak source. "Its program is essentially the same as it was two years ago. But the studio programs are more aggressive, and Rentrak has lost one-third to one-half of its competitive advantage."

As for the results of Rentrak corporate changes for its supermarket clients, some specialists can only wonder what's next. "It's too early to tell whether this will affect our purchasing budget," said Craig Hill, video specialist, Harps Food Stores, Springdale, Ark. "It's a concern because, with Warner Direct goals being so high, we had planned to rely on Rentrak to stay within budget."

"Rentrak is very helpful for supermarkets in providing copy depth," said Rick Nida, Rentrak's vice president of investor relations. Specialists who use the program will be closely following the progress of what Rentrak calls "the world's largest distributor of pre-recorded videocassettes on a revenue-sharing basis."

While the media focus has recently been on the Rentrak/CARE disagreement, the company has had other positive announcements this year. DVD revenue sharing began in August with "Supernova" from MGM Home Entertainment of Santa Monica, Calif. A-Pix Entertainment of New York recently joined as a product provider. Rentrak named MGM and Twentieth Century Fox Home Entertainment of Beverly Hills as suppliers of output deals -- in which customers opt for lower up-front fees in exchange for agreeing to stock all titles offered by the studios on PPT (Pay-Per-Transaction) terms. And the company was reportedly negotiating with distributor Valley Media of Woodland, Calif. to offer data tracking for a revenue sharing program.

This tracking service has been of most interest, however, in relation to unconfirmed reports of a deal to handle revenue sharing data under the new Warner Direct program administered by Warner Home Video of Burbank, Calif. "There is no announcement yet of our handling data for Warner revenue sharing," said Rentrak's Nida on September 22. But Warner has said it plans to offer revenue sharing to new customers in October. "The whole world says the Rentrak-Warner deal is done, except Rentrak," said another Rentrak source.

One less encouraging item is the company's disclosure of a $4.4 million debt owed by the recently bankrupt Video Update retail chain of St. Paul, Minn.

Predictions about future courses of action are speculative. "Rosenbaum could try to sell off 3PF.com or do an IPO," said a Rentrak source. "I know he thinks there's a huge value in 3PF.com and that it's the company's big asset." Rentrak's 3PF.com operation is an e-fulfillment center for on-line retailers. "Or he could say the real value in this company is 3PF.com and he could sell PPT."

Studios have been reported as potential buyers of the PPT system, but there are hurdles associated with this. "If you buy Rentrak, what are you buying?" asked the source. "You're buying a revenue sharing business that has contracts with a lot of studios. And every one of those contracts has to have a cut-and-run clause in it somewhere."

"I can't see Disney cooperating with Warner, for instance," said Hill of Harps, "if Warner were to buy PPT."

For now, though, there is little indication of a divestment. "The chairman of the board has expressed strong confidence in PPT," said Nida.

The new administration is optimistic about the future . "We are very pleased that shareowners have given us the opportunity to build value for them as we implement our strategic vision for this excellent company," said Rosenbaum in a statement. "We view this transition as an exciting time for Rentrak's shareowners and employees to take a fresh view of the opportunities and challenges facing Rentrak."

In the same release Rentrak president F. Kim Cox said that "we believe that we have the right organization in place and that it is sized right for the anticipated growth in our core PPT business. We intend to continue to provide excellent uninterrupted service to our customers and expect to offer an expanded slate of titles from suppliers as we work with studios to improve opportunities for video retailers."