Copyright 2000 EDGAR Online, Inc. (ver 1.01/2.003)   Page 55



                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                             Washington DC  20549

                                   FORM 10-K


/X/  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

For the fiscal year ended     December 31, 1999
                              -----------------
                                      OR
/ /  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

For the transition period from                 to
                               ---------------    ----------------

Commission file number   0-21824
                        ----------
                      HOLLYWOOD ENTERTAINMENT CORPORATION
            (Exact name of registrant as specified in its charter)

        Oregon                                      93-0981138
   -----------------------------------------------------------------------
     (State or other jurisdiction of            (IRS Employer
     incorporation or organization)             identification No.)

      9275 SW Peyton Lane, Wilsonville, OR 97070
-----------------------------------------------------------------------
    (Address of principal executive offices)  (Zip Code)

                         (503) 570-1600
              (Registrant's telephone number, including area code)

       SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
 Title of Each Class               Name of Each Exchange on
-----------------------            Which Registered
                                   --------------------------
  Common Stock                     Nasdaq National Market

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period than the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.         Yes  X    No
     Indicate by check mark if disclosure of delinquent filers pursuant to item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of the Form 10-K or any
amendment to this Form 10-K.  [  ]
     On March 13, 2000, the registrant had 46,145,892 shares of Common Stock
outstanding, and on such date, the aggregate market value of the shares of
Common Stock held by non-affiliates of the Registrant was $266,148,273 based
upon the last sale price reported for such date on the Nasdaq National Market.

                       DOCUMENTS INCORPORATED BY REFERENCE
Part III - Portions of registrant's Proxy Statement which is anticipated to  be
filed  within  120  days after the end of the registrant's  fiscal  year  ended
December 31, 1999.

<PAGE>
                      HOLLYWOOD ENTERTAINMENT CORPORATION

                          ANNUAL REPORT ON FORM 10-K

                         YEAR ENDED DECEMBER 31, 1999


Item                                                  Page

                                   PART I


1.  Business                                                   3
2.  Properties                                                12
3.  Legal Proceedings                                         13
4.  Submission of Matters to a Vote of Security Holders       13
4A. Executive Officers and Key Employees of the Registrant    14

                                   PART II

5.  Market for Registrant's Common Stock and Related
    Shareholder Matters                                       17
6.  Selected Financial Data                                   18
7.  Management's Discussion and Analysis of Financial
    Condition and Results of Operations                       19
8.  Financial Statements and Supplementary Data               25
9.  Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure                       25

                                   PART III

10. Directors and Executive Officers of the Registrant        26
11. Executive Compensation                                    26
12. Security Ownership of Certain Beneficial Owners and
    Management                                                26
13. Certain Relationships and Related Transactions            26

                                    PART IV

14. Exhibits, Financial Statement Schedules and Reports on
    Form 8-K                                                  27


<PAGE>
                                    PART I

ITEM 1.   BUSINESS

GENERAL

Hollywood Entertainment owns and operates 1,615 Hollywood Video retail
superstores in 44 states as of December 31, 1999 and is the second largest
retailer of rentable home videocassettes, DVDs and video games in the United
States.  Based on 2000 industry estimates from Paul Kagan Associates, Inc.
("Paul Kagan"), we estimate that our video stores attained a U.S. market share
of approximately 10%.  Our customer transaction database contains information
on about 27 million U.S. member accounts.  Hollywood Video revenue increased
from $17.3 million in 1993 to $1.1 billion in 1999.  We added 355 stores in
1999 and intend to add approximately 200 to 250 stores in each of 2000 and
2001.

In addition, with the acquisition of Reel.com, Inc. ("Reel.com") in
October 1998, we became the premier online destination  for film-related
content and commerce and began implementing a strategy to electronically
deliver entertainment products directly into the homes of our customers via the
internet.  Reel.com's annual on-line revenue increased from $15.0 million in
1998 to $40.2 million in 1999.

INDUSTRY OVERVIEW

     Video Retail Industry

According to Paul Kagan, the videocassette and DVD rental industry was
expected to grow by approximately 8%, reaching $8.7 billion in revenue in 1999.
We believe this growth will continue in 2000 and possibly beyond, driven in
part by greater availability of new release videocassettes as a result of
revenue sharing arrangements and increased advertising by movie studios and
video retailers.  According to Paul Kagan, the U.S. videocassette industry
(comprised of both rental and sales) has grown from $9.8 billion in revenue in
1990 to $18.5 billion in 1999, and is expected to reach $21.5 billion in 2002.
Paul Kagan estimates that in 1999, 85.9 million, or 85.9% of the 100 million
television households, owned a  VCR.  According to Paul Kagan, 20.5 million
VCR's were estimated to be sold in the U.S. in 1999 which represents the
largest number of VCR's sold in any single year.  In addition, Paul Kagan
estimates that about 2.5 million DVD players were sold in the U.S. in 1999, an
increase of 178% over the prior year.  According to Paul Kagan, the VCR and DVD
markets will continue to grow as the number of multi-VCR households is expected
to increase from 37.4 million in 1998 to 46.0 million by 2002 and the number of
VCR's and DVD players sold in 2002 is expected to reach 23.2 million.

The home video industry is highly fragmented but has experienced consolidation
in recent years as video store chains have gained significant market share from
single store operators.  Based upon information disclosed by Video Store
Magazine and Paul Kagan, the five largest video store chains had a 41% market
share of all U.S. consumer video rentals in 1998.  Dun & Bradstreet, as cited
by the Video Software Dealers Association, estimated that by the first quarter
of 1999 there were about 24,590 independent video stores in the United States,
down from about 26,960 in the first quarter of 1998.  About 49% of all
locations that rent video titles are currently operated by single store owners.
In addition, according to the Video Software Dealers Association, more than
14,000 of these single store operators generate annual revenues of less than
$220,000.  We believe that there are several competitive advantages in being a
large home video chain, including marketing efficiencies, brand recognition,
access to more copies of each videocassette through direct revenue sharing
agreements, sophisticated information systems, greater access to prime real
estate locations, greater access to capital, and competitive pricing made
possible by size and operating efficiencies.  Even if there is significant
consolidation, however, we expect that the home video industry will remain
fragmented.

     Movie Studio Dependence on Video Retail Industry

According to Paul Kagan, the video retail industry is the single largest
source of revenue to movie studios and represented approximately $7.3 billion,
or 48.3%, of the $15.1 billion of estimated domestic studio revenue in 1999.
Of the hundreds of movies produced by the major studios each year in the U.S.,
relatively few are profitable for the movie studios based on box office revenue
alone. According to the Motion Picture Association of America (the "MPAA"),
between 1990 and 1998 only 7.2% of all movies released generated in excess of
$20 million in U.S. theater revenue for studios. Over the same period, members
of the MPAA reported that the average production, advertising and distribution
cost per movie increased from $38.8 million to $78.0 million. We believe the
customer is more likely to view "non-hit" movies on rented videocassette or DVD
than in any other medium because video retail stores provide an inviting
opportunity to browse and make an impulse choice among a very broad selection
of new releases.  As a result, video retail stores, including those operated by
us, acquire movies on videocassette and DVD regardless of whether the movies
were successful at the box office, thus providing movie studios a reliable
source of revenue for almost all of the hundreds of movies produced each year.
Consequently, we believe movie studios are highly motivated to protect this
unique and significant source of revenue.

<PAGE>

Historically, movie studios have sought to generate incremental sources of
revenue through the addition of new distribution channels. To maximize revenue,
the studios have implemented a strategy of sequential release "windows," giving
each distribution channel the rights to its movies for a limited time before
making them available to the next sequential channel. The studios have
determined the sequential order in which they release movies to each
distribution channel based upon the order they believe will maximize their
total revenue from all distribution channels combined. These distribution
channels generally include the following, in release date order:

Order of Sequential Release Windows to Primary Channels of Distribution

                    -    Movie theaters
                    -    Video retail stores
                    -    Pay-per-view television (including DBS)
                    -    Premium channels (HBO, Showtime, etc.)
                    -    Basic cable television
                    -    Network television
                    -    Syndicated television

Trends in Video Rental and Sales

Studios have historically sold videocassettes to video retailers under two
pricing structures, "rental" and "sell-through."  Rental titles are initially
sold at relatively high prices (typically $60 to $65 wholesale) and promoted
primarily for rental, and then later re-released for sale to consumers at a
lower price (typically $10 to $15 wholesale).  Certain high-grossing box office
films, generally with box office revenue in excess of $100 million, are
targeted at the sell-through market.  These titles are released on
videocassette at a relatively low initial price (approximately $12 to $17
wholesale) and are both promoted as a rental title by video stores and sold
directly to consumers through a broad array of retailers including video
stores.  Studios elect to release a title either as rental or sell-through
based on which would optimize their income from the title.

More recently, the major studios and several large video retailers have
entered into revenue sharing agreements as an alternative to the historical
rental pricing structures.  Studios began offering retailers more
videocassettes for an individual title at substantially lower initial cost in
exchange for a share of the rental revenue that those copies generate over
their initial release window.  The additional copies have contributed to
improved consumer satisfaction early in a title's release because the supply of
titles better matches demand.  This has led to higher rental revenues for the
video store industry as well as for studios.  Revenue sharing also gives the
studios an incentive to market these titles because they share in the revenue
generated by increased transactions.

DVDs are an alternative format to VHS tapes that offer consumers digital
picture and sound and additional features such as enhanced content and
interactivity.  According to the Electronics Industry Association, for the
seven months ended July 1999, factories had shipped 1.6 million DVD players to
dealers representing a 346% increase over the same period in 1998.  The Company
introduced DVDs in all its stores in November 1998, resulting in the most
successful introduction of a new format in the Company's history.  DVDs are the
fastest growing new category introduced by the Company due to increased
interest in older movie titles as a result of the substantial improvement in
picture and sound quality over VHS.
<PAGE>

Home Video Game Industry

The home video game industry has historically been affected by changing
technology, limited hardware platform life cycles and hit-or-miss software
titles.  In addition, video games typically generate most of their rental
revenue during the first twelve months after their release.  Hollywood believes
that during this time period, the differential between the retail price and the
rental price of a new video game is typically high enough to make rentals an
attractive alternative to the customer.  According to Gerard Klauer Mattison &
Co., Inc., the total domestic home video game market generated about $3.9
billion in software sales in 1998 and is expected to grow to about $5.8 billion
in 1999, which represents a 49% increase.

Based upon estimates of Gerard Klauer Mattison & Co., Inc., Hollywood believes
that most of the recent growth in the home video game industry has been fueled
by the success of the Sony PlayStation-TM and Nintendo 64-TM and their
respective video games.  As of March 31, 1999, the installed base of Sony
PlayStation and Nintendo 64 within the United States was about 15.7 million and
10.6 million units, respectively.  The game industry has benefited from the
recent successful launch of the Sega Dreamcast, and should continue to grow
with the anticipated U.S. introduction of the Sony PlayStation II-TM,
Nintendo's Dolphin system, and Microsoft's X-Box.

BUSINESS  STRATEGY

Our goal is to build a strong national brand which consumers will identify
with the entertainment industry. We have developed an effective superstore
format that distinguishes us from competitors. We attempt to quickly establish
a leadership position in each of the markets in which we open stores.  We
successfully compete in both well-developed and relatively untapped markets. We
are also investing in technologies that enable us to deliver entertainment
directly into the homes of our customers.  Our business strategy includes the
following key elements:

Focus on Company-Built Superstores and Excellent Locations. Unlike many video
retailers who have grown through acquisitions, Hollywood has focused on
controlled organic growth.  Of Hollywood's 1,000 video superstores opened since
1995, over 90% of these stores have been opened as new stores where Hollywood
chose the site through a rigorous selection process.  We believe that this
control over site selection and discipline in the real estate process have been
among Hollywood's key competitive advantages.

Broad Selection and Superior Availability. We strive to provide our customers
with the broadest selection of movies and video games. Our superstores
typically carry approximately 8,000 titles and 15,000 videocassettes, DVDs and
video games. Our goal is to offer more copies of popular new video releases and
more titles than our competitors.  In part because of our new revenue sharing
arrangements with studios, we have increased the availability of most new
releases and typically acquire 100 to 175 copies of "hit" movies for each
Hollywood Video store.

Exciting, Enjoyable and Convenient Shopping Experience. Our superstores are
designed to capture the bright lights, energy and excitement of the motion
picture industry. We focus on creating an inviting atmosphere that encourages
browsing and generates repeat customers.  Our superstores are typically located
in high traffic, high-visibility locations. We believe excellent customer
service, a bright, clean and friendly shopping environment and convenient store
locations are important to our success.

Excellent Entertainment Value. We offer consumers the opportunity to rent new
releases, video games and any of our catalog movie titles for five days in most
of our stores.  New release movies typically rent for $3.79 and catalog movies
typically rent for $1.99.  We believe movie rental in general, and our pricing
structure and rental terms in particular, provide consumers convenient
entertainment and excellent value.

Electronic Commerce.  Having established our superstores as physical "portals"
linking consumers to the movie studios, we have begun  through  the acquisition
of Reel.com in October 1998 to establish an electronic "portal," linking
customers in their homes to movies and movie related entertainment.  We intend
to build on our relationships with movie studios, internet businesses such as
America Online and MSN and our more than 27 million physical store members to
enhance our electronic commerce business.
<PAGE>

Expanding Product Opportunities.  We regularly explore opportunities to enhance
entertainment experiences of our customers.  We are in the early stages of
rolling out a new business initiative that sells, buys and  trades video games,
as an expansion of our traditional video game rental business.  This
initiative, called "Game Crazy", is designed as a store-within-a-store concept,
leveraging a portion of our existing superstore real estate.  As of December
31, 1999, the Company had opened 67 of these departments, and plans to add an
additional 30 to 50 departments in 2000.  While the initial capital required to
add a Game Crazy department to an existing video store is approximately
$80,000, the outlay yields an estimated $400,000 in incremental revenue per
store.  Another significant product opportunity is DVD.  We believe DVD is a
format that complements our existing VHS business and is well suited
to rental or sale.  We introduced DVD for rental in the majority of our
stores in the fourth quarter of 1998, generating the highest revenues of any
new format in our history, and we plan to continue to expand our DVD
offerings in 2000.

Focus on Cash Generation and Return on Investment.  The Company has increased
its focus on maximizing cash generation and return on invested capital.  After
being a net user of cash since its inception as a result of rapid store growth,
the Company expects to become a net generator of cash in the fourth quarter of
2000.  Because of its large and highly profitable base of stores, the Company's
cash from operations is expected to be large enough to pay interest, cash taxes
and all growth and maintenance capital expenditures, and have significant cash
remaining to reduce the Company's debt or make investments.  To accelerate this
free cash flow milestone, the Company has announced that it is slowing growth
of its superstore base from a historical 350 new stores per year, down to 200
to 250 stores per year.  This single decision brings an additional $40 to $60
million in annual free cash flow to the Company.  Additionally, the Company
continues to focus on the return on investment of its stores.  The Company has
brought the cost to build a store down from over $500,000 in 1998 to
approximately $400,000 today, thereby shortening the payback period to
approximately 3 years, and increasing return on investment.

HOLLYWOOD VIDEO STORE DESIGN

Hollywood Video superstores average approximately 7,200 square feet and
are substantially larger than the stores of most of our competitors.  The store
exteriors generally feature large Hollywood Video signs and colors, which make
our stores easily visible to and recognizable by consumers.  The interior of
each store is clean and brightly lit.  Our superstores are decorated with
colorful neon murals depicting popular screen stars and walls of video monitors
with hi-fi audio accompaniment to create an exciting Hollywood environment.
Movies are organized into 28 categories, and videocassettes are arranged
alphabetically by title within each category to assist customers in locating
the movies.  New releases are prominently displayed in easily recognizable
locations within the store.  Videocassettes are displayed with the box cover
facing the customer for ease of selection and visual impact.  We use wall-
mounted and free- standing shelves arranged in wide aisles to provide access to
products and to encourage the movement of customers throughout the store.

EXPANSION STRATEGY

Video Store Openings and Flexible Store Format

We opened our first video superstore in October 1988 and grew to 25 stores
in Oregon and Washington by the end of 1993. In 1994 we significantly
accelerated our store expansion program, adding 88 stores and expanding into
California, Texas, Nevada, New Mexico, Virginia and Utah. In 1995 we added 192
stores and entered major new markets in the midwest, southwest, east and
southeast regions of the United States. Our expansion strategy is to continue
to open stores in regions where we have existing operations. We opened 246
stores in 1996, 356 stores in 1997, 353 stores in 1998 and 355 stores in 1999.
We plan to add 200 to 250 stores in each of 2000 and 2001.
<PAGE>

We have been rolling out a smaller superstore format that reduces the
target size of new stores from 7,500 square feet to 5,000 square feet, which
lowers our per-store annual rent and initial build-out costs.  These smaller
stores are able to carry the same amount of video and video game inventory as
larger stores due to a new store design and shelving system, and we believe
they retain a "superstore" look to consumers.  This efficient design also
allows us greater flexibility in locating new stores.  We have found that these
smaller, less expensive stores are generating similar revenue volumes as larger
units in comparable locations, thus increasing our financial return on new
stores.  We are rolling out these smaller stores in most of our new locations.

