Consolidation in the DVD and Laserdisc Software Distribution Business

Last week, Image Entertainment announced the acquisition of Ken Crane's LaserDisc/DVD Internet-based direct-to-consumer business, a division of Ken Crane's Home Entertainment of Hawthorne, CA. Long a favorite among laserdisc aficionados, and more recently DVD fans, the business was purchased for approximately $6.5 million in a combination of cash, stock, and the assumption of certain liabilities, subject to adjustment.

According to the announcement, Ken Crane's Web site has generated approximately $15 million in annual Internet/direct-to-consumer sales. The site offers DVDs and laserdiscs, and it attracts three to four million "hits" per month. Ken Crane's software division has a customer base of 80,000 active buyers.

Ken Crane's LaserDisc/DVD will operate as a wholly owned subsidiary of Image Entertainment, and it will utilize Image's new 76,000-square-foot Internet/retail-fulfillment distribution facility. Image expects the facility to be operational in October 1998 and expects to begin fulfilling for their new subsidiary in early 1999. Ken Crane, Jr., the head of Ken Crane's LaserDisc/DVD, will enter into a multiyear employment agreement upon the closing of the acquisition. He will oversee the operations of Image's new subsidiary as vice president and general manager.

"The sale of the software division gives Ken Crane's Home Entertainment the ability to focus on our core business of big screens and home theater," according to Ken Crane, Sr., president of Ken Crane's Home Entertainment. "The cash infusion will help fund our continued expansion and store remodeling to prepare for the arrival of HDTV. This transaction will assist in propelling Ken Crane's Home Entertainment into a leadership position as the premier home-theater retailer of HDTV in the Southern California marketplace."

Ken Crane, Jr., says, "According to the Adams Interactive Media Report dated June 4, 1998, video sales on the Internet are projected to reach $2.5 billion by 2003. I feel Image has positioned itself to participate in this potentially rapidly expanding market. I see nothing but opportunity and growth ahead of us."