Proposal - Movie Gallery Inc. and Sight & Sound Distributors Inc.
1997 Proposal for Movie Gallery
From
Sight & Sound Distributors
...Customized Fulfillment
Overview:
Since Sight & Sound and Movie Gallery formed their distribution partnership
several years ago we have together enjoyed a unique business relationship that
has allowed for both of our companies to look forward to continued efficiencies
as we grow together. Sight & Sound has enjoyed the market share increases Movie
Gallery has provided us, and we, in turn, have reciprocated by attempting to be
proactive in our approach to reducing Movie Gallery's costs for service and
product. We have resolved to create these efficiencies while never compromising
our service levels.
During this past year we brought some rather radical new approaches to the
partnership designed to serve both our companies equally. We trust they made you
more profitable. They remain an exclusive component of our business relationship
and epitomize our efforts this year at crafting more winning ways we can both
benefit by doing business together.
This year we believe we have created an ever better plan for Movie Gallery...one
which takes into consideration Movie Gallery's growth over the past year, Movie
Gallery's drive to reduce costs, and most importantly, one that is menu driven
so that Movie Gallery can enjoy the benefits of Sight & Sound's ability to be a
low-cost provider while maintaining the highest levels of service.
We are proposing a "fee based" supply program that gives Movie Gallery all of
the benefits of "owning" a distribution company while incurring none of the
start-up costs of building such a supply vehicle.
As always, we remain committed to the successful completion of all of Movie
Gallery's goals and greatly appreciate the opportunity to work together with you
in shaping the future of video retailing in the USA.
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RENTAL PRODUCT PRICING
Current: Cost plus [*] or an average of about [*] per unit.
Proposed: Cost plus [*] per unit/tape.
We would appreciate every effort at submitting us the preorder for the month's
titles no later than the 10th of the month prior, so that we can control
inventory costs on over/under ordering which occurs when we guestimate orders on
late preorders.
[*]
Current: [*]
[*]
[*].
Proposed: [*]
[*]
[*]
SELL-THROUGH EVENT TITLE ORDERING
("Event title" in this proposal now meaning any sell-through in a shipper of at
least 24 units and 72 units or less). "Event" in prior contract meant theatrical
revenues of $10 million dollars or more.
Current: Cost plus [*]
Proposed: Cost plus [*]
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Returns [*]
[*]
SELL-THROUGH CATALOGUE PRICING
("Catalogue" now means in this proposal any sell-through title priced $29.99 and
below that is not in a prepack of 24 or more units, or is shipped in a prepack
of 24 or more units).
Current: Cost plus [*]
Proposed: Cost plus [*]
*Sight & Sound would be willing to carry extra stock held for MGA on their
Top 1000 etc. to better "guarantee" product availability.
GAME PRICING
Current: Cost plus [*]
Proposed: [*] cost plus [*]
ACCESSORY/PROCESSING CHARGES
Current: [*]
Proposed: [*]
See exhibit B.
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DATING
Current: Net 60 days from invoice with payments to be made twice monthly.
Proposed: Net [*] days from [*]
We strongly propose the institution of EDI processes between our two companies
which we believe would create money saving efficiencies for both parties. Sight
& Sound is fully capable to go "on-line" with the process.
EDI will provide both our companies the following:
1. Invoices: Eliminate the need for MGA employees to keypunch invoices.
2. Credits: To speed MGA use and improve cash flow.
3. Cash remittance: Avoid unnecessary reconciliation problems that result
from misapplied payments.
4. Orders: Streamline the process, save time.
FREIGHT
Current: Free freight on all new release shipments to be delivered one day
prior to street date based upon availability of product from manufacturer... [*]
Proposed: Free freight on [*]Special orders [*]
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RETURN ALLOWANCES
Current: Rental:.. [*]
.........Event: [*]
.........Planogram: [*]
.........Other Sell-through: [*]
.........Games: [*]
Proposed:.........Rental: [*]
.........Event: [*]
.........Non Event: [*]
.........Games: [*]
ADVERTISING
Current: Rental = [*]
[*]
[*]
Sell-through = [*]
Advertising Assistance: [*]
Advertising Credits: Sight & Sound pays media directly within terms.
Proposed: Rental = [*]
[*]
Sell-through = [*]
Advertising Assistance: [*]
*Option: Sight & Sound will [*]
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Advertising Credits: Sight & Sound pays media directly within terms.