We believe the selection of locations for our stores is critical to the
success of our operations. We have assembled a new store development team with
broad and significant experience in retail tenant development.  The majority of
our new store development personnel are located in the geographic area for
which  they are responsible, but all final site approval takes place at the
corporate office, where new sites are approved by a committee of senior
management personnel. Final approval of all new sites is the responsibility of
the Chairman of the Real Estate Committee of the Board of Directors. Important
criteria for the location of a Hollywood Video superstore include density of
local residential population, traffic count on roads immediately adjacent to
the store location, visibility and accessibility of the store and availability
of ample parking. We generally seek what we consider the most desirable
locations, typically locating our stores in high-visibility stand-alone
structures or in prominent locations in multi-tenant shopping developments. We
typically compete for these prime sites with other retailers, banks,
restaurants and gas stations.  All of our stores are in leased premises; we do
not own any real estate.

Our expansion is dependent on a number of factors, including our ability
to hire, train and assimilate management and store level employees, the
adequacy of our financial resources and our ability to identify and
successfully compete in certain markets, to locate suitable store sites and
negotiate acceptable lease terms and to adapt its purchasing, management
information and other systems to accommodate expanded operations.  See "Item 7-
Management's Discussion and Analysis of Financial Condition and Results of
Operations-Liquidity and Capital Resources."  Our expansion is also dependent
on the timely fulfillment by landlords and others of their contractual
obligations to us, the maintenance of construction schedules and the speed at
which local zoning and construction permits can be obtained.

There is no assurance that we will be able to achieve our planned
expansion or that expansion will be profitable.  Our planned expansion,
including possible growth through acquisitions, could place pressure on our
management controls.  A failure to manage successfully our planned expansion
would adversely affect our business.  There is also no assurance that our new
stores will achieve sales and profitability comparable to our existing stores.

HOLLYWOOD'S INTERNET STRATEGY

On October 1, 1998, the Company acquired Reel.com, the premier online
destination for film-related content and commerce for approximately $96.9
million.  Concurrent with the acquisition of Reel.com, a group of strategic
Reel.com stockholders purchased an equity interest in the Company.  The group
of investors consists of CMGI, Inc. (Nasdaq: CMGI); Intel Corporation (Nasdaq:
INTC); Paul Allen's Vulcan Ventures, Incorporated and Scott Beck.  Reel.com
offers an extensive selection of approximately 50,000 titles on videocassette
and DVD's for sale. The website, located at http://www.Reel.com, offers
proprietary information about movies including descriptions, ratings, critics'
reviews, recommendations and links to star filmographies that entertain
consumers and help them select and purchase movies online.  Consumers can also
search through Reel.com's proprietary, hyperlinked database and can preview
selected videos.  These offerings position Reel.com to provide a valuable
marketing platform for film studios, advertisers and merchants.  In addition,
Hollywood's more than 27 million members provide Reel.com with substantial
marketing opportunities.
<PAGE>

Reel.com was rated one of the top 10 most recognized Internet commerce brands
by Opinion Research Corporation International in August 1999, and was recently
named "the best place to buy movies" by Yahoo! Internet Life.  According to
Media Metrix, the number of unique visitors to Reel.com increased from 848,000
in January 1999 to approximately 1.7 million in January 2000.  In addition,
Reel.com was recently named the most popular web site for gathering information
about films playing in movie theaters, based on a consumer survey conducted by
Greenfield Online and ASI Entertainment in March, 2000.  The survey also
revealed the internet's significant role in helping consumers make filmed
entertainment decisions.   Approximately 40% of wired consumers use the
internet to search for information about films prior to going to the theater.
In addition to an in depth database of information of 100,000 movies,
Reel.com's staff of movie experts create regular editorial features designed to
help movie-goers decide what to see in the theaters.   The following editorial
section of the Reel.com site provides examples of these features:

     In Theaters - Exclusive reviews and summary ratings of new films
     released theatrically each week as well as previews and trailers of
     films that will be released in the weeks ahead.

     Movie News - Up-to-the-minute news and buzz about films that are in
     production, in theatrical release and available on DVD and
     videocassette.

     Features - Interviews with actors and directors, movie trends and
     coverage of top film festivals.

     Screening Room - Approximately 900 on-demand movie trailers and
     original video programming.

     Hollywood Confidential - Insider movie news, buzz, scoops, and
     opinion by Jeffrey Wells, a well-known entertainment industry
     pundit.

     Top Ten Lists - "Hot" movies at the box office.

     Reel.com also provides us with a new distribution channel and we believe
     it complements our superstores in many ways:

     Reel.com currently sells both new and previously viewed
     videocassettes.  From our physical  superstores, we intend to provide
     Reel.com with a continuous supply of previously viewed videos, which
     are Reel.com's highest margin product.  In addition, as DVD inventory
     levels increase at our physical superstores we expect to be able to
     supply Reel.com with previously viewed DVDs to sell on Reel.com's
     website.

     While both businesses serve video retail customers, our stores
     generate most video-related business through rentals, while our
     online site generates virtually all of its commerce revenue through
     product sales.  Consequently, we believe there are substantial
     opportunities to add to our current on-line customer base of over
     900,000 customer households by promoting the Reel.com brand to our
     more than 27 million superstore customers.

     Reel.com's existing and developing expertise in using its
     intellectual property to help consumers browse through and select
     movie titles that fit their preferences can be leveraged in Hollywood
     Video stores to increase rentals of videos, particularly highly
     profitable catalog titles.  In the future we plan to combine
     Reel.com's intellectual property with our database of store customer
     rental history to provide personalized video recommendations.
<PAGE>

We believe Reel.com will also help position us for the eventual evolution
of the video business from physical delivery (through videocassettes and DVDs)
to electronic delivery directly to the home (through video-on-demand (V.O.D)).
We believe widespread electronic delivery of movies to the home at acceptable
quality levels will not occur for a number of years due to economic and
technological limitations.  If it becomes feasible in the future, we believe
Reel.com will position us to participate in that business. In the second
quarter of 2000, Reel.com intends to launch Reel on Demand, a V.O.D. trial in
conjunction with Sprint.  We expect the Sprint trial to demonstrate Reel.com's
ability to distribute content through the V.O.D medium and in turn spark the
interest of other V.O.D. enablers.   See "Competition."

We are evaluating strategic alternatives to maximize the value of Reel.com
to our shareholders and to provide additional financing sources for the
Reel.com business.  These alternatives include a public offering of a minority
position in Reel.com combined with a sale of an equity interest in Reel.com to
a strategic partner.

Our ability to achieve and manage growth of our online business is subject to
a number of risks and uncertainties, including those associated with
acquisitions generally and those related to the internet in particular.  We
will expend financial, operational, and management resources in operating this
new business and integrating operations with our existing business.  If we are
unable to do this cost-effectively, it could have a material adverse effect on
this new business and also be detrimental to the Company as a whole.  Internet
retailing is highly competitive and is characterized by rapid technological
change and changes in user and customer requirements and preferences.  In
addition, internet-based businesses are susceptible to technical difficulties,
including viruses, security breaches or other computer system interruptions,
which can reduce the availability of products and services, disrupt or delay
order fulfillment, and reduce customer satisfaction.  Customer satisfaction may
also be adversely affected by poor performance of those parties we contract
with to handle order fulfillment.  Our efforts to build recognition as an
internet retailer and to enhance website content and promote ease of use,
reliability and support for customers will require us to make additional
investments in this business segment going forward, and these investments may
not be profitable. The risks described in this paragraph will be greater if the
Reel.com business continues to grow rapidly.

PRODUCTS

Video Rental.  Our primary source of revenue is the rental of
videocassettes, DVDs and videogames. Our superstores typically carry
approximately 8,000 movie titles and 15,000 videocassettes, DVDs and video
games.  Excluding new releases, movie titles are classified into 28 categories,
such as "Action," "Drama," "Family" and "Children," and are displayed
alphabetically within those categories. We do not rent or sell adult movies in
our superstores. We are committed to offering more copies of popular new
releases than our competitors.

     Video Sales.  We offer new and previously viewed videos for sale.

Video Games.  In addition to video rentals and sales, we rent and to a
lesser extent sell video games licensed by Nintendo, Sega and Sony. Each mature
Hollywood Video store offers between 1,200 and 4,000 video games.  See
"Business Strategy."

Other Products.  We rent audio books, and for the convenience of our
customers we rent videocassette and video game players and sell blank
videocassettes, video cleaning equipment, confectionery and other items.
<PAGE>


REVENUE SHARING

In the fourth quarter of 1998, the Company entered into revenue sharing
agreements directly with major studios.  Under these new agreements, video
stores share with the studios an agreed upon percentage of the video store's
rental revenue for a limited period of time, usually up to 26 weeks.  This
percentage generally declines over a period of weeks following the initial
release of the movie.  The revenue sharing agreements, in many cases, also
allow the video stores to sell the previously viewed tapes to their customers.

The Company believes that Hollywood is one of the few retailers who has
revenue sharing agreements with all the major studios.  These revenue sharing
agreements provide a major competitive advantage for the Company and have the
following significant benefits:

    They provide the opportunity to substantially increase the quantity and
    selection of newly released video titles in stock and decrease the in-store
    copy depth problems that have plagued the industry for years;

    They increase revenues as a result of the increase in total number of
    transactions per store and number of videocassettes rented per transaction;

    They allow for significantly increased availability of new release
    movies; and

    They align the studios' economic interest more closely with the interest
    of the video stores.

In addition, the Company believes that revenue sharing has increased the
revenues received on an annual basis by the studios through increased rental
activity of new releases as well as greater distribution and revenues on non-
hit movies through minimum output provisions.

ADVERTISING AND MARKETING

To further our goal of having a strong national brand that consumers will
identify with the  entertainment industry, we advertise primarily using
television, radio, direct mail and the internet.  We frequently use cooperative
movie advertising funds made available by studios and suppliers to promote
certain videos.   We intend to increase our advertising expenditures in the
future.

PRICING

Revenue sharing arrangements significantly increased the number of new
release videocassettes acquired by the Company, thereby allowing the Company to
introduce a 5-day rental program on all product in the majority of the stores.
In exchange for this added convenience to our customers, the Company increased
its prices in  the majority of the stores in the fourth quarter of 1998 from
$1.49 to $1.99 for catalog titles and from $2.99 to $3.49 for new releases.  In
the fourth quarter of 1999, the Company increased its pricing on new releases
from $3.49 to $3.79 in the majority of its stores.  The Company believes that
the pricing structure and rental terms provide consumers convenient
entertainment and excellent value.

INVENTORY AND INFORMATION MANAGEMENT

Inventory Management.  We maintain detailed information on inventory
utilization. We track rental activity by individual videocassette, DVD and
video game to determine appropriate buying, distribution and disposition of
videocassettes and video games. The system provides information allowing us to
determine when to sell excess videocassettes, DVDs and video games, and when to
redistribute to new stores.  Our inventory of videocassettes, DVDs and video
games for rental is prepared according to uniform standards. Each new
videocassette, DVD and video game is removed from its original carton and
placed in a rental case with a magnetic security device and bar coding is
affixed to each videocassette, DVD and video game.

<PAGE>

Information Management.  We use a scalable client-server system and
maintain two distinct system areas: a point-of-sale ("POS") system and a
corporate information system. We maintain information, updated daily, regarding
revenue, current and historical rental and sales activity, demographics of
store membership, individual customer history, and videocassette, DVD and video
game rental patterns. This system allows us to compare current performance
against historical performance and the current year's budget, manage inventory,
make purchasing decisions on  new releases and manage labor costs. We believe
our system has the ability to continue to improve customer service, operational
efficiency, and management's ability to monitor critical performance factors.

COMPETITION

The video retail industry is highly competitive. We compete with local,
regional and national video retail stores, including Blockbuster, and with
supermarkets, pharmacies, convenience stores, bookstores, mass merchants, mail
order operations and other retailers, as well as with noncommercial sources
such as libraries. Some of our competitors have significantly greater financial
and marketing resources, market share and name recognition than we have.

We believe the principal competitive factors in the video retail industry
are title selection, rental period, the number of copies of popular titles
available, store location and visibility, customer service and employee
friendliness and convenience of store access and parking.  Substantially all of
our stores compete with stores operated by Blockbuster, most in very close
proximity.  In addition to competing with other video retailers, we compete
with all leisure-time activities, especially entertainment activities such as
movies, sporting events and network and cable television programs.

We compete with cable, satellite and pay-per-view television systems, in
which subscribers pay a fee to see a movie selected by the subscriber. Existing
pay-per-view services offer a limited number of channels and movies and are
only available to households with a direct broadcast satellite receiver or a
cable converter to unscramble incoming signals. Digital compression technology
and other developing technologies are enabling cable companies, direct
broadcast satellite companies, telephone companies and other telecommunications
companies to transmit a much greater number of movies to homes at more
frequently scheduled intervals throughout the day. Certain cable and other
telecommunications companies have tested V.O.D service in some markets.  V.O.D
service would allow a viewer to pause, rewind and fast forward movies. Based on
publicly available information, we believe these tests have shown that the
V.O.D. technology and service is still many years away from being able to
deploy on a large scale in a profitable manner.  We also believe movie studios
have a significant interest in maintaining a viable movie rental business
because their sale of videocassettes to stores represents the largest source of
their revenue.  According to Paul Kagan, in 1998 video stores represented
approximately 43% of the studios domestic and international revenue, while pay-
per-view represented only 1%.  In addition, home video provides the only
reliable source of revenue on "non-hit" or "B-title" movies which make up the
majority of movies produced by the major studios each year. As a result, we
believe movie studios will continue to make movie titles available to cable
television, satellite services or other distribution channels only after
revenues have been derived from the sale of videos to video stores.  Currently,
video stores receive product approximately two months earlier than pay per
view, cable and satellite distribution companies.  The window provided to video
stores by the studios has lengthened significantly over the last two years.

In addition, we believe substantial technological developments will be
necessary to allow pay-per-view television to match the viewing convenience and
selection available through video rental, and substantial capital expenditures
will be necessary to implement these systems.  In contrast, according to Adams
Media Research, 85.9 million, or 85.9%, of all U.S. television households own a
VCR and more VCR's were sold in 1999 than in any previous year.  Although we do
not believe cable television, V.O.D or other distribution channels represent a
near-term competitive threat to our business, technological advances or changes
in the manner in which movies are marketed, including in particular the earlier
release of movie titles to pay-per-view, including DBS, cable television or
other distribution channels, could make these technologies more attractive and
economical, which could have a material adverse effect on our business.
<PAGE>

SEASONALITY

The video retail industry generally experiences relative revenue declines
in April and May, due in part to the change to Daylight Savings Time and to
improved weather, and in September and October, due in part to the start of
school and introduction of new television programs.  The Company believes these
seasonality trends will continue.

EMPLOYEES

As of December 31, 1999, the Company had approximately 22,200 employees,
of which 21,370 were in the retail stores and zone offices and the remainder in
the Company's corporate administrative, and warehousing operations.

Store managers report to district managers who supervise the operations of
the stores.  The district managers report to regional managers, who report
directly to the Vice President or Senior Vice President of Operations for each
zone office.  The corporate support staff periodically has meetings with zone
personnel, regional managers, district managers and store managers to review
operations.  None of the Company's employees are covered by collective
bargaining agreements and employee relations are considered to be excellent.

SERVICE MARK

The Company owns United States federal registrations for its service marks
"Hollywood Video", "Hollywood Video Superstores" and "Reel".  The Company
considers its service marks important to its continued success.

<PAGE>
ITEM 2.   PROPERTIES

Store Locations

As of December 31, 1999, the Company's stores by location are as follows:

<TABLE>
<CAPTION>
                            HOLLYWOOD ENTERTAINMENT
                        NUMBER OF VIDEO STORES BY STATE
 <C>                               <C>
 Alabama       12                  Nebraska        11
 Arizona       51                  Nevada          22
 Arkansas       8                  New Hampshire    1
 California   271                  New Jersey      27
 Colorado      31                  New Mexico       7
 Connecticut   12                  New York        63
 Delaware       1                  North Carolina  25
 Florida       70                  North Dakota     3
 Georgia       36                  Ohio            73
 Idaho         11                  Oklahoma        20
 Illinois      83                  Oregon          58
 Indiana       32                  Pennsylvania    65
 Iowa          10                  Rhode Island     7
 Kansas        13                  South Carolina  10
 Kentucky      16                  South Dakota     3
 Louisiana     12                  Tennessee       32
 Maine          1                  Texas          166
 Maryland      24                  Utah            29
 Massachusetts 35                  Virginia        34
 Michigan      61                  Washington      70
 Minnesota     38                  Washington, D.C. 2
 Mississippi    4                  Wisconsin       29
 Missouri      26

Total Stores                                     1615
Total States (excluding District of Columbia)      44
</TABLE>
<PAGE>

All of the Company's stores are located in leased premises with an initial
lease term of five to 15 years and most have options to renew for between five
and 15 additional years.  Most of the store leases are "triple net," requiring
the Company to pay all taxes, insurance and common area maintenance expenses
associated with the properties.  The Company anticipates that future new stores
will also be located in leased premises.

