Not too long ago, Dennis Abboud was the chief operating officer of a national magazine distributing company. Five years later, he’s the CEO of Infinity Resources, Inc., a company that owns the largest music and movie catalog in the US.

In late 1999, the company Abboud was working for had hopes to participate in the emerging economy. “Our core competency was in packing and shipping, so we thought we’d set up a business to use as an e-commerce fulfillment business,” he said. It wasn’t too long before the company heard from Playboy Enterprises, Inc.

“We were in the magazine business, so we had an existing relationship with Playboy. At the time, Playboy owned some businesses that most people wouldn’t have expected them to own, such as Critics’ Choice Video, which was the largest movie cataloger in the US, and Collectors’ Choice Music, the largest music cataloger in the US. In addition, it owned Sarah Coventry Jewelry and the Playboy and SpiceTV catalogs and Web stores,” Abboud said.

During that time, Playboy.com, the entity that owned the businesses, was being counseled to shed its non-core and non-strategic assets to optimize its own enterprise value. This was fortuitous for Abboud because in 1997, Playboy had built a state-of-the-art catalog operations and fulfillment center in suburban Chicago to support Critics’ Choice, Collectors’ Choice and its core businesses.

“My company started to negotiate to buy Critics’ Choice and Collectors’ Choice with the goal of also taking over the operations and fulfillment center. Our intent was to use these assets as a springboard to launch our e-commerce fulfillment business, but our board of directors got cold feet,” said the CEO. “Just as we were going to reach a decision, the Internet market started to crash, and the NASDAQ started dropping 200 points per day.”

A clear vision
Abboud still saw some potential with the opportunity, and he took a leap of faith by arranging financing and buying the businesses himself. “I worked out an amicable exit strategy with my then-employer, bought Critics’ Choice Video, and assumed control of the operations and fulfillment center. Commensurate with those transactions, my new company, Infinity Resources, Inc., signed a long-term agreement with Playboy to provide fulfillment services for its retained enterprises, which included Collectors’ Choice Music, Playboy, and Spice.”

IRI began operating Critics’ Choice Video and started offering fulfillment services to third-party clients, such as packing and shipping orders, answering telephones, processing returns, warehousing inventory, etc.

“We had Playboy as our first blue-chip client, and we started to gather additional clients. By February 2001, we were starting to get the feeling that quality fulfillment clients were going to be harder to come by than we had originally anticipated,” Abboud said. “The Internet market was crashing, and the few companies that were looking for fulfillment services were high-credit risks.”

Abboud decided to break the company out of its shell, and instead of just running a catalog company that sold higher-priced classic movies on VHS, he decided to create an online company that sold only DVDs, at very low prices, with free shipping.

“We built an inexpensive Web site and ran a few radio advertisements to see if we could spark any interest—they did more than we expected. We launched DeepDiscountDVD.com on a Tuesday, and the Friday after we launched, we got 450,000 hits. The traffic crashed our Web site, but we had found ourselves a new business.”

Abboud said the Deep Discount brand became so popular because of its aggressive stance toward providing customers with low prices. “We’re sincere about our value propositions. We have several employees that do nothing but check our competition to make sure we’re true to our claim of having the lowest prices,” he said.

Entrepreneurial spirit
IRI’s acquisitions didn’t come few and far between after that. At the end of 2001, it acquired Collectors Choice Music from Playboy, which made it the largest movie and music cataloger in the US. That acquisition also brought the company additional fulfillment clients.

“We have an active and entrepreneurial culture, but we’re not reckless,” explained the CEO, who is a two-time Ernst and Young Entrepreneur of the Year finalist. The company has adopted the Six-Sigma methodology to help guide the quality of deliverables in its business. “We measure our business metrics constantly, and we always try to give anyone in our organization with a new idea a fair hearing,” he said, noting that some of IRI’s best ideas bubble up from lower-level associates. “We’re willing to try anything, as long as it’s not a bet-the-farm proposition.”

Abboud said the company’s robust physical and technological infrastructure allows for streamlined complementary businesses acquisitions. “Our company was built to acquire other businesses and rapidly integrate their operations,” he said. “We leverage our significant assets and infrastructure to make the acquired businesses more successful.” He also noted that in some cases, fulfillment clients turned out to be less than fully committed to the businesses IRI was supporting for them. “We buy businesses from those clients because it’s a great fit for us, but off-strategy for them.”

This business model has been quite effective for IRI, which has experienced exponential growth. It now operates a plethora of businesses, including its fulfillment services company, two movie catalog businesses, three online movie businesses, three music catalogs, an online music business, a wholesale music distributor, a record label, and several retail stores. It’s also coming off a record year for both sales and operating income.

The CEO is positioning the company to take its Deep Discount brand into Canada, and he’s in the early stages of planning a DeepDiscountBooks.com Web site. “We want to continue to grow our business, and we think that the best way to do that is to leverage the equity of the Deep Discount brand. I’m looking into new businesses that will fit our merchandising model and fit well with our existing infrastructure,” Abboud said.