Ezy DVD bails out ReelTime

Struggling internet video provider ReelTime has secured investment and assistance from online DVD and entertainment retailer EzyDVD.

Under the deal with Reeltime, EzyDVD will initially acquire six million Reeltime shares for cash and a further 142 million shares by assisting Reeltime to meet a number of key milestones over the next three years.

Jim Zavos, who founded EzyDVD in 1998, says the deal fits with the franchised retail DVD chain’s longer-term strategy because it enables digital delivery of movies. The ReelTime.tv website will be closed over the next couple of weeks, re-branded EzyDVD and re-launched.

Zavos will join the ReelTime board and has taken over the day-to-day management of the listed company (ASX code: RMA).

Zavos says: “We bring operational skills, supply negotiation skills, and very good relationships with suppliers to enable broader range of product.

“Anyone who looks at Reeltime will see they have been burning a lot of cash in last 12 months, and part of alliance will give them ability to strip a lot of costs out their business.”

When asked if this was a backdoor listing for EzyDVD, Zavos said: “There are no plans for a backdoor listing for EzyDVD but sometimes you let nature take its course.”

EzyDVD’s shareholding will be on a par with ReelTime’s largest shareholder, Movies Online Ltd, if the milestones are met. The purchase price was not disclosed, but ReelTime shares were trading at $0.017 prior to a voluntary suspension a week ago.

ReelTime has said says the milestones include cost reduction, revenue targets, market penetration/customer acquisition and extended content offerings. It claims that “benefits will flow to the company within three months as the first of the milestones are reached.”

ReelTime has offices in Melbourne and Sydney; EzyDVD is based in Adelaide. Zavos says no decision made about keeping the east coast offices open, but there will be some shared services.

Zavos started selling DVDs online from a website that cost him $3000 to build in 1998. In less than 10 years he built the online business based in Adelaide into a national chain of 70 franchised EzyDVD retail stores turning over about $100 million a year.

Following the announcement, ReelTime lifted the voluntary suspension in trading of its shares on the ASX.

In July Zavos talked to SmartCompany about his growth, making franchising work, new trends in the industry and the next stage of expansion for EzyDVD – converting video rental stores to retail/rental outlets under his brand.