December 26, 2000, 9:55 AM

Reel no more

Don Davis

Editor in Chief

Hollywood Entertainment Corp. has called a wrap to its online video store Reel.com.

Not willing to incur more losses in the low margin video/DVD market, Reel.com, Palo Alto, Calif., entered into a partnership with Buy.com. Reel.com will provide proprietary editorial content to inform and entertain customers. Aliso Viejo, Calif.-based Buy.com will act as e-commerce partner for the execution and fulfillment of customer orders on purchases of DVDs and videos placed on the Reel.com Web site. After taxes Reel will incur $25 million in losses.

Julian Chu, director of retail and consumer goods for Cambridge, Mass.-based Mainspring Com- munication Inc., says Hollywood Entertainment wasn’t willing to put up the cash because competition is too fierce. “They weren’t willing to invest the amount of money to get there,” says Chu. “Selling DVDs and videos is pretty cutthroat, there’s no profit margin.”

Reel.com’s demise is part of the natural attrition that is going on among video vendors, says Chu. “The market will shake out until there two or three players along with some smaller niche guys,” he says.

Hollywood Entertainment Corp. retains ownership of the Reel.com domain name but the company did not disclose further plans for the site. Chu says the company, which owns Hollywood Video, can still make good use of the site. “They could use it for people to sign up for membership or to reserve movies,” he says.

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