The Company's corporate headquarters are located at 9275 Southwest Peyton
Lane, Wilsonville, Oregon, and consists of approximately 123,000 square feet of
leased space.  The Company's warehouse facility is located at 25600 Southwest
Parkway Center Drive, Wilsonville, Oregon and consists of approximately 175,000
square feet of leased space.  These facilities are leased pursuant to
agreements that expire November 2008 and November 2005, respectively.  On March
15, 2000, the Company announced plans to lease a new 98,000 square foot
distribution and light assembly facility in Laverne, Tennessee starting in
June, 2000.  This facility is leased pursuant to an agreement that expires on
June, 2010.
<PAGE>

ITEM 3.        LEGAL PROCEEDINGS

During 1999, the Company was named as a defendant in three complaints which
the Company anticipates will be consolidated into a single class action
entitled WOODS V. HOLLYWOOD ENTERTAINMENT, ET AL, Case No. CV779511, in the
Superior Court of the State of California in and for the County of Santa Clara.
The plaintiffs are seeking to certify a class made up of certain exempt
employees which they claim are owed overtime payments in certain stores in
California.  The case is in the early stages of discovery.  A class has not
been certified.  The Company is unable to determine that the likelihood of an
unfavorable outcome of the litigation is either probable or remote.  The
Company intends to vigorously defend the action.

On January 24, 2000, the Company settled the case filed in April 1998
entitled RENTRAK CORPORATION V. HOLLYWOOD ENTERTAINMENT, ET AL, Case No. 98-04-
02811, Circuit Court for the County of Multnomah, Portland, Oregon.  The
plaintiff, Rentrak, had alleged that the Company was contractually obligated
until December 31, 2011 to deal exclusively with Rentrak whenever it obtained
videocassettes on a revenue sharing basis.  Rentrak had claimed the Company
violated its obligations by obtaining videocassettes on a revenue sharing basis
directly from the movie studios.  Rentrak also claimed that the Company
violated alleged audit and reporting obligations under contractual
arrangements.  The complaint was seeking injunctive relief and monetary damages
in the amount of approximately $200.0 million.  Under the terms of the
settlement, the Company paid Rentrak approximately $14.0 million, which
included Rentrak's attorney fees.  The Company also issued to Rentrak 200,000
shares of  the Company's Common Stock as part of the settlement.  All claims
between the parties were settled, including the release of the Company from any
exclusivity claim.  In the settlement, the Company specifically disclaimed and
denied any liability or wrongdoing.

On November 2, 1999, the Company settled the case filed in July 1998,
entitled TWENTIETH CENTURY FOX HOME ENTERTAINMENT, INC. V. HOLLYWOOD
ENTERTAINMENT, ET AL, Case No. SC 053 551, in the Superior Court of the County
of Los Angeles, Los Angeles, California.  The plaintiff, Fox, had sought
damages for lost revenue claiming the Company had reported inaccurate
transaction-related data concerning Fox titles to Rentrak Corporation.  The
settlement resulted in the dismissal of all claims against the Company.
<PAGE>

ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.


ITEM 4(A).  EXECUTIVE OFFICERS AND KEY EMPLOYEES OF THE REGISTRANT

The  following table sets forth information with respect to our executive
officers and certain other key employees as of March 15, 2000.

Name                Age  Positions with the Company

Mark J. Wattles*     39  Chairman of the Board and Chief Executive Officer
Jeffrey B. Yapp*     41  President and Chief Operating Officer
David G. Martin*     34  Executive Vice President and Chief Financial Officer
Donald J. Ekman*     47  Senior Vice President, General Counsel, Secretary
                         and Director
Alex M. Bond         30  Chief Financial Officer/Reel.com
Eric O. English      42  Senior Vice President of Legal Affairs
F. Bruce Giesbrecht  40  Senior Vice President of Strategic Planning
Glenn E. Hahn        48  Senior Vice President of Logistics
Dale A. Naftzger     54  Senior Vice President of Operations
J. Patrick O'Malley  49  Senior Vice President of Information Systems
Roger J. Osborne     47  Senior Vice President of Operations
Mark A. Perkins      38  Senior Vice President of  Store Development
Silvio D. Piccini    37  Senior Vice President of Product Planning and
                         Allocation
David Rochlin        36  Chief Operating Officer/Reel.com
William E. Shull III 41  Senior Vice President of Operations
William M. Spae      48  Senior Vice President of Operations Administration
Michelle VanHoose    43  Senior Vice President of Human Resources

MARK J. WATTLES founded the Company in June 1988 and has served as Chairman of
the Board and Chief Executive Officer since that time. Mr. Wattles served as
President of the Company from June 1988 to September 1997.  Mr. Wattles has
been an owner and operator in the video rental industry since 1985. He has been
a participant and key speaker in several entertainment industry panels and
conferences and currently serves as a member of the Video Software Dealers
Association (VSDA) Board of Directors.

JEFFREY B. YAPP was appointed President and Chief Operating Officer of the
Company in September 1997. Prior to joining the Company, Mr. Yapp served as
President Worldwide of Twentieth Century Fox Home Entertainment, Inc. from May
1997 until September 1997, and as President of Fox International from October
1994 to May 1997.  Previously, Mr. Yapp was Vice President of Marketing for
Pizza Hut, Inc. from October 1992, and International Vice President of Ernest
and Julio Gallo Winery from April 1986 to October 1992.

DAVID G. MARTIN was appointed Executive Vice President and Chief Financial
Officer, in February 1999.  From 1996 until he joined the Company, Mr. Martin
worked for NationsBanc Montgomery Securities LLC, most recently as a Managing
Director of high yield finance specializing in retail and consumer products.
From 1991 to 1996, he was a Vice President of high yield finance and merchant
banking at Nomura Securities International, Inc. Prior to 1991, Mr. Martin was
an investment banker with Salomon Brothers, Inc, specializing in mergers and
acquisitions.

DONALD J. EKMAN became a director of the Company in June 1993, became Vice
President and General Counsel in March 1994 and became Senior Vice President in
1995. Mr. Ekman was a partner in Ekman & Bowersox from January 1992 until March
1994, and from August 1990 until December 1991 he practiced law with Foster
Pepper & Shefelman.
<PAGE>

ALEX M. BOND has been the Chief Financial Officer of Reel.com since April 1999.
Mr. Bond joined Hollywood Entertainment in March 1999 and served as its Senior
Vice President of Internet Development until April 1999.  From January 1997 to
February 1999, he was Executive Vice President of Strategic Development for
Just for Feet, Inc., a retail company.  From January 1995 until January 1997,
he was employed by Hollywood Entertainment as Vice President of Strategic
Development.  From February 1993 until January 1995, he was an investment
banker with Montgomery Securities, currently Banc of America Securities LLC,
specializing in growth retail.

ERIC O. ENGLISH was appointed Senior Vice President of Legal Affairs in August,
1999.  Prior to joining the Company, Mr. English served as Assistant General
Counsel for Louisiana Pacific Corporation from April 1997 to August 1999.
Previously, Mr. English was Chief Litigation Counsel for Baker Hughes
Incorporated.  Mr. English was formerly a partner with the law firm of
Strasberger & Price, L.L.P.

F. BRUCE GIESBRECHT was named Senior Vice President of Product Management in
January 1996 and became Senior Vice President of Strategic Planning in January
1998.  He joined the Company in May 1993 as Vice President of Corporate
Information Systems and Chief Information Officer. Mr. Giesbrecht was a founder
of RamSoft, Inc., a software development company specializing in management
systems for the video industry, and served as its President.

GLENN E. HAHN joined the Company in April 1996 as Senior Vice President of
Operations and in January 1997 became Senior Vice President of Human Resources.
In January 2000 Mr. Hahn was named Senior Vice President of Logistics.  From
1993 to 1996 Mr. Hahn was Senior Vice President Director of Stores for
Fayva/Parade of Shoes (a specialty retail footwear division of J. Baker),
overseeing approximately 400 stores. From 1979 to 1993 Mr. Hahn worked for
Payless Shoesource (a division of May Department Stores) in various capacities.
From 1987 to 1993 Mr. Hahn worked as Division Operations Manager for Payless
Shoesource, overseeing approximately 580 specialty retail footwear stores at
the time of his departure.

DALE A. NAFTZGER joined the Company in April 1996 as Senior Vice President of
Operations.  Mr. Naftzger is currently responsible for the Company's Game Crazy
departments.  From March 1995 to December 1995 Mr. Naftzger was Chief Operating
Officer of Caribou Coffee Company, a privately owned specialty coffee retailer.
From 1994 to 1995 Mr. Naftzger was President and Chief Executive Officer of
Chop Chop Chinese to You, a Chinese food delivery business.  From 1992 to 1994
Mr. Naftzger was Senior Vice President Operations for Checkers Drive-In
Restaurants, overseeing all 248 company-owned and 200 franchised units.

J. PATRICK O'MALLEY joined the Company in October 1995 as Senior Associate
General Counsel.  In May 1998, Mr. O'Malley was promoted to Senior Vice
President of Asset Management.  In January 1999, Mr. O'Malley became the Senior
Vice President of Information Systems.  Prior to joining the Company, Mr.
O'Malley practiced law for over 17 years and was most recently the senior
partner in O'Malley & Antell.

ROGER J. OSBORNE is a Senior Vice President of Operations.  Prior to joining
the Company in January 1999, he was the Executive Vice President of J. Baker,
Corporation, an apparel and footwear retailer, and President of its Work `N
Gear Division since June 1997.  Before joining J. Baker Corporation, Mr.
Osborne was Senior Vice President and Zone Director for Mid-West and East coast
markets for the Company from November 1996 until May of 1997, and from January
1995 to November 1996, he served as the Senior Vice President of J. Baker, Inc.
and Director of its licensed shoe department business.  From 1988 until January
1995, Mr. Osborne was employed as Senior Vice President and Director of Store
Operations for Pic `n Pay Stores, Inc., a chain of discount footwear stores.
<PAGE>

MARK A. PERKINS joined the Company in September 1994 as Vice President of Real
Estate, and in April 1998 was promoted to Senior Vice President of Development.
From 1993 to 1994 Mr. Perkins worked for Blockbuster in various capacities
within the Real Estate Department.  From 1989 to 1993 Mr. Perkins worked in the
Real Estate Dept. for Jack In The Box, Inc.

SILVIO D. PICCINI joined the Company in October 1996 as Vice President of
Operations and became Senior Vice President of Product Planning and Allocation
in November 1999.  Prior to joining the Company, Mr. Piccini was President of
Tex-Chex, a fast food franchise. From 1987 to 1993 he served in various
management roles with Taco Bell Corporation, most recently as its Director of
Operations, overseeing 100 restaurants.

DAVID ROCHLIN has been the Chief Operating Officer of Reel.com since April
1999.  Mr. Rochlin previously served as Vice President of Marketing of Reel.com
from June 1998 to April 1999.  From 1996 to 1998, Mr. Rochlin was Director of
Marketing for NETCOM Online Communications, a telecommunications company.  From
1994 to 1996, he was Senior Director of Market Development at DNA Plant
Technology, a consumer biotechnology company.  From 1992 to 1994, he was a
brand and category manager at Del Monte Foods.  Mr. Rochlin is a regular
speaker on Internet retailing practices and is active in a variety of online
commerce industry groups, including shop.org and the GII Initiative.

WILLIAM B. SHULL III joined the Company in February 1998 as Senior Vice
President of Operations.  Mr. Shull previously served in various capacities at
AutoZone, most recently as the Regional Vice President overseeing the
operations and development for 250 stores.

WILLIAM M. SPAE joined the Company in July 1996 as Senior Vice President of
Operations, and in 1997 became Senior Vice President of Operations
Administration.  From 1991 to June 1996 Mr. Spae worked for Wendy's
International as Divisional Vice President, overseeing the development of
approximately 130 new units during this period and the overall operations of
more than 100 company-owned and 150 franchised units at the time of his
departure. From 1987 to 1991 Mr. Spae was a Zone Vice President for Taco Bell
Corporation, overseeing more than 160 company-owned and approximately 100
franchised units.

MICHELLE VanHOOSE became Senior Vice President of Human Resources on December
1, 1999.  Ms. VanHoose joined Hollywood as Vice President of Human Resources on
May 10, 1999.  Prior to joining Hollywood, she was Vice President of Human
Resources at Gymboree from 1995 to 1999, and was Director of Human Resources at
H2Oplus, a Chicago based manufacturer and retailer of beauty, skin care and
fragrance products from 1993 to 1995.

*Executive officers

<PAGE>

                                    PART II

ITEM 5.   MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS

The Company has not paid any cash dividends on its common stock since its
initial public offering in July 1993 and anticipates that future earnings will
be retained for the development of its business.  The payment of any future
dividends will be at the discretion of the Company's Board of Directors.  Loan
covenants contained in its senior subordinated notes limit the amount of
dividends the Company may pay and the amount of stock it may repurchase.  As of
December 31, 1999, these covenants effectively prohibit any dividends or stock
repurchases.  The Company's common stock is traded on the Nasdaq National
Market ("Nasdaq") under the symbol "HLYW".  The following table sets forth the
quarterly high and low last sale prices per share, as reported on Nasdaq.

<TABLE>
<CAPTION>
                     1999                 1998
             ----------------------------------------
  Quarter       High     Low         High       Low
  -------    -------    ------    --------    -------
<S>          <C>        <C>        <C>         <C>
  First       $34.50     18.38      $14.81      $8.03

  Second       27.50     17.69       15.00      10.13

  Third        19.50     12.00       20.00       9.75

  Fourth       17.44     13.38       29.88       8.75

</TABLE>

 As of December 31, 1999, there were 203 holders of record of the Company's
 common stock.


ITEM 6.   SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
                                    Year Ended December 31,
                     ------------------------------------------------------
                        1999        1998       1997       1996      1995
                     ----------  ---------  ---------  ---------  ---------
<S>                  <C>         <C>        <C>        <C>        <C>
OPERATING RESULTS:
Revenue              $1,096,841   $763,908   $500,501   $302,342   $149,430
                     ----------  ---------  ---------  ---------  ---------
Income (loss) from
 operations              (2,513)   (36,451)    23,303     38,418     17,537
                     ----------  ---------  ---------  ---------  ---------
Interest expense         45,691     33,355     14,302      4,339        490
                     ----------  ---------  ---------  ---------  ---------
Income (loss) before
 extraordinary
 item and cumulative
 effect of a change
 in accounting
 principle              (49,858)    (50,464)    5,559     20,630    11,786
                     ----------  ----------  --------  ---------  --------
Net income (loss)       (51,302)    (50,464)    4,996     20,630     9,226
                     ----------  ----------  --------  ---------  --------
-----------------------------------------------------------------------------
Net Income (Loss)
 Per Share Before
 Extraordinary Item
 and Cumulative
 Effect of a Change
 in Accounting
 Principle:
   Basic                 $(1.09)     $(1.30)    $0.15      $0.60     $0.37
   Diluted                (1.09)      (1.30)     0.15       0.59      0.36
                     ----------  ----------  --------  ---------  --------
Net Income (Loss)
 Per Share:
   Basic                 $(1.13)     $(1.30)    $0.14      $0.60     $0.28
   Diluted                (1.13)      (1.30)     0.13       0.59      0.28
                     ----------  ----------  --------  ---------  --------
BALANCE SHEET DATA:
Rental inventory,
 net                   $339,912    $259,255  $226,051   $144,264   $86,889
Property and
 equipment, net         382,345     328,182   234,497    115,812    65,958
Total assets          1,080,177     936,330   691,165    453,605   337,244
Long-term
 obligations(1)         533,906     392,145   233,496     82,361     7,971
Mandatorily
 redeemable
 Common stock                 -           -         -          -    54,250
Shareholders' equity    304,529     347,591   291,938    277,013   220,367

OPERATING DATA:
Number of stores at
 year end                 1,615       1,260       907        551       305
Weighted average stores
 open during the year     1,405       1,074       694        398       188
Comparable store
 revenue increase (2)       12%          8%        3%         7%        1%
-----------------------------------------------------------------------------
OTHER DATA
Hollywood superstores
  EBITDA                265,787     168,158   162,445    125,534    62,269
Add special
 charges (4)             26,885      99,910    26,320          -     2,560
Add non-cash
 expenses (5)            49,627      51,143    18,022      7,994     3,855
Less existing store
 investment in new
 release inventory     (137,794)   (189,814) (125,301)   (75,788)  (37,168)
                      ---------   ---------  --------    -------  --------
Adjusted EBITDA
 superstores (5)        204,505     129,397    81,486     57,740    31,516
Reel.com EBITDA (3)     (46,902)     (7,322)        -          -         -
                      ---------   ---------  --------   --------  --------
Consolidated Adjusted
  EBITDA                157,603     122,075    81,486     57,740    31,516
                      =========   =========  ========   ========  ========

Cash flows generated
 from (used in):
 Operating activities   173,303     244,078   174,956    115,798   57,407
 Investing activities  (320,338)   (438,411) (338,120)  (189,085)(157,529)
 Financing activities   150,001     194,399   154,224     56,156   91,085
----------------------------------------------------------------------------
</TABLE>

<PAGE>

(1)  Includes the current portion of long-term obligations.

