<PAGE>

                                                                   Exhibit 10.37
                                                                   -------------

                         REGISTRATION RIGHTS AGREEMENT
                         -----------------------------

     THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is dated as of May
                                               ---------
11, 1999 (the "Effective Date") and entered into by and between VIDEO UPDATE,
               --------------
INC., a Delaware corporation (the "Company"), and Ingram Entertainment Inc. or
                                   -------
any permitted transferee of the Warrant or shares of common stock issued upon
exercise of the Warrant (the "Purchaser").  Unless otherwise provided in this
                              ---------
Agreement, capitalized terms used herein shall have the meanings set forth in
the Warrant.

     WHEREAS, the Company has issued the Warrant, dated May 11, 1999 (the
"Warrant") to the Purchaser; and

     WHEREAS, the execution and delivery of this Agreement is required by the
Purchaser in connection with the Warrant.

     NOW THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereto agree as follows:

          SECTION 1.  Registration on Request.
                      -----------------------

          (a)  Registration on Request.  (i)  At any time and from time to time
               -----------------------
after December 31, 1999, upon the request of the Purchaser for a registration of
Registrable Securities the anticipated gross proceeds of which equals or exceeds
$1,000,000, the Company will promptly give written notice of such requested
registration to all registered holders of Registrable Securities, and thereupon
the Company, in accordance with the provisions of Section 4 hereof, will use its
best efforts to effect the registration under the Securities Act of

               (A)  the Registrable Securities which the Company has been so
          requested to register for disposition in accordance with the intended
          method or methods of disposition stated in such request, and

               (B)  all other Registrable Securities which the Company has
          been requested to register by the holders thereof by written request
          given to the Company within 20 days after the giving of such written
          notice by the Company (which request shall specify the intended method
          of disposition of such Registrable Securities),

all to the extent requisite to permit the disposition (in accordance with the
intended methods thereof as aforesaid) of the Registrable Securities so to be
registered.  The Company shall not be required to effect more than two
registrations pursuant to this Section 1 (each, a "Demand Registration") and, in
                                                   -------------------
any event, not more than one such Demand Registration within any six-month
period.
<PAGE>

               (ii)   Effective Registration Statement.  A registration
                      --------------------------------
     requested pursuant to this Section 1 shall not be deemed to be effected (A)
     if a registration statement with respect thereto shall not have become
     effective, or (B) if, after it has become effective, such registration is
     interfered with for any reason by any stop order, injunction or other order
     or requirement of the Securities and Exchange Commission (the "Commission")
     or any other governmental agency or any court, and the result of such
     interference is to prevent the holders of Registrable Securities to be sold
     thereunder from disposing thereof in accordance with the intended methods
     of disposition, or (C) if the conditions to closing specified in the
     purchase agreement or underwriting agreement entered into in connection
     with any underwritten registration shall not be satisfied or waived with
     the consent of the underwriters of such Registrable Securities that were to
     have been sold thereunder, other than as a result of any breach by any such
     holder of its obligations thereunder or hereunder.

               (iii)  Registration Statement Form.  Registrations under this
                      ---------------------------
     Section 1 shall be on such appropriate registration form of the Commission
     as shall be selected by the Company and as shall permit the disposition of
     the Registrable Securities so to be registered in accordance with the
     intended method or methods of disposition specified in the request of the
     holders of Registrable Securities being registered for such registration.
     The Company agrees to include in any such registration statement all
     information which the holders of Registrable Securities being registered
     shall reasonably request.

               (iv)   Selection of Underwriters.  If a requested registration
                      -------------------------
     pursuant to this Section 1 involves an underwritten offering, the managing
     underwriter or underwriters shall be selected by the Company in its sole
     discretion.

