Many view a corporate acquisition as the end of an era. Tim Winner tells Amanda Barber this company’s merger was only the beginning.

Twenty months ago, Movie Gallery, Inc. acquired Hollywood Video. Although mergers and acquisitions are normally a point of concern for employees, Tim Winner, Hollywood Video’s EVP and COO, focused on retaining his employees and attracting new talent to maintain the culture present before the acquisition.

“Whenever you go through a merger and acquisition, employees grow concerned,” said Winner. “Bringing two companies together as one is never an easy task. Shifting our focus away from our core mission of running great stores and taking care of our guests is always at risk. During the integration, we focused on keeping our teams together behind a common goal—delivering exceptional guest experiences.”

Making it work
From 30,000 feet, the view of Hollywood Video stores and Movie Gallery stores looks the same. The real work of making a merger a success begins on the ground floor. In this case it meant making the most of the fundamental differences between Movie Gallery and Hollywood Video. Each has a distinct target audience, with Movie Gallery operating stores in rural, small-market America, and Hollywood operating stores in urban and suburban markets. Movie Gallery’s average stores have sales volumes of $350,000, while Hollywood Video’s tend to reach $750,000 and up.

Tim Warner, EVP and COO

“When you’re comparing a unit doing $750,000 a year with one doing $350,000, there are differences in operating principles and marketing strategies,” said Winner. “Movie Gallery is fantastic at being a profitable low-cost provider in the home entertainment circle, while Hollywood Video focuses on value, selection, and service. Our job now is to bring the best aspects of both companies together.”

At one time, Hollywood Video was the fastest growing company in America. After the acquisition, the company decided to take a step away from expanding on their 2,064 existing stores to focus on improving the services offered at each location. Because Hollywood Video has not released an online movie rental service, the company decided to focus on its core strengths—great service, a broad selection of titles, and its movie catalogue.

During its 20-year history, Hollywood Video amassed one of the largest film libraries available on DVD. The competition, focused on driving new releases and online business, cannot say the same. The first step in promoting the company’s extensive film library was to renew its emphasis on the in-store experience by employing people who live and breathe movies.

Hollywood Video’s flashy exterior is well known in cities across America, but the quality of service provided in the store is what Winner believes differentiates his stores from others. Each store has roughly 21 televisions or monitors playing a variety of movies, and each employee is well versed on the film inventory. “We are using our vast film library to give the consumer choices, and our employees are there to guide them to movies they may not have heard about,” he said.

Offering more
In 1999, the company developed the Game Crazy brand focused on buying, selling, and trading video games. Eight years later, there are 684 Game Crazy stores, and the business generates $350 million in revenue. Although the increasing popularity of video gaming systems is a recent occurrence, Hollywood Video was already prepared to make room for an alternate business platform.

The strategy in the early days of Hollywood Video was to build 8,000-square-foot facilities based on the format of the day—VHS. With the growth of the smaller packaged DVD, the store-within-a-store idea grew. “The concept was to cut off 2,000-square-feet for a new business in the store with rent and utilities already baked into the cost,” said Winner. “We already had 2,000 of the best retail locations in America; we only needed to start the construction and deliver on the growing game phenomenon.”

One of Winner’s biggest challenges is getting the word out about what his stores can offer their communities in an era of escalating advertising wars between the competition. In January, the company launched a grassroots marketing campaign to empower district and regional managers and store directors to find partnerships with businesses in their communities. Their opportunity is to beat the competition at the local level and be the best choice in every neighborhood.

The company also partners with the national children’s organization, Starlight Starbright. In the past three years, the company opened Hollywood movie rooms in four hospitals across the country. The partnership also works well with the new marketing campaign, giving district and regional managers a chance to connect with Starlight Starbright’s local chapters.

“A group of store directors bring movies, popcorn, and candy and create a fun night for children stuck in hospitals,” said Winner. “Many companies don’t do this, and we’ve opened the door to allow our stores to further connect with their communities.”

Despite hearing rumors about the downfall of Hollywood Video, Winner has confidence that the vision of president, Joe Malugen, will guide the company to a successful future. “We are blessed because our CEO spends much of his time looking into and understanding new technologies. He’s been in the industry for 20 years and remains committed to the business and what’s happening day-to-day.”