Losses at Reel.com Dogging Hollywood Entertainment

Net loss: Video vendor Hollywood Entertainment Corporation would be doing well if it weren't for its publicly traded online operation Reel.com, which just can't make a profit no matter how hard it tries. The nation's second-largest video rental chain, Hollywood Video enjoyed strong growth last year but was driven into the red by losses incurred by the Internet business, which reported a fourth-quarter net loss of $21.7 million.

Reel.com has followed the now-familiar path of many Internet startups: generating tremendous interest among investors eager to embrace anything with "dot-com" in its name, but unable to come up with a workable business model that can generate profits. Parent organization Hollywood Entertainment is reportedly looking for the least painful way to unload the money-loser.

Minus losses from Reel.com and a $23.1 million charge stemming from settlement of a lawsuit with Rentrak Corp., Hollywood Entertainment posted a fourth-quarter income of $14.5 million, up from $11.7 million for the same period in 1998. Revenue was $296.5 million, up from $235.9 million a year ago. Same-store sales and rental revenue increased 4%.

Reel.com reported a fourth-quarter net loss of $21.7 million. Revenue was $18.6 million, a 107% sequential increase over the third quarter of 1999, company executives stated, according to the Hollywood Reporter. Total net loss in 1999 for Reel.com was $82.6 million, according to the March 2 edition of the Wall Street Journal, which reported Hollywood Entertainment's 1999 revenue as $1,096,841,000, with a net income for the year of negative $51,302,000. Subtract this last number from Reel.com's net loss and there is $31,300,000 in profit that Hollywood Entertainment would have made without an "online presence."