HOLLYWOOD ENTERTAINMENT TESTS VIDEO AT FRED MEYER

DAN ALAIMO

PORTLAND, Ore. -- Hollywood Entertainment is testing video rental departments inside eight Fred Meyer Inc. supercenters here, according to Rob Boley, a Fred Meyer spokesman.

Hollywood, also based in Portland, is a rapidly expanding video specialty store chain that is challenging Blockbuster in many markets with its newer, more up-to-date stores. "Hollywood Entertainment is a local company that has been growing very fast and has an excellent operation," said Boley. "We have videos for sale in our home electronics department, but we do not have videos for rent in our stores. So this service complements our one-stop shopping experience." Hollywood is familiar with the supermarket business. It bought a chain of 33 video stores from H-E-B Grocery Co., San Antonio, in March 1994, and picked up some of H-E-B's top video executives, including Craig Odanovich, former general manager, video. Odanovich recently resigned from his executive vice president post at Hollywood, according to industry sources. Art Seago, director, supermarket operations, heads up the Fred Meyer project for Hollywood. He also is from H-E-B, where he was manager, video marketing. The departments at Fred Meyer average 1,800 square feet, which is about half the size of a typical Hollywood video store, and have 6,000 rental units in inventory, said Seago. The first opened on April 15 in Bend, Ore., and the eighth opened on April 29 in Kent, Wash., he said.

"This is a way to make ourselves more convenient to a customer base that we are not reaching," Seago said. Selections include videos, 16-bit video games and audio books. The assortment of sell-through videos is limited because of the extensive offerings in Fred Meyer's

electronics department.

The video departments open to the inside of the Fred Meyer supercenters. They all are located near the entrance of the Fred Meyer units.

"All eight are different," Seago said. "We took available space that was vacated by previous tenants. We don't have a cookie cutter yet."

The test at Fred Meyer will determine whether Hollywood expands further with supermarket video departments, said Seago. "We are still in the test mode," Seago said. "We have to get through the test first and then there is a whole nation out there." Hollywood Entertainment uses a shared-revenue, pay-per-transaction distribution system from Rentrak Corp., also based in Portland. With these systems, retailers pay a handling fee of $10 or less and then share revenues with the supplier. Transactions are tracked electronically, which allows the retailer to stock new releases in greater depth than if they were purchased through traditional distribution. Rentrak recently acquired the majority interest in Entertainment One, Effingham, Ill., which operates video rental departments in Wal-Mart supercenters. Another subsidiary of Rentrak, Supermarket Video, Encino, Calif., has video departments in stores of Ralphs Grocery Co., Compton, Calif., and Riser Foods, Bedford Heights, Ohio. Meanwhile, Blockbuster Entertainment, Fort Lauderdale, Fla., is testing full-sized video shops inside two Smitty's stores in the Phoenix area. The test began late last year. Blockbuster is continuing to look closely at opportunities in supermarket video, according to industry sources.