New Majority Owner for Genius Products

SANTA MONICA, January 8:
An affiliate of the investment firm Quadrant Management has acquired a
60-percent stake in Genius Products, the beleaguered home-entertainment
distributor that Entertainment Rights (ER) today said it is mulling legal
action against.

GNPR Investments, a
Quadrant affiliate, is acquiring the majority stake from The Weinstein Company
(TWC), which is retaining a 15-percent interest in the distributor. The
remaining 25-percent is held by Genius Products, Inc.

The deal is the first
stage in the restructuring of the firm, with plans for changes in its cost
structure and the renegotiation of deals with vendors and content partners. TWC
has already restructured its deal with Genius Products. The independent studio
says it remains the "primary and most significant" content provider
for Genius, which will continue to be the exclusive U.S. home-video distributor
for TWC's feature film and direct-to-video releases. The deal runs through
December 31, 2010, with a mutual option to extend to December 31, 2011.

As part of its
restructuring, Genius Products is also considering recapitalization,
refinancing and going private.

Announcing the deal with
Quadrant, Bob Weinstein, a co-chairman TWC, stated: "Quadrant's impeccable
track record and leadership, along with their significant music catalogue, film
library and their new investment in video games that they are bringing to
Genius, equals a win for all parties involved. This joint restructuring is
another step of refocusing our company and will give Harvey and me more time to
concentrate on our movie slate."

In related news,
Entertainment Rights today said it is considering legal action against Genius
Products, its U.S. DVD distributor, as a result of non-payment of certain
trading and advance fees. ER issued a statement noting that it "considers
that some or all of amounts owed by Genius under its current contract may be at
risk."

The announcement was part
of an update on the company's health following the Christmas trading period.
The company's new CEO, Deborah Dugan, and CFO, Edward Knighton, have put in
place a cost-cutting initiative and are working on developing new revenue
streams that are expected to prove beneficial in the upcoming financial year,
which begins March 1. Cost cuts included reducing the staff count of 150 to
100. ER says it has now reached its target of achieving £5 million in
annualized cost savings.

In a statement, Dugan
said: "The new management team has assumed office at a time of weak
trading performance in a very difficult economic environment. Performance in
this financial year has been unsatisfactory. We continue to implement
organizational changes, which are expected to contribute not only to a stronger
budgeting and forecasting culture but also a robust turnaround plan for the future.
We remain in constructive talks with our bankers regarding new, longer term,
funding arrangements to support the group past the company's financial year end
of February 28, 2009."

—By Mansha Daswani