Movie Gallery Announces Acquisition of MovieBeam

Movie Gallery, Inc. today announced it has acquired substantially all of the assets, technology, network operations, and customers of MovieBeam, Inc, an on-demand movie service. The acquisition of the MovieBeam service provides Movie Gallery with a compelling technology platform to enable digital content delivery and drive future revenue growth. Terms of the transaction were not disclosed.

The MovieBeam service is a leader in delivering digital entertainment, providing customers a convenient way to rent movies from home. The MovieBeam content delivery network, which is available in 31 major metropolitan areas across the U.S., uses over-the-air datacasting technology to provide instant access to an ever-changing lineup of new releases and popular favorite movies- on-demand from virtually every major Hollywood studio.

In addition to MovieBeam's proprietary set-top box based content delivery network, Movie Gallery intends to use MovieBeam's existing infrastructure to underpin the development of alternative digital delivery capabilities. Movie Gallery believes that the state-of-the-art MovieBeam technology will be instrumental in its efforts to digitize and deliver content to its customers - - in both standard definition and high definition formats -- via new mediums including, for instance, downloading or streaming of movies over the internet, internet protocol-based content delivery and other developing channels.

"We believe the MovieBeam service provides the best video-on-demand service available in the marketplace today and is a strong compelling complement to the consumer retail video store experience," said Joe Malugen, Chairman and CEO of Movie Gallery, Inc. "Our acquisition of MovieBeam is the first phase of our long-term strategic plan to provide digital content to consumers. We will begin merchandising the MovieBeam service in our Hollywood Video and Movie Gallery stores and on our websites in the near future and we have exciting plans to build upon the existing content digitization and broadcast platforms."

Movie Gallery expects that the total incremental expense related to MovieBeam, including the initial acquisition cost and any ongoing development expenses, will be less than $10 million in 2007.