<PAGE>

                                                                   EXHIBIT 10.40

                        AMENDMENT TO EMPLOYMENT AGREEMENT
                        ---------------------------------

This Amendment to the Employment Agreement dated January 3, 2002 (the
"Agreement") is made as of October 31, 2003, by and between Klaus Moeller
("Employee") and Genius Products, Inc., a Nevada corporation ("Employer" or
"Company"), located at 740 Lomas Santa Fe, Suite 210, Solana Beach, California
92075 (the "Amendment").

                                   WITNESSETH:

WHEREAS, Employer would like to amend the terms of the Agreement to increase its
term, increase the annual salary and provide for the grant of additional stock
options; and

WHEREAS, Employer and Employee have agreed on the terms for this Amendment.

NOW, THEREFORE, in consideration of the foregoing and in exchange for the
promises and other good consideration set forth below, Employee and Employer
agree to the following amendments to the Agreement:

1. COMPENSATION.

         (a) Paragraph 2(a) is amended to provide for an annual salary of
$222,500 in 2004 and $244,750 in 2005.

         (b) Paragraph 2(c) is amended to grant an additional option to Employee
to purchase 250,000 shares of Genius Products, Inc. Common Stock in the form of
ANNEX A hereto (the "Option"). The terms of the Option (including, without
limitation, the option price and the time of vesting of the shares issuable
pursuant thereto) shall be governed by the face thereof except to the extent
such terms are superseded by Employer's stock option plan currently in effect, a
copy of which was attached to the Agreement as ANNEX C. The Option shall be
priced at the closing ask price on the date of issuance.

2. TERM AND TERMINATION. Paragraph 3 of the Agreement is amended to extend the
term of the Agreement until January 2, 2006. The Severance Period (as defined in
the Agreement) shall be adjusted to reflect the extension of the term of the
Agreement pursuant to this Amendment.

IN WITNESS WHEREOF, each of the undersigned has set forth its signature as of
the date first set forth above.

EMPLOYER:

Genius Products, Inc., a Nevada corporation

By:      /S/ MICHAEL MEADER
       -------------------------------------
       Michael Meader, Authorized Officer

EMPLOYEE:

         /S/ KLAUS MOELLER
       -------------------------------------
       Klaus Moeller



<PAGE>

                                                                         ANNEX A
                                                                         -------

                            [STOCK OPTION AGREEMENT]

                                       2


<PAGE>

                             STOCK OPTION AGREEMENT
                           SECOND AMENDED AND RESTATED
                      2000 NON-QUALIFIED STOCK OPTION PLAN

         This Stock Option Agreement is dated as of October 31, 2003, between
Genius Products, Inc. (the "COMPANY") and Klaus Moeller (the "GRANTEE").

         WHEREAS, the Grantee is an employee of the Company and will render
valuable services; and

         WHEREAS, the Company in recognition of such services has granted a
non-qualified option (the "OPTION") to Grantee as set forth therein and herein;
and

         WHEREAS, the parties wish to ratify and memorialize the grant and the
terms and conditions by which the Option is governed; and

         WHEREAS, the Company has adopted a stock option plan entitled 2000
Second Amended and Restated Non-Qualified Stock Option Plan (the "PLAN")
originally adopted by the board of directors on May 25, 2000, and as amended on
June 12, 2001 and November 20, 2001, under which shares of the Company's common
stock into which the Option is exercisable have been registered with the
Securities and Exchange Commission pursuant to a Form S-8 filed on May 25, 2000,
which will be amended by a subsequent filing to include subsequent amendments to
the plan including an increase in the number of shares subject to the plan;

         NOW THEREFORE, in consideration of the mutual covenants set forth
herein, and for other good and valuable consideration, the sufficiency of which
is hereby acknowledged, the parties hereby agree as follows:

         Section 1. GRANT OF OPTION. The Company hereby confirms the grant to
Grantee of the Option to purchase shares of common stock of the Company (the
"SHARES"), subject to the terms and conditions of this Option Agreement and
those of the Plan (which is incorporated herein by reference), as follows:

<TABLE>
<CAPTION>

DATE OF GRANT        NO. OF SHARES     EXERCISE PRICE     VESTING DATE(S)     TERM
-------------        -------------     --------------     ---------------     ----
<S>                  <C>               <C>                      <C>           <C>
October 31, 2003     250,000           $1.50                    *             10 years from
                                                                              date of grant
</TABLE>

* 50,000 shares to vest on December 31, 2004, and 200,000 shares to vest on
December 31, 2005, unless Grantee's employment is terminated. If Grantee's
employment is terminated other than by the voluntary resignation of the Grantee,
all options will vest immediately upon termination. If the Grantee voluntarily
resigns from the employment of the Company, the vesting of unvested options will
not be accelerated.