*Option: Sight & Sound will [*]
DEFECTIVES
Current: Return up to [*] days from street date for one to one exchange. If no
exchange product exists at Sight & Sound, Movie Gallery may take a credit for
the tape.
[*]
Sight & Sound issues a credit memo for exchange of the defective in these
instances when no replacement tape is in stock.
Proposed: Return [*]. If no exchange product exists at Sight & Sound, Movie
Gallery may take a credit for the tape.
Sight & Sound issues a credit memo for exchange of the defective in these
instances when no replacement tape is in stock.
[*]
SALES REPRESENTATION
Current:Sight & Sound employs Gary Hay as the Account Manager for Movie Gallery.
Sight & Sound employs a fully loaded customer service "Answer Center" for Movie
Gallery stores to call in orders, order defective replacements, check stock,
etc. that is available not only during business hours but also evenings and
weekends.
Sight & Sound employs four dedicated Movie Gallery telemarketers whose job it is
to proactively call stores probing for problems, questions, communication
disconnects between our two companies and the stores and MGA home office, and
rectify any situations they can before any damage is done at the store level.
Proposed: Sight & Sound employs the one and only Gary Hay as the Account Manager
for Movie Gallery.
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Sight & Sound employs a fully loaded customer service "Answer Center" for Movie
Gallery stores to call in orders, order defective replacements, check stock,
etc. that is available not only during business hours but also evenings and
weekends.
Sight & Sound employs four dedicated Movie Gallery telemarketers whose job it is
to proactively call stores probing for problems, questions, communication
disconnects between our two companies and the stores and MGA home office, and
rectify any situations they can before any damage is done at the store level.
Mike Grunwald will move to Dothan as primary on-sight sales rep. [*]
*Option: Sight & Sound will [*]
Prepacks
Current: .........[*]
Proposed:......... [*]
Business Interruption Guarantee
Current: Sight & Sound will credit Movie Gallery for rental lost due to S&S's
failure to deliver product by street date. This does not include delays in
shipments caused by UPS, RPS, or other shippers who deliver later than their
expected delivery date.
This also does not include receiving product late form video or game suppliers
or vendors.
Sight & Sound issues a credit memo for Business Interruption Guarantees
fulfillment.
Proposed: Sight & Sound will credit Movie Gallery for rentals lost due to S&S's
failure to deliver product by street date. This does not include delays in
shipment caused by UPS, RPS, or other shippers who deliver later than their
expected delivery date.
This also does not include receiving product late from video or game suppliers
or vendors.
Sight & Sound issues a credit memo for Business Interruption Guarantees
fulfillment.
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P.O.P.
Current: Sight & Sound delivers to the stores directly, during the first week of
the month, all posters in the Marquee kits.
Standees sent from shipping warehouses as available. We encourage studios to
ship direct on standees.
Proposed: Sight & Sound delivers to the stores directly, during the first week
of the month, all posters in the Marquee kits.
Standees sent from shipping warehouses as available. We encourage studios to
ship direct on standees.
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*SPECIAL CONSIDERATION:
If MGA would elect to choose a [*] year contract with Sight & Sound, [*]
If Sight & Sound were unable to [*]
Revised 3/13/97
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The signatures below are representation of a mutual agreement and acceptance of
the terms noted in this document between Sight & Sound Distributors, Inc. and
Movie Gallery, Inc. This agreement shall be in effect until March 30, 1998.
/s/ J.T. Malugen 3-13-97
J.T. Malugen, C.E.O. Date
Movie Gallery, Inc.
/s/ John Jump 3-13-97
John Jump Date
Sight & Sound Distributors, Inc.
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EXHIBIT B
MOVIE GALLERY PROCESSING CHARGES
Currently - Our Cost
MATERIALS
MQL VVC 226F [*]
EKN Insert [*]
West Label Tamper Seal [*]
*Checkpoint Flap Security [*]
Alpha Shrink Wrap [*]
Checkpoint Rewind Sticker [*]
Total Cost Materials [*]
w/o Flap Security [*]
*Flap Security Strips are [*].
LABOR
Unwrap Tape
Foil Tamper Proof
Rewind Sticker
Flap
Insert
Shrink Wrap
Tape in Case
Band Cover Box & Tape
Total Labor [*]
Our Cost Total Processing [*]
w/o Flap Security [*]
Current Charge ` [*]
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