Economy

EzyDVD collapses into receivership

SmartCompany /

Mounting debts, a string of big losses and weak retail sales has forced entertainment retailer EzyDVD into receivership, putting the jobs of more than 200 staff at risk.

Mounting debts, a string of big losses and weak retail sales has forced entertainment retailer EzyDVD into receivership, putting the jobs of more than 200 staff at risk.

The Adelaide-based retailer has 58 retail outlets around Australia (most are franchisees) and a large online retail operation. Founder Jim Zavos started the business in 1999 after running a number of video rental businesses and built EzyDVD’s turnover to $100 million by 2007.

But despite strong revenue growth, it appears EzyDVD’s finances were not as robust as they appeared. Receiver David Kidman from Ferrier Hodgson says the company has lost around $3 million over the last three years and debt has also been mounting.

The slump in sales experienced by most retailers in the last six months has proven to be the nail in the company’s coffin.

Attempts to contact Zavos were unsuccessful. “He’s no longer part of this company,” said a staff member at EzyDVD’s headquarters in Adelaide.

Kidman says all EzyDVD stores will continue to operate normally while he examines the company’s position and starts to look for a buyer.

“There’s a strong network of franchisees and staff and it’s spread across Australia so it’s sitting there so that we’ve certainly got a chance to get this business away in some shape or form,” he told ABC news.

Just six months ago EzyDVD appeared poised to enter a new growth phase after Zavos announced the company would launch EzyDownload, an online movie download service that was set to compete directly with Telstra’s BigPond download operation.

EzyDownload was created from the ashes of failed download company ReelTime, which collapsed earlier this year after racking up large losses. Zavos said in June that EzyDVD has spent around $1 million setting up EzyDownload, including acquiring ReelTime’s assets for the bargain basement price of $200,000.

But Zavos’s timing was poor and the launch of EzyDownload, which had been slated for September, was postponed due to the weakening retail environment.

Another challenge for EzyDVD and other online entertainment retailers is the rise of illegal downloads. In the 12 months from October 2007 to October 2008, the Australian Federation Against Copyright Theft claims to have helped state and federal agencies seize 967,500 pirated DVDs and 741 burners capable of producing over 18 million pirated DVDs a year.

EzyDVD employs 70 full-time staff at its Adelaide headquarter (which includes a warehouse and distribution facility) and in management roles with its company-owned stores. There are also around 150 casual employees across the country.

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