(2)  A store is comparable after it has been open and owned by the Company
     for 12 full months.  An acquired store converted to the Hollywood Video
     name store design is removed from the comparable store base when the
     conversion process is initiated and returned 12 full months after
     reopening.

(3)  EBITDA consists of net income (loss) before interest, taxes, depreciation
     and amortization. Reel.com EBITDA excludes the $1.9 million non-cash charge
     in 1998 related to purchased in-process R&D (see Note 15 to the
     Consolidated Financial Statements). EBITDA should not be viewed as a
     measurement of financial performance under Generally Accepted Accounting
     Principles ("GAAP") or as a substitute for GAAP measurements such as net
     income or cash flow from operations.  EBITDA is not necessarily comparable
     to other companies due to the lack of uniform definition of EBITDA by all
     companies.

(4)  These one-time special charges include:

     -1999: Litigation settlement charges of $25.4 million related to the
      settlement of the Fox and Rentrak lawsuits (see Note 15 to the
      Consolidated Financial Statements) and a $1.4 million charge for the
      cumulative effect of a change in accounting principle (see Note 1 to the
      Consolidated Financial Statements);
     -1998: an inventory write-down of $99.9 million (see Note 4 to the
      Consolidated Financial Statements);
     -1997: a litigation settlement of $18.9 million, an inventory write-down
      of $2.3 million, $4.6 million related to a failed self-tender offer, and
      $.6 million from a loss on early extinguishment of debt (See Note 15 to
      Consolidate Financial  Statements);
     -1995: $2.6 million relating to a change in the Company's method of
      amortizing the cost of videocassette rental inventory.

(5)   Adjusted EBITDA represents income (loss) from operations before
      depreciation and amortization plus non-cash expenses that reduced EBITDA,
      less the cost of acquiring new release videocassettes and game inventory
      which are capitalized. The non-cash expenses represent the cost of goods
      sold on previously viewed videocassettes and inventory shrink.  Adjusted
      EBITDA is consistent with the calculation specified in the covenants in
      the Company's bank credit agreement. Adjusted EBITDA should not be viewed
      as a measure of financial performance under GAAP and should not be
      considered as an alternative to cash flows from operating activities
      (as determined in accordance with GAAP) as a measure of liquidity. Our
      calculation of EBITDA is not necessarily comparable to other companies
      due to lack of uniform definitions of EBITDA by all companies.



ITEM 7. MANAGEMENT'S  DISCUSSION  AND ANALYSIS OF  FINANCIAL  CONDITION  AND
        RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

Summary Results of Operations

The Company's net loss for 1999 was $51.3 million, compared to net loss of
$50.5 million in 1998 and net income of $5.0 million in 1997.
<PAGE>

The following table sets forth, (i) results of operations data expressed
as a percentage of total revenue, (unless otherwise indicated); and (ii)  the
number of stores open at the end of each such period.
<TABLE>
<CAPTION>

                                            Year Ended December 31,
                                         ----------------------------
                                            1999      1998      1997
                                         --------   -------   -------
<S>                                      <C>        <C>       <C>
  Revenue:
    Rental revenue                          81.5%     82.9%     83.6%
    Product sales                           18.5%     17.1%     16.4%
                                         --------   -------   -------
                                           100.0%    100.0%    100.0%
                                         --------   -------   -------
  Cost of revenue:
   Cost of rental                           25.4%     35.6%     24.4%
   Cost of product                          14.1%     11.5%     10.7%
                                         --------   -------   -------
                                            39.5%     47.1%     35.1%
                                         --------   -------   -------
  Gross margin                              60.5%     52.9%     64.9%

  Operating costs and expenses:
    Operating and selling                   47.7%     50.1%     48.9%
    General and administrative               7.8%      4.9%     10.1%
    Amortization of intangibles              5.2%      2.4%      1.3%
    Purchased in-process research
     and development                            -      0.3%         -
                                         --------   -------   -------
                                            60.7%     57.7%     60.3%
                                         --------   -------   -------

  Income (loss) from operations             (0.2%)    (4.8%)     4.6%
  Nonoperating expense                      (4.2%)    (4.3%)    (2.8%)
                                         --------   --------   ------
  Income (loss) before income taxes,
   extraordinary item and cumulative
   effect adjustment                        (4.4%)     (9.1%)    1.8%
  (Provision for) benefit from income
   taxes                                    (0.2%)      2.5%    (0.7%)
                                         --------    --------  ------
  Income (loss) before extraordinary
   item and cumulative effect
   adjustment                               (4.6%)     (6.6%)    1.1%
  Extraordinary loss on extinguishment
   of debt                                      -          -    (0.1%)
  Cumulative effect of a change in
   accounting principle                     (0.1%)         -        -
                                         --------    -------   ------
  Net income (loss)                         (4.7%)     (6.6%)    1.0%
                                         ========    =======   ======
----------------------------------------------------------------------
  Other data:
   Rental gross margin (1)                  68.8%      57.1%    70.8%
   Product gross margin (2)                 23.8%      32.9%    34.8%

Number of superstores - end of period       1,615      1,260      907
----------------------------------------------------------------------
</TABLE>
   (1) Rental gross margin as a percentage of rental revenues.
   (2) Product gross margin as a percentage of product revenues.
<PAGE>

REVENUE

Revenue increased by $332.9 million, or 44%, in 1999 compared to 1998,
primarily due to the addition of 355 new superstores in 1999.  Revenue was also
favorably impacted by an increase of 12% in comparable store revenue in the
current year, combined with the full year impact of Reel.com revenue.  Reel.com
added $42.0 million in revenue (on-line revenue of $40.2 million) in 1999.
Revenue increased by $263.4 million, or 53%, in 1998 compared to 1997, due to
the addition of 353 new superstores in 1998 combined with an increase of 8% in
comparable store revenue.  In addition, Reel.com, which was acquired in October
1998, added $7.3 million in revenue in 1998. The Company ended 1999 with 1,615
superstores operating in 44 states, compared to 1,260 stores operating in 42
states at the end of 1998 and 907 stores operating in 42 states at the end of
1997.  The Company increased its prices at most stores in the fourth quarter of
1998 from $1.49 to $1.99 for catalog titles and from $2.99 to $3.49 for new
releases.  In the fourth quarter of 1999, the Company increased prices at most
stores from $3.49 to $3.79 for all new rental  releases.

GROSS MARGIN

Rental Margins

Rental gross margin as a percentage of rental revenue increased to 68.8% in
1999 from 57.1% in 1998. In the fourth quarter of 1998, the Company
significantly changed its business model.  In order to increase the quantity
and selection of newly released video titles and satisfy the customer's demand
while trying to mitigate the Company's risk, we entered into revenue sharing
agreements with major studios.  Prior to these revenue sharing agreements, the
Company paid approximately $60 to $65 per videocassette for major theatrical
releases that were priced for rental in the United States.  The Company was
seldom able to fully satisfy its customer's demand for new releases under this
fixed price model.  The Company expected that the revenue sharing model would
have a significant impact on the Company's cost of rental as it changed its
business model from a primarily fixed to a primarily variable cost approach.
Starting in the fourth quarter of 1998, revenue sharing payments became a
significant component of the Company's cost of rental.  The revenue sharing
agreements made it necessary for the Company to make adjustments to its
inventory valuation as of October 1, 1998 in order to account for the shorter
rental lives that videocassettes have in the revenue sharing business model
because initial customer demand is satisfied significantly sooner.  As a result
of this change, the Company recorded a $99.9 million one time charge to reflect
a reduction in the carrying value of rental inventory in the fourth quarter of
1998.  Excluding this charge, rental margins decreased as a percentage of
rental revenues from 72.9% in 1998 to 68.8% in 1999.  This decrease was
primarily due to increased revenue sharing payments to studios and increased
rental revenues.  Pursuant to the change in accounting method adopted on
October 1, 1998, revenue sharing payments are expensed net of $4 salvage value
per tape and rental tape amortization is accelerated.  During the current year,
payments made pursuant to the revenue sharing agreements increased by $136.6
million, partially  offset by a decrease in rental tape amortization of $28.0
million and reduced inventory loss of $1.9 million.

In the fourth quarter of 1997, the Company recorded a $4.5 million special
charge associated with the write-off of obsolete video game rental inventory
and related accessories caused by advancements in video game technology (see
Note 15 to the Consolidated Financial Statements). Rental gross margin as a
percentage of rental revenue, excluding the special charges noted above,
increased slightly to 72.9% in 1998 from 71.9% in 1997.

Product Margins

Excluding Reel.com, product margin as a percentage of product revenue decreased
from 34.8% in 1998 to 31.8% in 1999.  The decline in product margin in 1999 is
primarily due to pricing pressure on sell-through video merchandise from mass
merchant retailers, which use video sales as a loss leader to drive customer
traffic and due to the impact of on-line sales where both VHS and DVD titles
can be purchased at or below their wholesale cost in many cases.  Product
margin, as a percentage of product revenue, including Reel.com, was 23.8% in
1999, compared to 32.9% in 1998.
<PAGE>

Excluding Reel.com, product margin as a percentage of product revenue decreased
from 37.6% in 1997 before the game inventory write-off discussed below, to
34.8% in 1998.  The decline in product margin in 1998 was primarily due to
pricing pressure from mass-merchant retailers and e-commerce companies.
Product margin as a percentage of product revenue, including Reel.com was 32.9%
in 1998.  In the fourth quarter of 1997 the Company wrote-off obsolete video
game inventory and related accessories of $2.3 million caused by advancements
in video game technology (see Note 15 to the Consolidated Financial
Statements).

Operating Costs and Expenses

Operating and Selling

Total operating and selling expenses of $522.7 million in 1999 increased $140.0
million from $382.7 million in 1998.  Total operating expenses as a percentage
of total revenues decreased to 47.7% in 1999 from 50.1% in 1998.   The increase
in total operating expenses was due to increases in depreciation expense of
$15.7 million, store wages of $35.1 million, occupancy costs of $45.9 million
and other store operating expenses of $10.2 million.  Additionally, the Company
incurred $38.9 million in operating and selling expenses in 1999, an increase
of $33.0 million over the prior year, due to Reel.com.  The increase in
Reel.com expenses was primarily due to operating Reel.com, for the entire year
in 1999 compared to only the fourth quarter in 1998.  All of the above
increases, with the exception of Reel.com were due to the increase in the
number of superstores operated by the Company.  The Company operated 1,615
superstores at December 31, 1999 compared with 1,260 superstores at the end of
1998.  Operating and selling expense decreased as a percentage of total revenue
in 1999 primarily due to higher average revenue per store in 1999 compared to
1998.

Total operating expenses of $382.7 million in 1998 increased $137.8 million
from $244.9 million in 1997. Total operating expenses as a percentage of total
revenues increased to 50.1% in 1998 from 48.9% in 1997.  The increase in total
operating expenses was due to increases in depreciation expense of $20.5
million, store wages of $36.9 million, occupancy costs of $58.2 million and
other store operating expenses of $16.6 million.  Additionally, with the
acquisition of Reel.com in October 1, 1998, the Company added $5.8 million in
selling and operating expenses.  All of the above increases, with exception of
Reel.com, were due to the increase in the number of superstores operated by the
Company.  The Company operated 1,260 superstores at December 31, 1998 compared
with 907 superstores at the end of 1997.  Operating and selling expense
increased as a percentage of total revenue primarily due to lower average
revenue per store in 1998 compared to 1997.

General and Administrative

Total general administrative expenses of $85.9 million increased $48.4 million
from $37.5 million in 1998.  Total general and administrative expenses as a
percentage of total revenue increased to 7.8% in 1999 compared to 4.9% in 1998.
Included in general and administrative expenses in 1999 is a special charge of
$25.4 million for legal and settlement charges associated with the settlement
of the Fox and Rentrak lawsuits (see Note 15 to the Consolidated Financial
Statements).  Excluding this charge, general and administrative expenses
increased by $23.0 million in 1999, primarily due to an increase in payroll and
related costs, higher legal costs, due to the Fox and Rentrak lawsuits, and
increased overhead costs of $5.3 million associated with Reel.com.  The
increase in Reel.com expenses was primarily due to the full year impact of
operating Reel.com in 1999 compared to only the fourth quarter of 1998.
<PAGE>

Total general and administrative expenses of $37.5 million in 1998 decreased
$13.1 million from $50.6 million in 1997.  Total general and administrative
expenses as a percentage of total revenue decreased to 4.9% in 1998 compared to
10.1% in 1997.   The following two special charges are included in general and
administrative expenses in 1997.  First, the Company recorded a $4.6 million
charge in the fourth quarter of 1997 for costs related to the Company's failed
self tender offer (see Note 15 to the Consolidated Financial Statements).
Second, the Company recorded an $18.9 million charge in the first quarter of
1997 for the settlement of the securities litigation (see Note 15 to the
Consolidated Financial Statements). Excluding the special charges noted above,
general and administrative expenses increased $10.4 million in 1998 to $37.5
million from $27.1 million in 1997, primarily due to an increase in payroll and
related costs and occupancy costs combined with the acquisition of Reel.com in
October 1998.

Amortization of Intangibles

Amortization of intangibles increased by $38.3 million in 1999 compared to
1998, primarily due to the full year impact of amortizing goodwill associated
with the Reel.com acquisition, as discussed in Note 7 to the Consolidated
Financial Statements.

Amortization of intangibles increased by $12.4 million in 1998 compared to 1997
due to the Reel.com acquisition.

Other Operating Charges

The Company incurred a non-cash charge of $1.9 million in 1998 to write-off the
value of purchased in-process research and development costs in connection with
the acquisition of Reel.com (see Note 7 to the Consolidated Financial
Statements).

Nonoperating Income (Expense), Net

Interest expense, net of interest income, increased in 1999 compared to 1998
and 1997 due to increased levels of borrowings associated with the issuance of
senior subordinated notes in August 1997 and June 1999 (see Note 10 to the
Consolidated Financial Statements), combined with increased borrowings under
the revolving credit facility.

INCOME TAXES

The Company's effective tax rate was a provision of 3.9% in 1999 compared to a
benefit of 27.6% in 1998 and a provision of 40.5% in 1997, given the Company's
net loss for financial reporting purposes versus net income for tax reporting
purposes as a result of the non-deductibility of goodwill amortization
associated with the Reel.com acquisition (see Note 7 to the Consolidated
Financial Statements).

EXTRAORDINARY LOSS ON EXTINGUISHMENT OF DEBT

In August 1997, the Company issued $200.0 million principal amount of 10.625%
senior subordinated notes.  The proceeds from the notes were then used to repay
the outstanding indebtedness under the existing bank loan.  As a result, the
Company recorded a charge for the write-off of the remaining deferred financing
costs related to the indebtedness repaid as an extraordinary loss of $0.6
million, net of the related income tax benefit of $0.4 million.

CHANGE IN EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE

In April 1998, SOP 98-5, "Reporting on the Cost of Start-up Activities" was
finalized, which requires that cost incurred for start-up activities, such as
store openings, be expensed as incurred.  The Company adopted SOP 98-5
effective January 1, 1999.  The cumulative effect of the change in accounting
principle was to increase net loss by $1.4 million, net of tax benefit.
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

The Company generates substantial operating cash flow because most of its
revenue is received in cash.  The amount of cash generated from operations in
1999 significantly exceeded debt service requirements of the Company's long-
term obligations.  The capital expenditures (including purchases of rental
inventory) of the Company are primarily funded by the excess operating cash
flow and through loans under a revolving line of credit.  The Company currently
has a $300 million revolving line of credit available to address the timing of
certain working capital and capital expenditure disbursements.  The Company is
negotiating to replace its current $300.0 million line of credit with a new
$375.0 million facility, consisting of a $175.0 million revolving line of
credit and $200.0 million term loan.  The Company expects to close on the new
credit facility in April/May 2000.  The Company believes cash flow from
operations, supplemented by the availability of the new credit facility, will
provide the Company with adequate liquidity and the capital necessary to
achieve its planned expansion for the foreseeable future. The Company has
increased its focus on maximizing cash generation and return on invested
capital.  After being a net user of cash since its inception, the Company
expects to become a net generator of cash in the fourth quarter of 2000.  Due
to its large and highly profitable base of stores, the Company's cash from
operations is expected to be large enough to pay interest, cash taxes, and all
growth and maintenance capital expenditures, and have significant cash
remaining to reduce the Company's debt.  To accelerate this free cash flow
milestone, the Company has announced that it is slowing the growth of its
superstore base from a historical 350 stores per year, down to 200 to 250
stores per year.

