New Links For Airport Chain

While most real estate strategies are yielding diminishing returns for home entertainment retailers, InMotion Entertainment's acquisition of AltiTunes shows that it thinks that airport locations represent a growth opportunity.

The deal, completed in early January, brings together two airport-based chains with a combined 53 stores and anticipated sales of $40 million this year. Jacksonville, Fla.-based InMotion is in the process of adding 10 locations, with plans to ink more new leases this year.

"We like travel hubs, and we will be moving into all travel hubs moving forward," says Barney Freedman, co-founder of InMotion. "We want to provide one-stop [entertainment] shopping for the traveler."

Of the 53 locations, 50 are in U.S. airports. Two are in international airport locations, and one is in New York's Grand Central Terminal. Although there is overlap in 13 markets, the acquisition will not cause InMotion to shutter any stores.

Will the InMotion concept succeed in traditional store locations? Yes, Freedman says, but there are still "so many more airports and transportation hubs" that could use an InMotion store.

Terms of the deal were not released. Freedman says InMotion financed the acquisition "internally," using a combination of equity and debt.

The merger takes the company's employee count to a little more than 330 from its current 200. Key AltiTunes corporate staffers, like Eden Yariv, VP of marketing and new business development; Brian Yatzor, VP of music merchandising; Tom Hurd, VP of operations; and Dan Daly, VP of merchandising, have been offered jobs with the company. Amy Nye-Wolf, the founder of AltiTunes, will remain as a consultant.

Plans are to relocate some of those executives to Jacksonville but to keep a small office in New York. Key personnel at InMotion include co-founders Michael Freedman and David Kight, a cousin to the Freedman brothers.

During the next few months, the company will lay the groundwork for the integration of the chains, a process that will begin in April.

All locations will carry the InMotion Entertainment logo. The integration is expected to be complete by end of summer.

InMotion, which launched in February 1999, started out renting portable DVD players and movies at two airports, in Minneapolis and Portland, Ore. "We had immediate success," Freedman says.

Although laptops now come equipped with DVD players, the company's movie rentals remain popular. And the chain diversified its offerings, adding portable electronic equipment in 2000. It now carries camcorders, digital cameras, MP3 players, headsets and portable CD players, among other devices. On a transaction basis, InMotion's business comprises 70% rentals and 30% sales, but on a dollar basis that ratio is just the opposite, Freedman says.

A typical store carries about 250 movie titles, and rentals can cost as little as $5 per day. But like its competitors, InMotion is trying various pricing schemes, including a recently launched $10 per month movie subscription service that enables travelers to rent an unlimited number of times with no late fees.

It is also adding a delivery service for travelers who depart from airports not serviced by the chain. InMotion stores operate from 6 a.m. to 9 p.m., and all locations have 24-hour drop boxes for rental returns. If there isn't a store in the destination city, products can also be returned via express mail.

"We are very good at selling high-end electronics, and AltiTunes is very good at selling movies and music," Freedman says. "So we will add rental to all AltiTunes and CDs to all InMotion locations."

For its part, AltiTunes, which was founded by Nye-Wolf in 1994, carries 1,000 music and movie titles in its kiosk locations and up to 3,000 in its in-line stores. "Most of the music is rock and pop, mainly titles in the Billboard charts," Yatzor says. It also carries other genres, including Latin, gospel, new age, classical and reggae. Selection is often tailored to locations.

Real estate can range from 150-square-foot kiosks to 2,100-square-foot stores, Freedman says. The majority of outlets fall in the 500- to 800-square-foot range.

InMotion prefers visibility and location over square footage, Freedman says. "We want prime real estate," he says.

Yariv says the company will create national, regional and local in-store promotions that leverage the 300 million passengers that are exposed to the InMotion Entertainment brand each year. "We cater to our customers' lifestyles," she says. "The promotions and strategic partnerships will educate, influence and enhance the customer experience. Our efforts are designed to provide a personalized shopping experience."

AltiTunes buys directly from one manufacturer. Both chains rely on wholesalers VPD in Folsom, Calif., and Baker & Taylor in Charlotte, N.C., for most of their music and movies. InMotion has a 4,000-square-foot warehouse, and management will decide at a later date whether it wants to explore trying to "get open" with more vendors.