                                       3


<PAGE>

         Section 2. EXERCISE OF OPTION.

                  (a) RIGHT TO EXERCISE. This Option to purchase Shares shall be
exercisable at any time after the applicable Vesting Date and prior to the end
of the Term, subject to the applicable provisions of the Plan and this Option
Agreement.

                  (b) METHOD OF EXERCISE. This Option shall be exercisable by
delivery of an exercise notice in the form attached as EXHIBIT A (the "EXERCISE
NOTICE") which shall state the election to exercise the Option, the number of
Shares with respect to which the Option is being exercised, and such other
representations and agreements as may be required by the Company. The Exercise
Notice shall be accompanied by payment of the aggregate Exercise Price as to all
exercised Shares. This Option shall be deemed to be exercised upon receipt by
the Company of such fully executed Exercise Notice accompanied by the aggregate
Exercise Price.

                  (c) COMPLIANCE WITH APPLICABLE LAW. No Shares shall be issued
pursuant to the exercise of an Option unless such issuance and such exercise
complies with all applicable laws. Assuming such compliance, for income tax
purposes the Shares shall be considered transferred to the Grantee on the date
on which the Option is exercised with respect to such Shares.

         Section 3. METHOD OF PAYMENT. Payment of the aggregate Exercise Price
shall be by any of the following, or a combination thereof, at the sole
discretion of the Company:

                  (a) cash or check;

                  (b) consideration received by the Company under a formal
cashless exercise program adopted by the Company in connection with the Plan; or

                  (c) surrender of other Shares which, (i) in the case of Shares
acquired upon exercise of an Option, have been owned by the Grantee for more
than six (6) months on the date of surrender, and (ii) have a fair market value
on the date of surrender equal to the aggregate Exercise Price of the Exercised
Shares.

         Section 4. NON-TRANSFERABILITY OF OPTION. This Option may not be
transferred in any manner otherwise than by will or by the laws of descent or
distribution and may be exercised during the lifetime of Grantee only by
Grantee. The terms of the Plan and this Option Agreement shall be binding upon
the executors, administrators, heirs, successors and assigns of the Grantee.

         Section 5. TERM OF OPTION. This Option may be exercised only prior to
the Expiration Date set out in the Notice of Grant, and may be exercised during
such term only in accordance with the Plan and the terms of this Option.

         Section 6. TAX CONSEQUENCES. Set forth below is a brief summary as of
the date of this Option of some of the federal tax consequences of exercise of
this Option and disposition of the Shares. THIS SUMMARY IS NECESSARILY
INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE OPTIONEE
SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE
SHARES.

                                       4


<PAGE>

                  (a) EXERCISE OF NON-QUALIFIED STOCK OPTION. There may be a
regular federal income tax liability upon the exercise of a Non-Qualified Stock
Option. The Grantee will be treated as having received compensation income
(taxable at ordinary income tax rates) equal to the excess, if any, of the fair
market value of the Shares on the date of exercise over the Exercise Price. If
Grantee is an employee or a former employee, the Company will be required to
withhold from Grantee's compensation or collect from Grantee and pay to the
applicable taxing authorities an amount in cash equal to a percentage of this
compensation income at the time of exercise, and may refuse to honor the
exercise and refuse to deliver the Shares if such withholding amounts are not
delivered at the time of exercise.

                  (b) DISPOSITION OF SHARES. In the case of a Non Qualified
Stock Option, if Shares are held for at least one year, any gain realized on
disposition of the Shares will be treated as long-term capital gain for federal
income tax purposes.

         Section 7. ENTIRE AGREEMENT; GOVERNING LAW. The Plan is incorporated
herein by reference. The Plan and this Option Agreement constitute the entire
agreement of the parties with respect to the subject matter hereof and supersede
in their entirety all prior undertakings and agreements of the Company and
Grantee with respect to the subject matter hereof, and may not be modified
adversely to the Grantee's interest except by means of a writing signed by the
Company and Grantee. This agreement is governed by the internal substantive laws
but not the choice of law rules of California.

         Section 8. SUCCESSORS AND ASSIGNS. The Company may assign any of its
rights under this Agreement to single or multiple assignees, and this Agreement
shall inure to the benefit of the successors and assigns of the Company. Subject
to the restrictions on transfer herein set forth, this Agreement shall be
binding upon Grantee and his or her heirs, executors, administrators, successors
and assigns.