At December 31, 1999, the Company had cash and cash equivalents of $6.9 million
and a working capital deficit of $65.7 million.  Rental inventories are
accounted for as noncurrent assets under GAAP because they are not assets which
are reasonably expected to be completely realized in cash or sold in the normal
business cycle.  Although the rental of this inventory generates a substantial
portion of the Company's revenue, the classification of these assets as
noncurrent excludes them from the computation of working capital. The
acquisition cost of rental inventories, however, is reported as a current
liability until paid and, accordingly, included in the computation of working
capital.  Consequently, the Company believes working capital is not as
significant a measure of financial condition for companies in the video retail
industry as it is for companies in other industries.  Because of the accounting
treatment of rental inventory as a noncurrent asset, the Company may, from time
to time, operate with a working capital deficit.

Cash Provided by Operating Activities

During 1999, net cash generated by operations was $70.8 million lower than the
prior year.  This decrease was due to lower depreciation and amortization
expenses, net of the non-cash inventory valuation charge and the write-off of
purchased in process research and development costs in 1998 (see "Results of
Operations"), combined with a net unfavorable change in certain working capital
accounts, partially offset by a net favorable change in deferred income taxes
(see Note 11 to the Consolidated Financial Statements).

Cash Used in Investing Activities

Net cash used in investing activities decreased by $118.1 million from the
prior year primarily due to reduced purchases of rental inventory for new and
existing stores (excluding product purchased under revenue sharing agreements),
a decrease in investment in businesses acquired and reduced capital
expenditures with respect to new store construction, remodeling of certain
existing stores and for the continued development of management information
systems (see "Capital Expenditures").

Cash Provided by Financing Activities

Net cash provided by financing activities decreased by $44.4 million from the
prior year. In the prior year, the Company sold 3.4 million shares of its
common and preferred stock in connection with the Reel.com acquisition for an
aggregate amount of $45.4 million (see Note 7 to the Consolidated Financial
Statements), partially offset by the repurchase of 850,000 shares of the
Company's common stock for approximately $10.5 million.  In 1999, the Company
had an increase in indebtedness repaid resulting from the payment of the $6.0
million note due in April, 1999 (see Note 7 to the Consolidated Financial
Statements).
<PAGE>

Capital Expenditures

The Company's capital expenditures include product for stores, store equipment
and fixtures, remodeling a certain number of existing stores, implementing and
upgrading office and store technology and opening for new store locations.
Each new store opening requires initial capital expenditures, including
leasehold improvements, inventory, equipment and costs related to site
location, lease negotiations and construction permits.  We currently anticipate
that capital expenditures of approximately $130.0 million will be incurred in
2000, of which $110.0 million is anticipated to relate to new, relocated and
remodeled stores and the conversion of acquired stores.  The remaining balance
relates to corporate capital expenditures.  We expect the total investment per
new store to approximate $400,000, which includes rental and merchandise
inventory, leasehold improvements, signage, furniture, fixtures and equipment.
We have brought down the cost from over $500,000 per-store in 1998 through
improved construction and product efficiencies. The  cost of opening a new
store can vary based on size, construction costs in a particular market, and
other factors.  These capital expenditures will be funded primarily by cash
generated from operations, supplemented by the availability of a new senior
revolving line of credit or other forms of equipment financing and/or leasing,
if necessary.

YEAR 2000 ISSUES

The year 2000 Issue is the result of computer programs being written using two
digits rather than four to define the applicable year.  Computer programs that
have date sensitive software may recognize a date using "00" as the year 1900
rather than year 2000.  To be in "Year 2000 compliance" a computer program must
be written using four digits to define years.  As a result, computer systems
and/or software used by many companies may have required upgrading to comply
with such "Year 2000" ("Y2K") requirements.

The century rollover to January 1, 2000 went extremely well for Hollywood
Entertainment Corporation.  All mission-critical systems performed as
anticipated.  The thousands of programs and applications that had been
remediated continued to function without interruption or failure as we moved
into the Year 2000.

Hollywood continues to monitor date-related systems matters.  Based upon the
performance of our programs, applications, and systems to date, we believe that
Y2K issues are no longer of any material concern to the Company and its
business.  The cost of the Y2K effort was approximately $1.2 million.


GENERAL ECONOMIC TRENDS, QUARTERLY RESULTS AND SEASONALITY

The Company anticipates that its business will be affected by general economic
and other consumer trends.  Future operating results may be affected by various
factors, including variations in the number and timing of new store openings,
the performance of new or acquired stores, the quality and number of new
release titles available for rental and sale, the expense associated with the
acquisition of new release titles, additional and existing competition,
marketing programs, weather, special or unusual events and other factors that
may affect retailers in general.  In addition, any concentration of new store
openings and the related new store pre-opening costs and other expenses
associated with the opening of new stores near the end of a fiscal quarter
could have an adverse effect on the financial results for that quarter and
could, in certain circumstances, lead to fluctuations in quarterly financial
results.

The video retail industry generally experiences relative revenue declines in
April and May, due in part to the change in Daylight Savings Time and due to
improved weather, and in September and October, due in part to the start of
school and the introduction of new television programs.  The Company believes
these seasonality trends will continue.
<PAGE>

FORWARD LOOKING STATEMENTS

The information set forth in this report, including without limitation in Item
1, Business, under the caption "Industry Overview" with respect to industry
consolidation "Business Strategy" with respect to future relationships,
expanding product opportunities and generation and use of cash, "Hollywood's
Internet Strategy" with respect to the future of Reel.com and the future of
electronic delivery of video, "Advertising and Marketing" with respect to
future advertising expenditures, "Competition" with respect to the future
viability of the video industry, "Expansion Strategy" with respect to planned
new store openings and in Item 7, Management's Discussion and Analysis of
Financial Condition and Results of Operations, under the caption "Liquidity and
Capital Resources" with respect to planned new store openings and the
sufficiency of financial resources includes "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934 and is subject to the safe harbors created by
those sections.  Certain factors that could cause results to differ materially
from those projected in the forward-looking statements are set forth in Item 1,
Business, under the captions "Expansion Strategy", "Hollywood's Internet
Strategy", "Competition", in Item 7, Management's Discussions and Analysis of
Financial Conditions and Results of Operations, under the caption "General
Economic Trends, Quarterly Results and Seasonality" and in Item 3, Legal
Proceedings.


ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Incorporated by reference to Item 14 of this report on Form 10-K.


ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

<PAGE>

                                   PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information with respect to directors of the Company is incorporated by
reference from the Company's definitive proxy statement, under the caption
"Nomination and Election of Board of Directors," for its 2000 annual meeting of
shareholders (the "2000 Proxy Statement") to be filed pursuant to Regulation
14A promulgated by the Securities and Exchange Commission under the Securities
Exchange Act of 1934, which proxy statement is anticipated to be filed no later
than 120 days after the end of the Company's fiscal year ended December 31,
1999.  Information with respect to executive officers of the Company is
included under Item 4(a) of Part I of this report.

ITEM 11.  EXECUTIVE COMPENSATION

Information required by this Item 11 is hereby incorporated by  reference
from the 2000 Proxy Statement.


ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information required by this Item 12 is hereby incorporated by  reference
from the 2000 Proxy Statement.


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

None.


                                    PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

Listed below are all financial statements, notes, schedules and exhibits filed
as part of this Annual Report on Form 10-K:

     (a)(1), (2) FINANCIAL STATEMENTS

The following financial statements of the Registrant, together with the Report
of Independent Accountants dated March 1, 2000, on pages F-1 to F-21 of this
report on Form 10-K are filed herewith:

(i)  Financial Statements

Report of Independent Accountants

Consolidated Balance Sheets as of December 31, 1999 and 1998

Consolidated Statements of Operations for the years ended December 31, 1999,
1998 and 1997

Consolidated Statements of Changes in Shareholders' Equity for the years ended
December 31, 1999, 1998 and 1997

Consolidated Statements of Cash Flows for the years ended December 31, 1999,
1998 and 1997

Notes to Consolidated Financial Statements

(ii)  FINANCIAL SCHEDULES

All financial schedules are omitted as the required information is inapplicable
or the information is presented in the respective consolidated financial
statements or related notes.

(a) (3)    Exhibits

The  following exhibits are filed with or incorporated by reference  into
this Annual Report:
<PAGE>

EXHIBIT
NUMBER         DESCRIPTION

3.1      1993B Restated Articles of Incorporation, as amended  (incorporated
         by reference to the Registrant's Registration Statement on Form S-1
         (File No. 33-63042)(the "Form S-1"), by reference to Exhibit 4 to the
         Registrant's Registration Statement on Form S-3 (File No. 33-96140),
         and by reference to Exhibit 3.1 to the Registrant's Quarterly Report
         on Form 10-Q for the quarter ended September 30, 1998.

3.2      1999 Restated Bylaws (incorporated by reference to Exhibit 3.2 to the
         Registrant's Registration Statement on Form S-4 (File No. 333-82937)
         (the "1999 S-4")).

10.1     Indenture, dated August 13, 1997, between the Registrant and U.S.
         Trust Company of California, N.A., as Trustee (incorporated by
         reference to Exhibit 4.1 to the Registration Statement on Form S-4
         (No.333-35351) (the "1997 S-4")), as supplemented by the First
         Supplemental Indenture, dated as of June 24, 1999, between the
         Registrant and the Trustee (incorporated by reference to Exhibit 4.2
         of the 1999 S-4) and the Second Supplemental Indenture, dated as of
         January 20, 2000, between the Registrant and the Trustee.

10.2     1993 Stock Incentive Plan, as amended (incorporated by reference
         to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for
         the quarter ended June 30, 1997).

10.3     Form of Incentive Stock Option Agreement (incorporated by
         reference to Exhibit 10.1 of the Form S-1).

10.4     Form of Nonqualified Stock Option Agreement (incorporated by
         reference to Exhibit 10.3 of the Form S-1).

10.5     Revolving Credit Agreement, dated as of September 5, 1997, among
         the Registrant, as Borrower, and Societe Generale, DLJ Capital
         Funding, Inc. Goldman Sachs Credit Partners L.P. and certain other
         financial institutions, as Lenders, and Societe Generale, as Agent
         for the Lenders, Donaldson, Lufkin & Jenrette Securities Corporation,
         as Administrative Agent, Goldman Sachs Credit Partners, L.P., as
         Documentation Agent, and Credit Lyonnais Los Angeles Branch, Barclays
         Bank PLC, Deutsche Bank AG, New York Branch, U.S. Bank National
         Association and KeyBank National Association, as Co-Agents
         (incorporated by reference to Exhibit 10.1 of the 1997 S-4), as
         amended by a Second Amendment Agreement dated as of March 1, 1999
         (incorporated by reference to Exhibit 10.1 of the Registrant's
         Quarterly Report on Form 10-Q for the quarter ended March 31, 1999),
         the Fourth Amendment entered into as of November 22, 1999 and the
         Fifth Amendment entered as of March 22, 2000.

10.6     Employment letter between the Registrant and Jeffrey B. Yapp,
         dated July 31, 1997 (incorporated by reference to Exhibit 10.7 to the
         Registrant's Annual Report on Form 10-K for the year ended  December
         31, 1997). *

21.1     List of Subsidiaries.

23.1     Consent of PricewaterhouseCoopers LLP.

27.1     Financial Data Schedule.


               (b) REPORTS ON FORM 8-K:

         None filed during the fourth quarter of 1999.

               *Management Contract.
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders of Hollywood Entertainment
Corporation

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of changes in shareholders' equity and
of cash flows present fairly, in all material respects, the financial position
of Hollywood Entertainment Corporation and its subsidiaries at December 31,
1999 and 1998, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1999, in conformity
with accounting principles generally accepted in the United States. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits.  We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States, which require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement.  An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation.  We believe that our audits provide a reasonable basis
for the opinion expressed above.

As discussed in Note 4 of the consolidated financial statements, the Company
changed its amortization method for videocassette rental inventory in 1998.


PricewaterhouseCoopers LLP

Portland, Oregon
March 1, 2000

<PAGE>

<TABLE>
<CAPTION>

                      HOLLYWOOD ENTERTAINMENT CORPORATION
                          CONSOLIDATED BALANCE SHEETS
                     (In thousands, except share amounts)
                                       ---------------------------
                                       December 31,   December 31,
                                           1999         1998
                                       ------------   ------------
<S>                                    <C>            <C>
ASSETS
Current assets:
Cash and cash equivalents                    $ 6,941      $ 3,975
Accounts receivable                           42,679       40,862
Merchandise inventories                       84,373       58,083
Income taxes receivable                        1,797            -
Prepaid expenses and other current
 assets                                       10,377       12,138
                                        ------------   ----------
Total current assets                         146,167      115,058
Rental inventory, net                        339,912      259,255
Property and equipment, net                  382,345      328,182
Goodwill, net                                145,504      187,607
Deferred income tax asset                     52,691       35,513
Other assets, net                             13,558       10,715
                                        ------------   ----------
                                         $ 1,080,177    $ 936,330
                                        ============   ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term
 obligations                             $    14,493    $   8,418
Accounts payable                             111,578      107,865
Accrued expenses                              64,566       34,664
Accrued revenue sharing                        9,402       13,500
Accrued interest                              11,865        9,693
Income taxes payable                               -        5,739
                                         -----------   ----------
Total current liabilities                    211,904      179,879
Long-term obligations, less current
 portion                                     519,413      383,727
Other liabilities                             44,331       25,133
                                         -----------   ----------
                                             775,648      588,739
Shareholders' equity:
 Preferred stock, 19,500,000 shares
 authorized; no shares issued and
 outstanding                                       -            -
Common stock, 100,000,000 shares
 authorized; and 45,821,537 and
 44,933,055 shares issued
 and outstanding, respectively               362,307      354,067
Retained deficit                             (57,778)      (6,476)
                                        ------------   ----------
Total shareholders' equity                   304,529      347,591
                                        ------------   ----------
                                         $ 1,080,177    $ 936,330
                                        ============   ==========
</TABLE>

                See notes to consolidated financial statements.

<PAGE>

<TABLE>
<CAPTION>
                      HOLLYWOOD ENTERTAINMENT CORPORATION
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                   (In thousands, except per share amounts)

                                          Twelve Months Ended
                                               December 31,
                                  -------------------------------------
                                      1999         1998         1997
                                  -----------   ----------   ----------
<S>                                <C>          <C>          <C>
 Rental revenue                     $ 893,491    $ 633,140    $ 418,527
 Product sales                        203,350      130,768       81,974
                                  -----------   ----------   ----------
                                    1,096,841      763,908      500,501
                                   ----------   ----------   ----------
Cost of Revenue:
 Cost of rental                       278,890      271,778      122,014
 Cost of product                      154,990       87,799       53,471
                                   ----------   ----------   ----------
                                      433,880      359,577      175,485
                                   ----------   ----------   ----------
Gross Profit                          662,961      404,331      325,016
Operating costs and expenses:
 Operating and selling                522,682      382,728      244,946
 General and administrative            85,873       37,543       50,572
 Amortization of intangibles           56,919       18,611        6,195
 Purchased in-process research
   and development                          -        1,900            -
                                   ----------   ----------    ---------
                                      665,474      440,782      301,713
                                   ----------   ----------    ---------
Income (loss) from operations          (2,513)     (36,451)      23,303

Nonoperating income (expense):
 Interest income                          214          141          342
 Interest expense                     (45,691)     (33,355)     (14,302)
                                   ----------   ----------    ---------
Income (loss) before income taxes,
 extraordinary loss
 and cumulative effect adjustment     (47,990)     (69,665)       9,343
(Provision for) benefit from
 income taxes                          (1,868)      19,201       (3,784)
                                   ----------   ----------    ---------
Income (loss) before cumulative
 effect of a change in
 accounting principle and
 extraordinary loss on
 extinguishment of debt               (49,858)     (50,464)      5,559
Cumulative effect of a change in
 accounting principle
(net of income tax benefit
 of $983)                              (1,444)           -           -
Extraordinary loss on
 extinguishment of debt (net of
 income tax benefit of $372)                -            -        (563)
                                   ----------   ----------   ---------
Net income (loss)                  $  (51,302)   $ (50,464)   $  4,996
                                   ==========   ==========   =========
------------------------------------------------------------------------
Net income (loss) per share
 before cumulative effect of
 a change in accounting principle
 and extraordinary loss on
 extinguishment of debt:
   Basic                            $   (1.09)  $   (1.30)    $  0.15
   Diluted                              (1.09)      (1.30)       0.15
-------------------------------------------------------------------------
Net income (loss) per share:
   Basic                            $   (1.13)  $   (1.30)    $  0.14
   Diluted                              (1.13)      (1.30)       0.13
-------------------------------------------------------------------------
Weighted average shares
 outstanding:
   Basic                               45,592      38,844      36,659
   Diluted                             45,592      38,844      37,718
-------------------------------------------------------------------------
</TABLE>
                See notes to consolidated financial statements.

