Foiled ihug finds solace in Video Ezy

By ROB O'NEILL

Two days after being effectively rebuffed by Force Corporation, internet service provider ihug has taken 51 per cent of the 115-store Video Ezy chain.

The deal is the first part of ihug's online strategy to allow users who "have a life outside the internet" to order goods online.

ihug director Tim Wood said: "It's mainly the foundation for our e-mmediate delivery system, an e-commerce fulfilment system where people can order online and get the goods within half and hour to an hour."

To the suggestion that online pizza ordering would be next, Mr Wood responded that talks were progressing with a number of large players in various categories.

Mr Wood disagreed with suggestions that the video rental business was past its peak. He said views on convergence were quite confused. Studios would continue to release videos as they did now - before the film was available through pay-per-view systems and television networks.

Video Ezy managing director Russell Clark was not prepared to disclose the value of the deal. He did, however, confirm it was a cash transaction.

The Video Ezy interests had not taken any shareholding in Ihug, though that had not been ruled out.

Mr Clark said video rental companies were faced with the question of new technology.

The deal is designed to ensure that Video Ezy, which claims a 35 per cent share of the local rental market, is not left out as new delivery systems develop.

Mr Wood said Video Ezy opened channels for cross promotion. As an answer to the threat posed by free internet access providers, Ihug subscribers would be able to receive benefits including free or discounted videos and other goods.

He said Force Corporation had been briefed about the impending deal before the merger of the two companies seemingly collapsed earlier this week.

Force company secretary Peter Holdaway put the cost of Force's flirtation with ihug at around $200,000. He also said suggestions from ihug managing director Nick Wood that Force's share registry had doubled after the planned ihug deal was announced were correct.

"We always have our core cinema business to fall back on," said Mr Holdaway. "It has good cash flows and is going well so I don't think it [the likely loss of ihug] will have any negative impact on Force."

Mr Holdaway also confirmed that one broker, DF Mainland, had been largely responsible for bringing many of the new shareholders into Force.