RED DEER, AB, April 16 /CNW/ – Trevor Hillman, President & CEO of VHQ Entertainment (TSX – VHQ) is very pleased to announce that the Company has become the first major Canadian video rental retailer operator to launch an online DVD rental service in the country.
The new service is fully operational and can be viewed at:
http://www.vhqonline.ca
or
http://www.vhqonline.com
VHQ purchased the assets of CinemaFlow, a Vancouver area based private company that developed a cutting edge and scalable software suite to manage the operations of its own online DVD rental service. VHQ paid $480 thousand by way of the issuance of 600 thousand shares of the company at $0.60 and $120 thousand in cash. In addition, VHQ will pay CinemaFlow an additional earn-out of $365 thousand, with payment based on 20% of revenues generated by the online DVD rental service until the earn-out is satisfied. Jody Mehring, the developer of the web-site has been appointed Vice-President of VHQ Online. He has also been granted an option to acquire up to 37,500 common shares of VHQ at an exercise price of $0.60 per common share at any time on or before April 15, 2009.
VHQ will have a new enlarged distribution center operational in the Vancouver area by early May. The Company is now reviewing potential locations for a distribution center in the Toronto area, with an early summer opening targeted.
In the next few weeks VHQ will provide additional details of its marketing program and the important role that its exclusive relationship with the AIR MILES(R) reward miles program will play as the service is rolled out on a coast-to-coast basis.
Based on the success of the online DVD rental program pioneered by NetFlix in the United States, VHQ management strongly believes a similar program in Canada will provide significant benefits and growth opportunities to its current operations, which are comprised of 59 corporate video and home entertainment stores. NetFlix reported revenues of approximately $270 million (USD) in 2003 and saw its subscriber base jump 84% to 1.9 million in the first quarter of 2004 as compared to last year.
While the Company will continue to increase its store count through acquisition and new corporate locations, VHQ Online provides the vehicle by which operations can attain a national presence in a relatively short period of time. A critical consideration at the outset was the necessity to secure reliable scalable software technology that would “drive” the online ordering system as well as automatically manage inventory, subscriber notification and a host of other applications. It was this key point that led to the discussions with CinemaFlow, which had proven the merits of its technology based on the efficiency of its own online operation and related customer satisfaction.
VHQ’s sales and marketing relationships, long-time business arrangements with movie studios and the underlying strength of its organization all provide significant advantages towards meeting the objective of rapidly growing the subscriber base for VHQ Online.
VHQ recently reported third quarter financial results for the period ended February 29th, which saw record revenues of $7.88 million for the three-month period and $21.47 million in the nine-month period.
The Toronto Stock Exchange has neither approved nor disapproved the information contained herein.