         Section 9. INTERPRETATION. Any dispute regarding the interpretation of
this Agreement shall be submitted by Grantee or by the Company forthwith to the
Administrator which shall review such dispute at its next regular meeting. The
resolution of such a dispute by the Administrator shall be final and binding on
all parties.

         Section 10. RECEIPT OF PLAN. Grantee acknowledges receipt of a copy of
the Plan and represents that he or she is familiar with the terms and provisions
thereof, and hereby accepts this Option subject to all of the terms and
provisions thereof. Grantee has reviewed the Plan and this Option Agreement in
their entirety, has had an opportunity to obtain the advice of counsel prior to
executing this Option and fully understands all provisions of the Option
Agreement. Grantee hereby agrees to accept as binding, conclusive and final all
decisions or interpretations of the Administrator upon any questions arising
under the Plan or this Option. Grantee further agrees to notify the Company upon
any change in the residence address indicated below.

                  [Remainder of page intentionally left blank.]

                                       5


<PAGE>

GRANTEE:                                    GENIUS PRODUCTS, INC.

         /S/ KLAUS MOELLER                           /S/ MICHAEL MEADER
-------------------------------             ----------------------------------
                                            By:  Michael Meader
Klaus Moeller                               Its:  President

                                       6


<PAGE>

                                    EXHIBIT A
                                    ---------

                             [LETTERHEAD OF GRANTEE]

[Date]

Genius Products, Inc.
740 Lomas Santa Fe, Suite 210
Solana Beach, CA  92075

Attention:  Corporate Secretary

                                 EXERCISE NOTICE
                      2000 NON-QUALIFIED STOCK OPTION PLAN
                      ------------------------------------

         1. EXERCISE OF OPTION. Effective as of this ___ day of ___________,
_____, the undersigned ("Grantee") hereby elects to exercise Grantee's option to
purchase _________ shares of the Common Stock (the "SHARES") of Genius Products,
Inc. (the "COMPANY") under and pursuant to that certain plan entitled the Second
Amended and Restated 2000 Non-Qualified Stock Option Plan adopted by the Company
originally as of May 25, 2000, and as amended on June 12, 2001, and November 20,
2001 (the "PLAN") and the Stock Option Agreement dated May 6, 2002 (the "OPTION
AGREEMENT").

         2. DELIVERY OF PAYMENT. Grantee herewith delivers to the Company the
full purchase price of the Shares, as set forth in the Option Agreement.

         3. REPRESENTATIONS OF GRANTEE. Grantee acknowledges that Grantee has
received, read and understood the Plan and the Option Agreement and agrees to
abide by and be bound by their terms and conditions.

         4. RIGHTS AS SHAREHOLDER. Until the issuance of the Shares (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company), no right to vote or receive dividends
or any other rights as a shareholder shall exist with respect to the Shares,
notwithstanding the exercise of the Option. The Shares shall be issued to the
Grantee as soon as practicable after the Option is exercised.

         5. TAX CONSULTATION. Grantee understands that Grantee may suffer
adverse tax consequences as a result of Grantee's purchase or disposition of the
Shares. Grantee represents that Grantee has consulted with any tax consultants
Grantee deems advisable in connection with the purchase or disposition of the
Shares and that Grantee is not relying on the Company for any tax advice.

                                       7


<PAGE>

         6. TRANSFER RESTRICTIONS; STOP-TRANSFER ORDER.

         (a) REFUSAL TO TRANSFER. Grantee acknowledges and agrees that the
         Company shall not be required (i) to transfer on its books any Shares
         that have been sold or otherwise transferred in violation of any of the
         provisions of the Stock Option Agreement or the Plan or (ii) to treat
         as owner of such Shares or to accord the right to vote or pay dividends
         to any purchaser or other transferee to whom such Shares shall have
         been so transferred.

         (b) STOP-TRANSFER NOTICES. Grantee agrees that, in order to ensure
         compliance with the restrictions referred to in the Stock Option
         Agreement, the Company may issue appropriate "stop transfer"
         instructions to its transfer agent, if any, and that, if the Company
         transfers its own securities, it may make appropriate notations to the
         same effect in its own records.

Submitted by:                             Accepted by:

GRANTEE:                                  GENIUS PRODUCTS, INC.

_____________________________             ______________________________
Signature                                 Name:_________________________
                                          Title:________________________

_____________________________             ______________________________
Print Name                                Date received

                                       8