Magazine music deals polish distributor's image.

IMAGE Entertainment Inc., which has made a name for itself distributing compilations of popular music, is working on a greatest hits package of its own.

The Chatsworth firm has put together a string of deals with music industry magazines whose greatest hits collections will feed its distribution pipeline.

Image is ramping up its exclusive CD and DVD deals with Vibe Magazine and Relix Magazine, and re-energizing its deal with The Source, a hip-hop publication.

"Possible Latin hip-hop collaborations and new artist or new talent products all are in discussion," said Dennis Cho, Image's general counsel and vice president of business. "We are open to anything."

In December, Image inked a three-year deal with Vibe as the publication's exclusive audio distributor, and the two companies are currently working on a greatest-hits compilation series called "Vibe Revolutions" slated for first-volume release this summer. A DVD deal is also in the works.

"This is not a finite series," said Vibe president Kenard Gibbs, "It's open ended."

Image also signed a distribution deal with rock music magazine Relix last month. Image will produce and distribute Relix-branded DVDs and CDs, which the magazine will promote in print. Among the first releases will be two DVDs from the Jammys and a CD from Blues Traveler frontman John Popper.

For many of its titles, Image also has exclusive audio and broadcast rights and, through its subsidiary Egami Media, Inc., exclusive video on demand, streaming video and download rights.

In addition to the magazine deals, Image owns the rights to about 250 CDs and 3,000 DVD titles. Among them are feature films and documentaries including "Chronicles of Narnia: The Lion, the Witch and the Wardrobe," "Traffic" and "Hoop Dreams."

"It's important to keep in mind that we have an incredibly wide variety of titles, and any given genre doesn't make up a disproportionate percentage of that," said Allen Blackwell, Image's vice president of urban programming.

Image turned down a takeover offer of $4 cash per share from Lions Gate Entertainment Corp. in October, and the recent deals may help bolster the company's stock, which has dipped from its Oct. 31 closing price of $4.14 and hovered around $3.34 last week.

For its second quarter that ended Sept. 30, Image lost $613,000 on revenue of $23.7 million, compared to year-earlier earnings of $1.2 million on revenue of $28.6 million.

However, earnings for the third quarter that ended Dec. 31 rose to $2.34 million, or 11 cents a share, from $1.96 million, or 10 cents a share the previous year.

Previous track

The Source provided Image with its biggest hits, and until recently, its biggest headaches.

Image had audio and video distribution arrangements with Source Entertainment Inc--the sister company of The Source magazine publisher Source Enterprises Inc--dating back to early 2004, for a series of Source-branded DVD and CD products. Included were the popular "Hip Hop Hits" compilation albums, including volumes 8 and 9, which sold more than 250,000 copies each.

The relationship hit the skids in 2005, when Image requested fights clearance documents for the songs on the discs, as well as proof of royalty payments to artists for the material used.

"They were not at all forthcoming about it, and they never showed us proof of payments on royalty advances or the clearance documents for the rights to the songs," Cho said. Executives from Image also clashed with David Mays, the recently terminated founder of The Source magazine.

"David Mays used to run the Source and we had some disagreements with him over what should have been routine things," Cho said. "It was extremely difficult and we had to ultimately file arbitration."

Current Source executives did not return phone calls seeking comment.

A clause in the companies' agreement forced the matter into arbitration in 2005, where Image eventually prevailed. The judge declined to enforce the award, however, and the matter went to the courts.

The break in the stalemate came in January, when the Source Enterprises directors ousted Mays and magazine president Ray "Benzino" Scott.

"Once we heard about the management change, we got in touch with them, and found that we love them. They are great guys who really know the business and were eager to resolve things," Cho said. "We decided hey, let's not kill the goose that laid the golden egg, let's move forward with this series. We have restored an excellent relationship."

Image possesses the exclusive rights to all forthcoming Source video and audio projects. The first, "Hip Hop Hits Volume 11," is slated for release in the fall. The "Hip Hop Hits" series is expected to continue for quite some time, Cho said, with another release due out in 2007 and additional releases every six to nine months in the future.

"There are a lot of collaborative possibilities on the horizon," Blackwell said.