Web video sites may pick bones of Movie Gallery

The failed brick-and-mortar video rental store is selling off URLs, trademarks, and tech.

Movie Gallery, the once powerhouse video-rental chain, went bankrupt last spring and is now trying to sell off such assets as trademarks, URLs, and proprietary technology.

While the company's demise and liquidation means more bad news for traditional video rentals, it could be a boon for Web video start-ups. At its height five years ago, Movie Gallery operated 4,700 Hollywood Video and Movie Gallery stores and generated $2.5 billion in annual revenue. A Web video service looking to work under a well-known brand or glean insights from the company's sales and marketing data might find something of use here, said Gabe Fried, the man in charge of selling some of Movie Gallery's assets.

Movie Gallery's creditors have hired Streambank, the firm Fried founded that advises on the valuation and sale of intangible assets. Fried told CNET that since Movie Gallery was first founded in 1995, millions of consumers have rented games or films from from Movie Gallery, Hollywood Video or the company's game outlet, Game Crazy.

"When you get down to mainstream America, brand matters tremendously," Fried said. "Movie Gallery's assets are valuable to people who want to pick up the market that is being left available by the closure of Movie Gallery, Hollywood Video and some of their competitors."

The collapse of Movie Gallery is just the latest evidence that the traditional video-rental business is kaput. The beginning of the end for brick-and-mortar stores came with Netflix and the offer to mail DVDs to customers for a small monthly fee. The death blows came when consumers began adopting automated rental kiosks from Redbox and Web delivery of film from Netflix's streaming service. This meant no more having to schlep to the local video store to watch flicks.

But Fried said that while traditional rental merchants are floundering, they still had lots of customers who have yet to embrace Web delivery or Netflix's mail-order service.

"The size of the current kiosk or mail-order DVD-rental market pales in comparison to the market lost with the traditional video-rental business," Fried said. "Therefore it leaves a large untapped market for both movie rental and video game sales."

Blockbuster, once a staple of home movie viewing, is scrambling to stay relevant. The once dominant player in the category suffered another embarrassment this week when the New York Stock Exchange booted the company's shares from its trading board. Blockbuster shares, which were priced at 18 cents last week, had been mired below $1 for too many weeks and this violated NYSE rules.

So, out of the ashes may be opportunities for next-generation rental merchant.

Fried said that among the Movie Gallery assets on sale are:

• URLs such as Hollywoodvideo.com, Reel.com, Gamecrazy.com and Moviegallery.com
• Proprietary kiosk technology
• Some smartphone apps
• Proprietary recommendation technology
• Trademarks and logos.

Correction 6:40 am. PDT July 9:This story misspelled one of the URLs for sale. The correct spelling is Reel.com.

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