Franchise Entertainment Group, the operator of the Blockbuster and Video Ezy chains in Australia and Asia, has swooped on the assets of collapsed DVD retailer EzyDVD.
EzyDVD collaped in late December with debts of about $18 million. The chain, founded by Jim Zavos, claimed to have annual turnover of about $100 million.
Under the terms of the deal, FEG will buy the EzyDVD brand and online business, the franchise network, as well as stock, plant and equipment and 11 company-owned EzyDVD stores. The 25 franchised EzyDVD stores will also come under FEG’s control.
A price of the acquisition was not disclosed, although it is believed the deal was worth around $10 million.
But the deal will not come without pain for EzyDVD staff. The company’s head office, warehouse and distribution facility in South Australia will close in the next one-to-three months, with the loss of around 30 jobs.
EzyDVD’s receiver, Ferrier Hodgson, has also closed 15 unprofitable company-owned stores.
FEG director Paul Uniacke is clearly excited to have picked up a bargain.
He had actually conducted due diligence on EzyDVD back in June 2008 and was keen to buy some of the company’s assets back then.
“I just dusted off the files from last year when I heard the administrators were in,” he says
Uniacke is particularly please to be getting his hands on EzyDVD’s online business. FEG previously operated an online DVD retail business called Empire, but this was shut down a few years ago after losing money.
Uniacke had planned to relaunch a new Video Ezy online DVD sales site later this year, but says purchase of the EzyDVD online site will make this much easier.
“The opportunity to buy a packaged site was great. Ultimately the EzyDVD and Video Ezy site will compete in a fashion, but it’s a bit like saying Blockbuster and Video Ezy compete – they are independent brands and they compete in the market.”
Retail sales has become an increasingly crucial part of the video rental business. Uniacke says that five years ago, around 92% of Video Ezy’s annual revenue came from rentals. Today, around half of its $400 million in annual sales comes from sales of DVDs.
“Retail is very important to the rental businesses that want to survive,” he says.
Uniacke’s philosophy is that consumers will decide how they consume movies – rent, buy, or order online – and it is up to FEG to ensure these needs are met.
“We won’t dictate how you consume. The rule is, you decide how you watch your movies.”
To this end, Blockbuster has also set up a channel on the new personal video recorder TiVo, which allows users to order a DVD that is then mailed out to them.
Uniacke also sees EzyDVD’s retail presence as a big advantage. While Blockbuster and Video Ezy stores are mainly located in strip shopping centres, EzyDVD has prime positions in many of Australia’s big malls.
Uniacke is already in Adelaide organising the transition of ownership, looking forward to getting his hands on the new business.
“This is going to be a tough year, we understand that,” he says. “But December has been very good for the business and January has been very solid. People aren’t going out as much, so they are renting. So they are also going in to the stores and browsing the retail shelves.”
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James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
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