<PAGE>
<TABLE>
<CAPTION>

                      HOLLYWOOD ENTERTAINMENT CORPORATION
           CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
                     (In thousands, except share amounts)

                                    Common Stock         Retained
                                ---------------------    Earnings
                                  Shares       Amount    (Deficit)    Total
                                ----------    --------    -------    --------
<S>                             <C>           <C>         <C>        <C>
Balance at December 31, 1996    36,006,201    $238,021    $38,992    $277,013
Issuance of common stock:
 Public offerings, net             300,000       4,695          -       4,695
 Stock options exercised           480,195       3,712          -       3,712
 Tax benefit from stock options          -       1,522          -       1,522
Net income                               -           -      4,996       4,996
                                ----------    --------    -------    --------
Balance at December 31, 1997    36,786,396     247,950     43,988     291,938
                                ----------    --------    -------    --------
Issuance of common stock:
 Stock options exercised           633,859       4,376          -       4,376
 Tax benefit from stock options          -       2,563          -       2,563
 Reel.com acquisition            4,000,000      42,760          -      42,760
 Sold to Reel.com affiliates     1,982,537      26,764          -      26,764
 Conversion of preferred stock
  to common stock                2,380,263      29,324          -      29,324
 Stock options issued for
  Reel.com acquisition                   -      10,840          -      10,840
Common stock repurchases          (850,000)    (10,510)         -     (10,510)
Net loss                                 -           -    (50,464)    (50,464)
                               -----------    --------    --------   --------
Balance at December 31, 1998    44,933,055     354,067     (6,476)    347,591
                               -----------    --------    --------   --------
Issuance of common stock:
 Stock options exercised           888,482       4,392          -       4,392
 Tax benefit from stock options          -       3,848          -       3,848
Net loss                                 -           -    (51,302)    (51,302)
                                ----------    --------   ---------   --------
Balance at December 31, 1999    45,821,537    $362,307   $(57,778)   $304,529
                                ==========    ========   =========   ========
</TABLE>

                See notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
                      HOLLYWOOD ENTERTAINMENT CORPORATION
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (In thousands)

                                        ------------------------------------
                                                 Year Ended December 31,
                                                1999       1998      1997
                                        ------------------------------------
<S>                                      <C>           <C>         <C>
Operating activities:
 Net income (loss)                        $ (51,302)    $(50,464)   $  4,996
 Adjustments to reconcile net
  income (loss) to cash provided
   by operating activities:
 Cumulative effect of a change
  in accounting principle                     1,444            -          -
 Extraordinary loss on
  extinguishment of debt                          -            -        563
 Depreciation and amortization              222,842      195,387    139,705
 Amortization of deferred financing
  costs                                       1,936        1,462        496
 Inventory valuation charge                       -       99,910          -
 Write-off of purchased in-process
  research and development                        -        1,900          -
 Change in deferred rent                      3,565        3,961      3,467
 Change in deferred income taxes             (1,545)     (27,236)    (1,985)
 Net change in operating assets
  and liabilities:
   Accounts receivable                       (1,817)      (1,071)   (13,781)
   Merchandise inventories                  (26,290)       3,749    (16,227)
   Accounts payable                           3,713       10,194     36,616
   Accrued interest                           2,172        1,437      7,843
   Accrued revenue sharing                   (4,098)      13,500          -
   Other current assets and
    liabilities                              22,683       (8,651)    13,263
                                           --------     --------   --------
     Cash provided by operating
       activities                           173,303      244,078    174,956
                                           --------     --------   --------
Investing activities:
 Purchases of rental inventory, net        (185,877)    (265,158)  (194,273)
 Purchase of property and
   equipment, net                          (112,258)    (132,122)  (139,709)
 Investment in businesses acquired          (17,434)     (40,804)         -
 Increase in intangibles and other
  assets                                     (4,769)        (327)    (4,138)
                                           --------     --------   --------
     Cash used in investing
      activities                           (320,338)    (438,411)  (338,120)
                                           --------     --------   --------
Financing activities:
 Proceeds from the sale of
  common stock, net                               -       45,398      4,695
 Issuance of long-term obligations           90,162            -    203,159
 Repayments of long-term obligations         (8,401)      (2,429)    (1,864)
 Repurchase of common stock                       -      (10,510)         -
 Tax benefit from exercise of
  stock options                               3,848        2,563      1,522
 Proceeds from exercise of stock
  options                                     4,392        4,376      3,712
 Increase (decrease) in revolving
  loan, net                                  60,000      155,001    (57,000)
                                           --------    ---------   --------
     Cash provided by financing
      activities                            150,001      194,399    154,224
                                           --------    ---------   ---------
Increase (decrease) in cash and
 cash equivalents                             2,966           66     (8,940)
Cash and cash equivalents at
 beginning of year                            3,975        3,909     12,849
                                           --------    ---------   --------
Cash and cash equivalents at end
  of year                                   $ 6,941      $ 3,975    $ 3,909
                                           ========    =========   ========
Other Cash Flow Information:
 Interest expense paid                     $ 42,896     $ 31,562   $  6,735
 Income taxes paid (refunded), net            5,741         (706)     7,282
</TABLE>

                See notes to consolidated financial statements.

<PAGE>

                      HOLLYWOOD ENTERTAINMENT CORPORATION
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                         DECEMBER 31, 1999, 1998, 1997

1.   SIGNIFICANT ACCOUNTING POLICIES

     Corporate Organization and Consolidation

 The accompanying financial statements include the accounts of Hollywood
 Entertainment Corporation and its wholly owned subsidiaries (the "Company").
 The Company's subsidiaries include Hollywood Management Company and Reel.com,
 Inc.. All significant intercompany transactions have been eliminated.

     Nature of the Business

 The Company operates a chain of video superstores ("Hollywood Video")
 throughout the United States and an internet retailer of video only
 products ("Reel.com").  The Company was incorporated in Oregon on June 2,
 1988 and opened its first store in October 1988. As of December 31, 1999 and
 1998, the Company operated 1,615 stores in 44 states and 1,260 stores in 42
 states, respectively.

     Use of Estimates in the Preparation of Financial Statements

 The preparation of financial statements in conformity with generally
 accepted accounting principles requires management to make estimates and
 assumptions that affect the reported amounts of assets and liabilities and
 disclosure of contingent assets and liabilities as of the date of the
 financial statements and the reported amounts of revenues and expenses during
 the reporting period. Actual results could differ from those estimates.
 Significant estimates relative to the Company include depreciation and
 amortization policies.

     Revenue Recognition

 The Company recognizes rental and product revenue related to the Hollywood
 Video segment at the point of rental or sale to the customer.  Additional
 fees on rentals are recognized when earned, net of allowances for
 uncollectible amounts based on historical experience.  The Company accrues
 for revenue sharing expenses at contractual rates at the point videocassettes
 are rented.  Such expenses are included as cost of rental in the accompanying
 statement of operations.  Revenue from the Reel.com segment for product
 sales, net of allowances and estimated returns, is recognized when the
 product is shipped to the customer.

     Cost of Rental

 Cost of rental includes revenue sharing expense and amortization of
 videocassettes.

     Cash and Cash Equivalents

 The Company considers highly liquid investment instruments, with an original
 maturity of three months or less, to be cash equivalents.

     Inventories

 Merchandise inventories, consisting primarily of prerecorded videocassettes,
 concessions, and other accessories held for resale, are stated at the lower
 of cost or market.  Cost of sales is determined using an average costing
 method.  Rental inventory, which includes videocassettes, video games, DVDs
 and audio books, is stated at cost and amortized over its estimated useful
 life to a specified salvage value.  See Note 4 for a discussion of the
 amortization policy applied to rental inventory and a discussion of the
 change in amortization method effective October 1, 1998.
<PAGE>

     Property, Equipment, Depreciation and Amortization

 Property is stated at cost and is depreciated on the straight-line method for
 financial reporting purposes over the estimated useful life of the assets,
 which range from approximately five to ten years.  Leasehold improvements
 are amortized primarily over the lesser of ten years or the
 term of the lease.

 Additions to property and equipment are capitalized and include
 acquisitions of property and equipment, costs incurred in the development and
 construction of new stores, major improvements to existing property and major
 improvements in management information systems.  As property and equipment is
 sold or retired, the applicable cost and accumulated depreciation and
 amortization are eliminated from the accounts and any gain or loss thereon is
 recorded.

 In 1998, the Company adopted Statement of Position 98-1 ("SOP 98-1"),
 which defines the types of costs that may be capitalized for internally
 developed computer software.  Accordingly, the Company capitalized $.3
 million and $1.5 million in 1999 and 1998, respectively.

     Long-Lived Assets

 The Company follows Statement of Financial Accounting Standards ("SFAS")
 No. 121, "Accounting for the Impairment of Long-Lived Assets."  The statement
 establishes accounting standards for the impairment of long-lived assets to
 be held and used, and for long-lived assets to be disposed.  Impairment of
 long-lived assets is recognized when events or changes in circumstances
 indicate that the carrying amount of the asset or related group of assets may
 not be recoverable.  Measurement of the amount of the impairment may be based
 on the market values of similar assets or estimated discounted future cash
 flows resulting from use and ultimate disposition of the asset.   Management
 has determined that there has been no material impairment to any long-lived
 assets as of December 31, 1999 and 1998.

     Treasury Stock

 In accordance with Oregon law, shares are automatically retired and
 classified as available for  issuance upon the repurchase of common stock.

     Income Taxes

 The Company calculates income taxes in accordance with SFAS No. 109,
 "Accounting for Income Taxes", which requires recognition of deferred tax
 liabilities and assets for the expected future tax consequences of events
 that have been included in the financial statements and tax returns.

     Deferred Rent

 Many of the Company's operating leases contain predetermined fixed
 increases of the minimum rental rate during the initial lease term.  For
 these leases, the Company recognizes the related rental expense on a
 straight-line basis and records the difference between the amount charged to
 expense and the rent paid as deferred rent.
<PAGE>

     Fair Value of Financial Instruments

 In accordance with SFAS No. 107, "Disclosure about Fair Value of Financial
 Instruments", the Company has disclosed the fair value, related carrying
 value and method for determining the fair value for the following financial
 instruments in the accompanying notes as referenced: cash and cash
 equivalents (see Note 1), accounts receivable (see Note 2), and long-term
 obligations (see Note 10).

     Comprehensive Income

 The Company adopted SFAS No. 130, "Reporting Comprehensive Income" as of
 January 1, 1998.  Comprehensive income is equal to net income (loss) for all
 periods presented.

     Advertising

 The Company receives cooperative reimbursements from vendors as eligible
 expenditures occur relative to the promotion of rental and sales product.
 Advertising costs, net of these reimbursements, are expensed as incurred.

     Segment Reporting

 The Company has adopted SFAS 131, "Disclosures about Segments of an
 Enterprise and Related Information" in 1998.  This statement establishes
 standards for reporting information about operating segments in annual
 financial statements and requires selected information about operating
 segments in interim financial reports issued to shareholders.  The Company
 has disclosed the information required by SFAS 131 in Note 17 to the
 Consolidated Financial Statements.

     Store Preopening Costs

 Store preopening costs, including store employee labor costs and
 advertising, incurred prior to the opening of a new store had been expensed
 during the first full month of a store's operation.  In April 1998, Statement
 of Position 98-5 (SOP 98-5), "Reporting on the Costs of Start-up Activities"
 was  finalized, which requires that costs incurred for start-up activities,
 such as store openings, be expensed as incurred.  The Company adopted SOP 98-
 5 effective January 1, 1999.  The cumulative effect of the change was to
 increase net loss by $1.4 million, net of tax.
<PAGE>


2.   ACCOUNTS RECEIVABLE

 Accounts receivable as of December 31, 1999 and 1998 consists of:

<TABLE>
<CAPTION>
                                         -----------------------
                                            1999         1998
                                         ----------   ----------
                                               (in thousands)
      <S>                                  <C>          <C>
      Construction receivables              $ 8,274     $ 9,234
      Additional rental fees                 15,218      17,884
      Marketing allowances                    8,863      10,677
      Other                                  10,324       3,067
                                         ----------   ---------
                                            $42,679     $40,862
                                         ==========   =========
</TABLE>

 The carrying amount of accounts receivable approximates fair value because of
 the short maturity of those receivables.



3.   RENTAL INVENTORY

 Rental inventory as of December 31, 1999 and 1998 consists of:

<TABLE>
<CAPTION>

                                   -------------------------
                                       1999           1998
                                   ----------     ----------
                                         (in thousands)
   <S>                             <C>            <C>
   Rental inventory                $  571,460      $ 450,593
   Less accumulated amortization     (231,548)      (191,338)
                                   ----------     ----------
                                   $  339,912      $ 259,255
                                   ==========      =========
</TABLE>

 Amortization expense related to rental inventory was $107.6 million,
 $135.3 million and $112.5 million in 1999, 1998 and 1997, respectively, and
 is included in cost of rental. As rental inventory is transferred to
 merchandise inventory and sold (previously viewed product), the applicable
 cost and accumulated amortization are eliminated from the accounts,
 determined on a first-in-first-out ("FIFO") basis applied in the aggregate
 based on monthly purchases. Any gain or loss thereon is recorded in the
 Company's consolidated statements of operations.

4.   CHANGE IN AMORTIZATION METHOD FOR RENTAL INVENTORY

 Effective October 1, 1998, Hollywood Video adopted a new method of
 amortizing videocassette rental inventory.  During the fourth quarter of
 1998, Hollywood Video acquired a majority of new video releases under revenue
 sharing arrangements with major studios, which the Company expects to
 continue in the future.  Revenue sharing allows the Company to acquire
 videocassettes at a lower product cost than the traditional buying
 arrangements, with a percentage of the net rental revenues shared with the
 studios over a contractually determined period of time.  The increased copy
 depth under revenue sharing arrangements satisfies the initial consumer
 demand for new releases over a shorter period of time.  As the new business
 model results in a significantly greater proportion of rental revenue
 received over a shorter period of time, the Company has changed its method of
 amortizing rental inventory in order to match expenses with the anticipated
 revenues to be generated therefrom.
<PAGE>


     Post-October 1, 1998 policy

 For tapes acquired under revenue sharing, as of October 1, 1998, it is the
 Company's policy to expense the studio's share of the revenue net of an
 estimated salvage value of $4 per videocassette. Revenue sharing expense is
 included in cost of rental in the accompanying statements of operations.

 Non-revenue sharing new release videocassettes acquired at a fixed price
 are amortized on an accelerated basis to an average net book value of $8 over
 four months and then to an estimated salvage value of $6 over the following
 56 months.

 Base stock videocassettes purchased at a fixed price for new store
 openings and filler stock are amortized straight-line over 60 months to an
 estimated $6 salvage value.

     Pre-October 1, 1998 policy

 Previous to October 1, 1998, non-revenue sharing new release videocassettes
 were amortized on an accelerated basis over 4 months to an average net book
 value of $15 and then on a straight-line basis to their estimated salvage
 value of $6 over the next 32 months.

 Base stock videocassettes were amortized on a straight-line basis to an
 estimated salvage value of $6 over 36 months.

 The new method of amortization has been applied to rental inventory held
 as of October 1, 1998.  The adoption of the new method of amortization has
 been accounted for as a change in accounting estimate effected by a change in
 accounting principle, and accordingly the Company recorded a pre-tax charge
 of $99.9 million, or $1.53 per diluted share, in the fourth quarter of 1998.
 The calculation of the change in operating expense attributable to
 videocassettes for periods prior to October 1, 1998 would not be meaningful
 because the new business model involving revenue sharing arrangements had not
 been implemented.  The change in estimate, effective October 1, 1998
 decreased net loss by $1.0 million, or $.03 per diluted share net of tax in
 the fourth quarter of 1998.

 Video Games

 Video games are amortized on an accelerated basis to approximately $14.50
 over the first twelve months and then to an estimated salvage value of $7
 over the following twelve months.


5.   PROPERTY AND EQUIPMENT

     Property and equipment as of December 31, 1999 and 1998 consists of:

<TABLE>
<CAPTION>
                                           ---------------------
                                              1999        1998
                                           ---------  ----------
                                              (in thousands)
        <S>                                <C>         <C>
        Fixtures and equipment             $ 146,318   $ 123,068
        Leasehold improvements               327,838     279,805
        Equipment under capital lease         16,058       3,426
        Leasehold improvements under
         capital lease                        35,258       7,167
                                           ---------  ----------
                                             525,472     413,466
        Less accumulated depreciation
         and amortization                   (143,127)    (85,284)
                                           ---------  ----------
                                           $ 382,345   $ 328,182
                                           =========  ==========
</TABLE>
<PAGE>

 Accumulated depreciation and amortization, as presented above, includes
 accumulated amortization of assets under capital leases of $8.0 million and
 $3.0 million at December 31, 1999 and 1998, respectively.


6.   GOODWILL

 Goodwill as of December 31, 1999 and 1998 consists of:
<TABLE>
<CAPTION>
                                     --------------------
                                        1999       1998
                                     ---------  ---------
                                       (in thousands)
          <S>                        <C>       <C>
          Goodwill                   $236,445   $222,004
          Less accumulated
            amortization              (90,941)   (34,397)
                                     --------  ---------
                                     $145,504   $187,607
                                     ========   ========
</TABLE>

 Goodwill represents the excess of cost over fair value of net assets
 purchased and is being amortized on a straight-line basis over 2 or 20 years.
 Goodwill in connection with store acquisitions is amortized over 20 years.
 Goodwill from the Reel.com acquisition is being amortized over 2 years.  The
 Company assesses the recoverability of store acquisition intangibles by
 determining whether the amortization of the goodwill over the remaining
 lives can be recovered through projected future operating results on an
 undiscounted basis.  The Company believes that there are no impaired
 intangible assets with respect to store acquisitions.


