BENTONVILLE, Ark. -- The two major operators of video rental departments in Wal-Mart and Kmart supercenters are consolidating. Entertainment One, Effingham, Ill., which operates 51 video shops inside Wal-Mart Supercenters on a leased-space basis, has bought Supercenter Entertainment Corp., Dallas, which operates 45 video shops in Wal-Mart Supercenters and 25 in Super Kmart Centers of Kmart Corp., Troy, Mich. Shared-revenue distributor Rentrak Corp., Portland, Ore., owns 57% of Entertainment One. The deal to buy Supercenter Entertainment from founder and owner Jack Silverman was announced in late August and is expected to close on Sept. 15. The acquisition was made for 878,000 shares of Rentrak common stock, which was worth about $5.25 million as of Aug. 31. It does not include a number of supermarkets that Supercenter Entertainment racks on a revenue-sharing basis for customers of the Fleming Cos., Oklahoma City. Entertainment One plans to open 33 more of the store-within-a-store rental and sell-through sections by the end of the year in Wal-Mart stores. Earlier in August, Rentrak retained Oppenheimer & Co., New York, to raise as much as $25 million in long-term debt to finance the expansion of Entertainment One, as well as other businesses it is involved in.
It plans to earmark $15 million for the supercenter operation, enough to open 150 of the video shops in the next 18 months, said Ron Berger, Rentrak's chairman, president and chief executive officer. "The synergies and strategy of becoming the primary player in Wal-Mart Supercenters were very exciting to us," said Steve Berns, president, Entertainment One. Berns also is president of Supermarket Video, Encino, Calif., another company in which Rentrak holds a majority interest. Supermarket Video operates video departments in stores of Ralphs Grocery Co., Compton, Calif., and Riser Foods, Bedford Heights, Ohio. The video rental programs in Wal-Mart and Kmart supercenters will likely be strengthened by this consolidation of vendors and the involvement of Rentrak, said industry observers. Since most of these sections are located on the supermarket side of the mammoth stores, this represents incremental growth for the entire supermarket video category, the observers noted.
Entertainment One will continue to open video shops in both Wal-Mart and Kmart supercenters, said Berger. The shops cost about $100,000 each to open, said Berger. Since Rentrak took over majority ownership in May, Entertainment One has been upgrading the selection and ambience of its departments, said Berns. It plans to do the same with the Supercenter Entertainment sections. Among the key changes: -- A name change to BlowOut Video, with more attention to aesthetics and heavier promotional activity. -- More breadth and depth in product, with inventory increasing 15% to 20% to about 3,500 tapes. Most sections are about 1,000 square feet. Some are now testing CD-ROM. -- Shifting the Supercenter Entertainment shops from the shared-revenue program of SuperComm, Dallas (a former sister company of Supercenter Entertainment that is now a Disney subsidiary), to Rentrak.