7.   ACQUISITIONS

     Reel.com

 On October 1, 1998, the Company completed the merger of Reel.com with and
 into Hollywood Entertainment Corporation.  At the closing, the Company
 acquired all the outstanding shares of Reel.com for $32.7 million in cash and
 4,000,000 shares of Common Stock and 1,000,000 shares of Series A Redeemable
 Preferred Stock.  Both common and preferred shares were valued at $10.69 per
 share, representing a 10% discount from the October 1, 1998 closing price.
 In addition, the Company assumed Reel.com's incentive stock option plan and
 converted all outstanding Reel.com stock options into options to acquire the
 Company's Common Stock. Options for a total of 958,568 shares were assumed
 in connection with the acquisition (the options granted were valued at $11.31
 per share using the Black-Scholes option valuation model).

 Concurrent with the acquisition of Reel.com, the Company sold 1,982,537
 shares of Common Stock and 1,380,263 shares of Series A Redeemable Preferred
 Stock at a price of $13.50 per share to certain shareholders and affiliates
 of Reel.com.

 The Series A Redeemable Preferred Stock was converted into Common Stock on
 a one for one basis upon shareholder approval on December 30, 1998.

 The acquisition of Reel.com for approximately $96.9 million has been
 accounted for under the purchase method of accounting.  The financial
 statements reflect the allocation of the purchase price and assumption of
 Reel.com's liabilities and include the operating results from the date of
 acquisition.
 <PAGE>

 The following sets forth the reconciliation of the cash paid (in
 thousands) for Reel.com, Inc.:
<TABLE>
         <S>                                       <C>
            Fair value of assets acquired           $   3,634
            Goodwill                                  100,349
            Purchased research and development          1,900
            Value of stock issued                     (53,450)
            Value of stock options issued             (10,840)
            Liabilities assumed                        (8,934)
                                                    ---------
         Cash paid, including transaction costs,
          net of cash received                      $  32,659
                                                    =========
</TABLE>

 The value of stock options issued was determined using the Black-Scholes
 stock option pricing model.  Goodwill is being amortized over the estimated
 useful life of 2 years.

 The following unaudited pro forma information presents the results of the
 Company's operations assuming the Reel.com acquisition occurred at the
 beginning of each period presented (in thousands, except per share data):

<TABLE>
<CAPTION>
                                       Year Ended December 31,
                                      ------------------------
                                         1998          1997
                                      ----------    ----------
          <S>                         <C>           <C>
          Total revenue               $  773,812    $  502,033
          Net loss                       (97,306)      (46,247)
          Net loss per share:
             Basic                         (2.16)        (1.03)
             Diluted                       (2.16)        (1.03)
</TABLE>

 The pro forma financial information is not necessarily indicative of the
 operating results that would have occurred had the Reel.com acquisition been
 consummated as of the beginning of each period, nor is it necessarily
 indicative of future operating results.

     Store Acquisitions

 During 1999, the Company acquired the operations and assets of 49 video
 superstores for an aggregate purchase price of $17.4 million.  The
 acquisitions were accounted for under the purchase method of accounting.
 Approximately $14.6 million was allocated to Goodwill and is being amortized
 over the estimated useful life of 20 years.  The results of operations for
 these acquisitions do not have a material effect on the consolidated
 operating results and therefore are not included in the proforma data
 presented.

 During 1998, the Company acquired the operations and assets of 41 video
 superstores located in New York (11) and Florida (30) for an aggregate
 purchase price of $14.1 million.  $6.0 million of the purchase price was paid
 with a note payable bearing interest at 10.0% per annum due April 1, 1999,
 and the remainder was paid in cash.  The acquisitions were accounted for
 under the purchase method of accounting.  Approximately $9.8 million was
 allocated to Goodwill and is being amortized over the estimated useful life
 of 20 years.  The results of operations for these acquisitions do not have a
 material effect on the consolidated operating results and therefore are not
 included in the pro forma data presented above.
<PAGE>

8.   OPERATING LEASES

The Company leases all of its stores, corporate offices, distribution center
and zone offices under non-cancelable operating leases.  All of the Company's
stores have an initial operating lease term of five to 15 years and most have
options to renew for between five and 15 additional years.  Most operating
leases require payment of property taxes, utilities, common area maintenance
and insurance.  Total rent expense, including related lease-required costs,
incurred during 1999, 1998, and 1997 was $201.6 million, $154.8 million and
$96.0 million, respectively.

At December 31, 1999, the future minimum annual rental commitments under non-
cancelable operating leases were as follows:


               ------------------------------
                                   Operating
               Year Ending          Leases
               December 31,     (in thousands)
               ------------------------------
               2000               $194,626
               2001                190,440
               2002                186,587
               2003                184,237
               2004                178,631
               Thereafter          742,234


9.   EMPLOYEE BENEFIT PLANS

 The Company is self-insured for employee medical benefits under the
 Company's group health plan.  The Company maintains stop loss coverage for
 individual claims in excess of $100,000 and for annual Company claims which
 exceed approximately $3.0 million in the aggregate.  While the ultimate
 amount of claims incurred is dependent on future developments, in
 management's opinion, recorded reserves are adequate to cover the future
 payment of claims. Adjustments, if any, to recorded estimates resulting from
 ultimate payments will be reflected in operations in the period in which such
 adjustments are known.

 Beginning January 1, 1998, the Company added a 401(k) plan in which
 eligible employees may elect to contribute up to 15% of their earnings.
 Eligible employees who are at least 21 years of age, have completed at least
 one year of service and work at least 1,000 hours in a year.  The Company did
 not make any matching contributions to the 401(k) plan in 1999 or 1998.

 The Company does not maintain any other retirement plans nor offer any
 form of post-retirement benefits.
<PAGE>


10.  LONG-TERM OBLIGATIONS

 The Company had the following long-term obligations as of December 31,
 1999 and 1998:

<TABLE>
<CAPTION>
                                          ------------------------
                                             1999         1998
                                          ---------    -----------
                                               (in thousands)
         <S>                              <C>           <C>
          Senior subordinated notes       $ 250,000      $ 200,000
          Borrowings under bank
            revolving credit agreement      240,000        180,000
          Obligations under capital          43,886          6,111
            leases
          Other                                  20          6,034
                                          ---------     ----------
                                            533,906        392,145
          Less current obligations           14,493          8,418
                                          ---------     ----------
                                          $ 519,413      $ 383,727
                                          =========     ==========
</TABLE>


 In August 1997, the Company issued $200 million principal amount of
 10.625% senior subordinated notes (the "Notes") due August 15, 2004. The
 proceeds received from the sale of the Notes, net of offering costs of $6.8
 million, were used to repay the entire outstanding indebtedness under the
 then existing bank revolving loan.  The Company recorded a charge for the
 write-off of the remaining deferred financing costs related to the
 indebtedness repaid as an extraordinary loss of $0.6 million, net of related
 income tax benefit of $0.4 million, in 1997.

 In June 1999, the Company issued an additional $50 million principal amount
 of 10.625% senior subordinated notes under substantially the same terms as
 the original $200 million.  Proceeds were used to repay a portion of its
 indebtedness outstanding under its senior revolving credit agreement.

 The Notes are redeemable, at the option of the Company, after August 14,
 2001 at rates starting at 105.313% of principal amount reduced annually
 through August 15, 2003, at which time they become redeemable at 100% of the
 principal amount.  In addition, at any time prior to August 15, 2000, the
 Company may redeem in the aggregate up to 35% of the original principal
 amount of the Notes with the proceeds of one or more public equity offerings,
 at a redemption price of 110.625% of principal amount. The terms of the Notes
 may restrict, among other things, the payment of dividends and other
 distributions, investments, the repurchase of capital stock and the making of
 certain other restricted payments by the Company, the incurrence of
 additional indebtedness by the Company or any of its subsidiaries, and
 certain mergers, consolidations and disposition of assets.  Additionally, if
 a change of control occurs, as defined, each holder of the Notes will have
 the right to require the Company to repurchase such holder's Notes at 101% of
 principal amount thereof.

 The Company is limited in the amount of cash dividends that it can pay and
 the amount of common stock and subordinated indebtedness that it may
 repurchase by applicable covenants contained in the Notes.
<PAGE>


 In September 1997, the Company entered into a senior revolving credit
 agreement which provides for the availability of up to $300 million in
 aggregate extension of credit. The outstanding balance is due and payable on
 September 5, 2002.  Revolving credit loans under the credit agreement bear
 interest, at the Company's option, at an applicable margin  over  the bank's
 base rate loan or the IBOR rate.   The applicable margin is based  upon the
 ratio of consolidated indebtedness to consolidated adjusted EBITDA, as
 defined below.  The credit agreement also provides for a commitment fee of
 1/2% of any unused portion of the credit agreement. Among other restrictions,
 the credit agreement contains financial covenants relating to specified
 levels of: indebtedness to income from operations before depreciation and
 amortization plus non-cash expenses that reduced EBITDA, less the cost of
 acquiring new release videocassettes and game inventory which are capitalized
 (adjusted EBITDA); adjusted EBITDA less taxes paid in cash to interest
 expense; maintenance of average store contribution levels; and the
 maintenance of minimum tangible net worth.  Amounts outstanding under the
 credit agreement are collateralized by substantially all of the assets of the
 Company.

 The Company was not in compliance with the net leverage ratio as of
 December 31, 1999 due to the $25.4 million charge associated with the
 settlement of the Rentrak and Fox lawsuits (see Note 15 to the Consolidated
 Financial Statements).  The Company has however, obtained a waiver from the
 banks with respect to this covenant specified in the revolving credit
 agreement.

 As of December 31, 1999, the fair value of the Notes was $231.6 million.
 The fair value of the Notes was based on quoted market prices as of December
 31, 1999.  The revolving credit facility is a variable rate loan, and thus,
 the fair value approximates the carrying amount as of December 31, 1999.

 At December 31, 1999, maturities on long-term obligations for the next five
 years were as follows:

<TABLE>
<CAPTION
                    -----------------------------
                    Year Ending
                    December 31,      Amount
                    ---------------------------
                              (in thousands)
                    <S>            <C>
                    2000           $  14,493
                    2001              11,065
                    2002             254,749
                    2003               3,599
                    2004             250,000
                    Thereafter             -
                                 -----------
                                  $  533,906
                                 ===========
</TABLE>
<PAGE>

11.  INCOME TAXES

 The provision for (benefit from) income taxes for the years ended December
 31, 1999, 1998 and 1997 consists of:

<TABLE>
<CAPTION>

                                      ------------------------------
                                          1999      1998      1997
                                      ----------  --------  --------
                                              (in thousands)
        <S>                           <C>         <C>       <C>
        Current:
         Federal                        $  2,802         -  $  1,581
         State                             1,064       983       218
                                      ----------  --------  --------
         Total current provision           3,866       983     1,799

        Deferred:
         Federal                          (2,450)  (17,281)     1,468
         State                               452    (2,903)       517
                                      ----------  --------  ---------
         Total deferred liability
           (benefit)                      (1,998)  (20,184)     1,985
                                      ----------  --------  ---------
         Total provision (benefit)       $ 1,868  $(19,201)  $  3,784
                                      ==========  ========= =========
</TABLE>

 The Company is subject to minimum state taxes in excess of statutory state
 income taxes in many of the states in which it operates.  These taxes are
 included in the current provision for state and local income taxes.  Certain
 acquisitions in 1995 and the Reel.com acquisition in 1998 yielded
 nondeductible goodwill which is reflected in the tax rate reconciliation
 below.  The tax impact of purchase accounting adjustments is reflected in
 deferred taxes.  A reconciliation of the statutory federal income tax rate
 with the Company's effective income tax rate is as follows:

<TABLE>
<CAPTION>
                                               --------------------------
                                                 1999      1998     1997
                                               --------  -------  -------
       <S>                                      <C>       <C>      <C>
       Statutory federal rate
        (benefit)                               (34.0%)   (34.0%)   34.0%
       State income taxes, net of
        federal income
        tax benefit                               2.1      (1.8)     5.5
       Amortization of nondeductible
        goodwill                                 35.7       6.9        -
       Other, net                                  .1       1.3      1.0
                                               -------   -------  -------
                                                  3.9%    (27.6%)   40.5%
                                               =======   =======  =======

</TABLE>

Deferred income taxes reflect the impact of "temporary differences" between
amounts of assets and liabilities for financial reporting purposes and such
amounts as measured by tax laws.  The tax effects of temporary differences that
give rise to significant portions of deferred tax assets and liabilities at
December 31 are as follows:
<PAGE>

<TABLE>
<CAPTION>
                                                ----------------------
                                                    1999       1998
                                                ----------  ----------
        <S>                                     <C>         <C>
        Deferred tax assets:
          Tax loss carryforward                  $  29,428   $ 26,618
          Deferred rent                              7,037      5,589
          Financial leases                           5,903      3,883
          Income deferred for financial
           Statement purposes                        1,861      2,308
          Tax credit carryforward                    4,031      1,906
          Financial statement expenses
           deferred
           for tax purposes                            676        784
          Accrued legal settlement                   9,835          -
          Other                                         25         24
                                                ----------   --------
          Total deferred tax assets                 58,796     41,112
          Valuation allowance                       (6,105)    (5,599)
                                                ----------   --------
          Net deferred tax assets                   52,691     35,513
                                                ----------  ---------
        Deferred tax liabilities:
          Depreciation and amortization            (22,894)    (8,227)
          Capitalized leases                        (3,745)    (2,778)
          Tax expenses deferred for
           financial statement purposes               (247)      (248)
                                                ----------   --------
          Total deferred tax liabilities           (26,886)   (11,253)
                                                ----------   --------
        Net deferred tax asset (liability)        $ 25,805   $ 24,260
                                                ==========  =========
</TABLE>

At December 31, 1999, the Company had approximately $73.6 million of net
operating loss carryforwards available to reduce future income taxes,
representing operating losses of Hollywood Entertainment, Reel.com and Title
Wave, a company acquired during 1995 through a stock purchase.  The Company
expects to fully utilize Hollywood Entertainment, post acquisition Reel.com and
Title Wave losses in future years and thus no valuation allowance has been
recorded. The Company has provided a valuation allowance for pre-acquisition
losses of Reel.com.  The carryforward periods expire in years 2009 through
2019. The Company has federal Alternative Minimum Tax ("AMT") credit
carryforwards of $4.0 million which are available to reduce future regular
taxes in excess of AMT.  These credits have no expiration date.

The Company may realize tax benefits as a result of the exercise of certain
employee stock options.  For financial reporting purposes, any reduction in
income tax obligations as a result of these tax benefits is credited to
shareholders' equity.

12.  SHAREHOLDERS' EQUITY

 Preferred Stock

 At December 31, 1999 the Company is authorized to issue 19,500,000 shares
 of preferred stock in one or more series.  The Board of Directors has
 authority over the designations, preferences, special rights, limitations or
 restrictions thereof as it may determine.  The Company issued and sold a
 total of 2,380,263 shares of Series A Redeemable Preferred Stock in
 connection with the Reel.com acquisition.  These shares were converted into
 Common Stock on a one for one basis upon shareholder approval on December 30,
 1998.

     Common Stock

 During 1998, the Company repurchased 850,000 Common Shares on the open
 market for $10.5 million.

 In October 1998, the Company exchanged and sold a total of 8,362,800
 shares of its Common Stock in connection with the acquisition of Reel.com as
 discussed in Note 7.  This amount includes the Preferred Shares converted to
 Common Stock discussed above.
<PAGE>


 In December 1996, the Company completed a public offering of 2,000,000
 shares of its common stock. The net proceeds from the offering were
 approximately $34.7 million.  Additionally, in January 1997, the
 underwriters purchased an additional 300,000 shares pursuant to the
 overallotment option for net proceeds to the Company of approximately $4.7
 million.


13.   STOCK OPTION PLANS

 In general, the Company's stock option plans provide for the granting of
 options to purchase Company shares at the market price of such shares as of
 the option grant date.  The options generally have a nine year term and
 become exercisable on a pro rata basis over five years.  The Company adopted
 stock option plans in 1993 and 1997 providing for the granting of non-
 qualified stock options, stock appreciation rights, bonus rights and other
 incentive grants to employees up to an aggregate of 10,000,000 shares of
 common stock.  The 1997 plan provides for the granting of nonqualified stock
 options to employees up to an aggregate of 2,000,000 shares of common stock.
 The Company granted non-qualified stock options pursuant to the 1993 and the
 1997 Plans totaling 2,804,925, 5,347,269 and 2,165,513 in 1999, 1998 and
 1997, respectively.

 The Company has elected to follow APB No. 25;  "Accounting for Stock
 Issued to Employees" ("APB 25"), and related interpretations in accounting
 for its employee stock options.  Under APB 25, because the exercise price of
 the Company's employee stock options equals the market price of the
 underlying  stock on the date of the grant, no compensation expense is
 recognized.  Pro forma information regarding net income per share is required
 by SFAS No. 123, "Accounting for Stock-Based Compensation", and has been
 determined as if the Company had accounted for its employee stock options
 under the fair value method of that statement.  The fair value of these
 options was estimated at the date of grant using Black-Scholes option pricing
 model with the following weighted-average assumptions for 1999, 1998 and
 1997:

<TABLE>
<CAPTION>
                                    -----------------------------
                                        1999    1998     1997
                                    -----------------------------
     <S>                             <C>       <C>      <C>
      Risk free interest rate           6.33%   4.5%     5.7%
      Expected dividend yield           0%      0%       0%
      Expected lives                  5 years  5 years  5 years
      Expected volatility               85%     75%      65%
</TABLE>

 The Black-Scholes option valuation model was developed for use in
 estimating the fair value of traded options which have no vesting
 restrictions and are fully transferable.  Because the Company's employee
 stock options have characteristics significantly different from those of
 traded options, and because changes in the subjective input assumptions can
 materially affect the fair value estimate, in the Company's opinion the
 existing available models do not necessarily provide a reliable single
 measure of the fair value of the Company's employee stock options.

 Using the Black-Scholes option valuation model, the weighted average grant
 date value of options granted during 1999, 1998 (excluding the options
 assumed in connection with the Reel.com acquisition) and 1997 was $9.95,
 $6.77, and $10.10 per option, respectively.  Options issued in connection
 with the  Reel.com acquisition totaled 958,568 and had an aggregate fair
 market value of $10.8 million at the closing date using the Black-Scholes
 option valuation model.

 For the purpose of pro forma disclosures, the estimated fair value of the
 options is amortized over the option's vesting period. The value of options
 issued in connection with the Reel.com acquisition are excluded from the
 proforma disclosure as the value of these options was part of the acquisition
 purchase price.
<PAGE>

     The Company's pro forma information is as follows:

<TABLE>
<CAPTION>

                                             December 31,
                  ------------------------------------------------------------
                           1999                 1998                1997
                  --------------------  -------------------- ------------------
                                Pro                  Pro                Pro
                   Reported    Forma     Reported   Forma    Reported  Forma
                  ---------  ---------  ---------  --------- -------- ------
<S>               <C>        <C>        <C>        <C>        <C>     <C>
Net income
 (loss)           $(51,302)  $(57,665)  $(50,464)  $(53,583)  $4,996  $1,459
Earnings (loss)
 per Share:
  Basic              (1.13)     (1.26)     (1.30)     (1.38)    0.14    0.04
  Diluted            (1.13)     (1.26)     (1.30)     (1.38)    0.13    0.04

</TABLE>

 Options to purchase 2,300,344 shares of common stock were not included in the
 computation of pro forma diluted earnings per share for December 31, 1999, as
 such shares were anti-dilutive.

 The pro forma effect on net income for 1999, 1998 and 1997 is not
 representative of the pro forma effect on net income in future years because
 it does not take into consideration pro forma compensation expense related to
 grants made prior to 1996.

 A summary of the Company's stock option activity and related information for
 1999, 1998 and 1997 is as follows (in thousands, except per share amounts):

<TABLE>
<CAPTION>
                                                    Weighted
                                                     Average
                                                     Exercise
                                            Shares     Price
                                          ---------  --------
     <S>                                  <C>        <C>
      Outstanding at December 31, 1996       4,040     9.25
        Granted                              2,165    16.35
        Exercised                             (480)    7.74
        Cancelled                             (587)   11.79
                                          ---------  --------
      Outstanding at December 31, 1997       5,138    12.09
        Granted (1)                          5,347     8.55
        Exercised                             (633)    7.39
        Cancelled                           (2,392)   13.79
                                          ---------  --------
      Outstanding at December 31, 1998       7,460     9.40
        Granted                              2,805     14.05
        Exercised                             (889)     5.24
        Cancelled                           (1,189)     9.13
                                          ---------  --------
      Outstanding as December 31, 1999       8,187     11.49
                                          =========  ========
</TABLE>

  (1)  Includes 958,568 stock options issued in connection with the Reel.com
       acquisition.  See Note 7.

<PAGE>
A  summary  of options outstanding and exercisable at December 31, 1999  is  as
follows (in thousands, except per share amounts):

<TABLE>
<CAPTION>

           --------------------------------------------------------------
                 Options Outstanding           Options Exercisable
           --------------------------------------------------------------
                            Weighted
                             Average    Weighted                 Weighted
                           Remaining    Average                   Average
  Range of       Number         Life    Exercise    Number       Exercise
Exercise Prices Outstanding (in years)   Price    Exercisable      Price
-------------------------------------------------------------------------
<S>                <C>        <C>       <C>           <C>       <C>
$ 0.56 - $6.50       852      5.74      $ 4.31        492       $  4.50
  6.84 - 9.25      1,363      6.64        8.35        460          8.06
  9.50 - 10.44     1,416      7.58       10.14        402         10.17
 10.50 - 15.00     3,474      7.98       12.71        529         12.65
 15.06 - 28.625    1,082      7.05       18.98        273         18.62
                 --------  -------    --------     ------       -------
                   8,187      7.33      $11.49      2,156       $ 10.11
                 ========  =======    ========     ======       =======

</TABLE>


14.  EARNINGS PER SHARE

A  reconciliation of the basic and diluted per share computations for 1999,
1998 and 1997 is as follows (in thousands, except per share data):

<TABLE>
<CAPTION>

                                    ------------------------------------
                                                    1999
                                    ------------------------------------
                                                    Weighted       Per
                                          Income     Average      Share
                                          (Loss)      Shares      Amount
                                      ----------   ---------    ---------
<S>                                   <C>           <C>        <C>
Income (loss) before
 extraordinary item and
 cumulative effect adjustment          $ (49,858)     45,592    $  (1.09)
Extraordinary loss, net of tax                 -           -           -
Cumulative effect
adjustment, net of tax                    (1,444)          -       (0.04)
                                      ----------    --------   ---------
Income (loss) per common share         $ (51,302)     45,592    $  (1.13)

Effect of dilutive securities:
Stock options                                  -           -           -
                                      ----------    --------   ---------
Income (loss) per share-
 assuming  dilution                    $ (51,302)     45,592    $  (1.13)
                                      ==========    ========   =========
</TABLE>

<TABLE>
<CAPTION>

                                      ------------------------------------
                                                       1998
                                      ------------------------------------
                                                     Weighted        Per
                                        Income        Average       Share
                                        (Loss)        Shares        Amount
                                      ----------    ---------    ---------
<S>                                   <C>           <C>         <C>
Income (loss) before
 extraordinary item and
 cumulative effect adjustment          $ (50,464)     38,844    $  (1.30)
Extraordinary loss, net of tax                 -           -           -
Cumulative effect
adjustment, net of tax                         -           -           -
                                      ----------    --------    --------
Income (loss) per common share         $ (50,464)     38,844    $  (1.30)

Effect of dilutive securities:
Stock options                                  -           -           -
                                      ----------    --------   ---------
Income (loss) per share-
assuming  dilution                     $ (50,464)     38,844    $  (1.30)
                                      ==========    ========   =========
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
                                      ------------------------------------
                                                      1997
                                      ------------------------------------
                                                      Weighted        Per
                                        Income         Average       Share
                                        (Loss)         Shares       Amount
                                      ----------    ----------    ---------
<S>                                   <C>            <C>         <C>
Income (loss) before
 extraordinary item and
 cumulative effect adjustment          $  5,559        36,659    $   0.15
Extraordinary loss, net of tax             (563)            -       (0.01)
Cumulative effect
adjustment, net of tax                        -             -           -
                                      ---------    ----------   ---------
Income (loss) per common share        $   4,996        36,659   $    0.14

Effect of dilutive securities:
Stock options                                 -         1,059       (0.01)
                                     ----------      --------   ---------
Income (loss) per share-
assuming  dilution                    $   4,996        37,718   $    0.13
                                     ==========      ========   =========

</TABLE>

Due to the Company's loss in 1999 and 1998, a calculation of earnings per share
assuming dilution is not required.  In 1999 and 1998 dilutive securities
consisted of options convertible into approximately 2.1 million and 1.3 million
shares of common stock, respectively, using the treasury stock method to
compute dilution.


15.  SPECIAL AND/OR UNUSUAL ITEMS

 The Company incurred the following special and/or unusual charges in 1999,
 1998 and 1997.

 On January 24, 2000, the Company and Rentrak Corporation reached a settlement
 of their dispute concerning revenue sharing videocassettes Rentrak had
 provided to the Company.  The settlement agreement resolves all disputes
 between the companies and dismisses all claims against the Company.  The
 Company incurred $23.1 million in settlement and legal costs.  The settlement
 included $8.0 million in cash to cover outstanding invoices and consideration
 for business disruption to Rentrak; $6.0 million to cover Rentrak's legal
 fees and costs; and finally, the Company issued 200,000 shares of its common
 stock to Rentrak.  Additionally, the Company also incurred $5.8 million in
 legal fees related to the lawsuit.

 On November 1, 1999, the Company and Twentieth Century Fox Home Entertainment
 reached a settlement of their dispute.  Fox had filed suit alleging fraud and
 interference with Fox's contract with Rentrak.  The Company incurred $2.3
 million in settlement and related legal costs.

 In 1998, the Company recorded a $99.9 million charge related to the
 valuation of its rental inventory  (see Note 4).  In addition, the Company
 wrote off $1.9 million related to purchased research and development costs
 associated with the Reel.com acquisition (see Note 7).

 The Company recorded a $6.8 million charge in the fourth quarter of 1997
 to write down video game inventory and related accessories to net realizable
 value that had become obsolete due to advancements in video game technology.
 Of the $6.8 million charge, $2.3 million was included in cost of product
 sales and $4.5 million was included in cost of rental sales on the
 consolidated statements of operations.
 <PAGE>

 The Company recorded a $4.6 million charge in the fourth quarter of 1997
 for costs related to the Company's self-tender offer to acquire shares of its
 common stock at $11.00 per share, which failed because the minimum number of
 shares required for the transaction were not tendered.  This charge is
 included in general and administrative expenses on the consolidated
 statements of operations.

 In March 1997, the Company recorded a $18.9 million charge for the
 settlement of the securities litigation initiated in December 1995.  The
 charge consisted of $14.8 million in damages and $4.1 million in legal and
 professional expenses.  The Company agreed to the settlement to avoid further
 litigation expense and inconvenience and to put an end to all controversy and
 claims related to the subject of litigation.

16.  COMMITMENTS AND CONTINGENCIES

 During 1999, the Company was named as a defendant in three complaints which
 the Company anticipates will be consolidated into a single class action
 entitled WOODS V. HOLLYWOOD ENTERTAINMENT, ET AL, Case No. CV779511, in the
 Superior Court of the State of California in and for the County of Santa
 Clara.  The plaintiffs are seeking to certify a class made up of certain
 exempt employees which they claim are owed overtime payments in certain
 stores in California.  The case is in the early stages of discovery.  A class
 has not been certified.  The Company is unable to determine that the
 likelihood of an unfavorable outcome of the litigation is either probable or
 remote.  The Company intends to vigorously defend the action.

17.  SEGMENT REPORTING

 In June 1997, the Financial Accounting Standards Board (FASB) issued
 Statement No. 131, "Disclosures about Segments of an Enterprise and Related
 Information" effective for fiscal years beginning after December 15, 1997.
 The Company adopted Statement No. 131 in 1998.

 The Company identifies its segments based on management responsibility.
 In 1999 and 1998, the Company had 2 segments.  At December 31, 1999, the
 Hollywood Video segment consists of the Company's 1,615 retail stores located
 in 44 states and the Reel.com segment, which is the leading video-only store
 on the internet.  The Company measures segment profit as operating profit,
 which is defined as income before interest expense and income taxes.
 Information on segments and a reconciliation to income before income taxes
 are as follows (in thousands):

<TABLE>
<CAPTION>

                                    Year Ended December 31, 1999
                             ---------------------------------------
                             Hollywood
                             Video        Reel.com      Total
                             -----------  ---------- -----------
<S>                          <C>          <C>        <C>
Revenues                     $1,054,879   $ 41,962   $1,096,841
Tape amortization               107,127        450      107,577
Other depreciation and
  amortization                   64,078     51,187      115,265
Operating income (loss)          96,025    (98,538)      (2,513)
Interest expense, net            41,042      4,435       45,477
Total assets                  1,010,773     69,404    1,080,177
Purchase of property and
  equipment, net                108,804      3,454      112,258

</TABLE>
<PAGE>


<TABLE>
<CAPTION>
                              Year Ended December 31, 1998
                             --------------------------------
                             Hollywood
                             Video         Reel.com   Total
                             -----------   --------  --------
<S>                          <C>           <C>       <C>
Revenues                     $  756,658    $ 7,250   $763,908
Tape amortization               135,093        191    135,284
Other depreciation and
  amortization                   47,592     12,511     60,103
Operating income (loss)         (14,527)   (21,924)   (36,451)
Interest expense, net            33,048        166     33,214
Total assets                    842,212     94,118    936,330
Purchase of property and
  equipment, net                131,364        758    132,122

</TABLE>
There was only one segment, Hollywood Video, in 1997.



18.  QUARTERLY FINANCIAL DATA (UNAUDITED)

Selected quarterly financial data is as follows (in thousands, except per
share data):

<TABLE>
<CAPTION>
                                                Quarter Ended
                               ---------------------------------------------
                                   March      June   September    December
                                --------- ---------  ----------  -----------
 <S>                            <C>        <C>        <C>        <C>
 1999
 ------------------------
 Total revenue
  As previously reported        $266,529   $250,368   $266,319
  Adjustments (1)                   (404)      (905)      (652)
                                ---------  ---------  ---------
  As adjusted                    $266,125   $249,463   $265,667    $315,586
                                =========  =========  =========   =========
 Gross profit:
  As previously reported         $166,581   $155,382   $165,177
  Adjustments (1)                    (371)    (1,002)      (873)
                                ---------  ---------  ---------
  As adjusted                    $166,210   $154,380   $164,304    $178,067
                                =========  =========  =========   =========
 Income from operations
  As previously reported          $13,390    $ 5,707    $ 1,016
  Adjustments (1)                     204     (1,106)    (1,375)
                                ---------  ---------  ---------
  As adjusted                    $ 13,594    $ 4,601    $  (359)   $(20,349)
                                =========  =========  =========   ==========
 Net income (loss)
  As previously reported         $ (4,221)  $ (8,329)  $(11,662)
  Adjustments (1)                     204     (1,106)    (1,375)
                                ---------  ---------  ---------
  As adjusted                    $ (4,017)  $ (9,435)  $(12,997)   $(24,853)
                                =========  =========  =========   ==========
 Net income (loss) per
  share:
    Basic
     As previously reported      $  (0.09)   $ (0.18)  $  (0.25)
     Adjustments (1)                 0.00      (0.03)     (0.03)
                                ---------   ---------  ---------
     As adjusted                 $  (0.09)  $  (0.21)  $  (0.28)   $  (0.54)
                                =========   =========  =========   =========
 Net income (loss) per
  share:
    Diluted
     As previously reported      $  (0.09)  $  (0.18)  $  (0.25)
     Adjustments (1)                 0.00      (0.03)     (0.03)
                                ---------   ---------  ---------
     As adjusted                 $  (0.09)  $  (0.21)  $  (0.28)   $  (0.54)
                                =========   =========  =========   =========
 1998
 -------------------------
 Total revenue                   $169,952   $166,731   $184,072    $243,153
 Gross profit                     115,210    109,727    123,396      55,998
 Income (loss) from
  operations                       19,797     17,403     18,982     (92,633)
 Net income (loss)                  7,663      5,654      6,082     (69,863)
 Net income (loss)
  per share:
     Basic                           0.21       0.15       0.16       (1.56)
     Diluted                         0.21       0.15       0.16       (1.56)
</TABLE>

     (1) During the fourth quarter of 1999, the Reel.com segment of the Company
     recorded adjustments primarily related to advertising revenue and product
     development costs.  The impact of these changes, including related income
     tax effects, was to increase previously reported net income by $204,000
     for the quarter ended March 31, 1999 and to decrease net income by
     $1,106,000 and $1,375,000 for the quarters  ended  June  30, 1999 and
     September 30, 1999, respectively.


<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, as of  March 30, 1999.

                    Hollywood Entertainment Corporation


                       By: /S/ DAVID G. MARTIN
                       ---------------------------
                         David G. Martin
        Executive Vice President
                       and Chief Financial Officer

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the registrant and
in the capacities indicated as of  March 30, 1999.

Signatures               Title


MARK J. WATTLES
----------------
Mark J. Wattles     Chairman of the Board of Directors,
               and Chief Executive Officer
                         (Principal Executive Officer)

DAVID G. MARTIN
---------------
David G. Martin     Executive Vice President
                and Chief Financial Officer
               (Principal Financial and Accounting Officer)

DONALD J. EKMAN
---------------
Donald J. Ekman     Director


SCOTT A.BECK
-------------
Scott A. Beck       Director


WILLIAM P. ZEBE
---------------
William P. Zebe     Director