               (v)    Priority in Requested Registrations.  If a requested
                      -----------------------------------
     registration pursuant to this Section 1 involves an underwritten offering,
     and the managing underwriter shall advise the Company in writing (with a
     copy to each Person requesting registration of Registrable Securities)
     that, in its opinion, the number of securities requested to be included in
     such registration exceeds the number which can be sold in such offering
     within a price range acceptable to the holders of a majority of the
     Registrable Securities requested to be included therein, the Company will
     include in such registration, to the extent of the number which the Company
     is so advised can be sold in such offering, first all Priority Securities
     (as hereinafter defined) requested to be included (to the extent described
     in the last sentence of this clause (v)) and then pro rata among the
                                                       --- ----
     holders of Registrable Securities requesting inclusion therein in
     accordance with the number of securities requested to be included in such
     registration by each such holder; provided, that if, as a result of the
                                       --------
     preceding clause or the last sentence of this clause (v), the number of
     Registrable Securities registered and sold on behalf of holders of
     Registrable Securities in any registration requested pursuant to this
     Section 1 is less than 80% of the Registrable Securities as to which such
     holders requested registration pursuant to this Section 1,

                                      -2-
<PAGE>

     then such registration shall be deemed to be a registration under Section 2
     hereof and not under Section 1 hereof. To the extent that any of the
     holders listed on Schedule A (collectively, "Priority Holders") request
                       ----------                 ----------------
     registration of any of the shares of common stock held by them on the date
     hereof and identified on Schedule A (collectively, the "Priority
                              ----------                     --------
     Securities")), the Priority Securities shall, but only to the extent the
     ----------
     registration rights of such holders as in effect the date hereof so
     require, be first included in the proposed registration prior to the
     inclusion of any Registrable Securities.

               SECTION 2.  Piggyback Registrations.
                           ------------------------

               (a)  Right to Piggyback.  Whenever the Company proposes to
                    ------------------
register any of its equity securities under the Securities Act (other than
pursuant to a transaction described in Rule 145 of the Securities Act or on Form
S-8), whether or not for sale for its own account, the Company will each time
give prompt written confidential notice of such proposed filing to the Purchaser
or any other holder of the Warrant ("Holders") (i) in all cases at least 20 days
before the anticipated filing date and (ii) in the case of a proposed
registration in connection with the exercise of any demand registration rights
(other than the demand registration rights under Section 1) within five (5)
Business Days after the Company receives notice of such demand. Such notice
shall offer such Holders the opportunity to register such amount of Registrable
Securities as they shall request (a "Piggyback Registration"). Subject to
                                     ----------------------
Sections 3(b) and 3(c) hereof, the Company shall include in each such Piggyback
Registration all Registrable Securities with respect to which the Company has
received written requests for inclusion therein within 15 days after such notice
has been given by the Company to the Holders. If the Registration Statement
relating to the Piggyback Registration is to cover an underwritten offering,
such Registrable Securities shall be included in the underwriting on the same
terms and conditions as the securities otherwise being sold through the
underwriters. The Holders shall be permitted to withdraw all or part of the
Registrable Securities from a Piggyback Registration at any time prior to the
effective time of such Piggyback Registration.

               (b)  Priority on Primary Registrations.  If a Piggyback
                    ---------------------------------
Registration is an underwritten primary registration on behalf of the Company by
or through one or more underwriters of recognized standing and the managing
underwriters thereof advise the Company in writing that in their good faith
judgment the number of securities requested to be included in such registration
exceeds the number which can be sold in such offering without materially and
adversely affecting the marketability of the offering, then the Company will
include in the Registration Statement relating to such registration (i) first,
the securities the Company proposes to sell, (ii) second, the Priority
Securities (but only to the extent the registration rights of such holders as in
effect on the date hereof so require) and the Registrable Securities (but only
to the extent the registration rights of the holders of the Priority Securities
permit the Registrable Securities to be included) requested to be included in
such registration by the holders thereof, reduced, if necessary, on a pro rata

                                       -3-
<PAGE>

basis, based on the number of shares owned by each such Holder, and (iii) third,
if no Registrable Securities had to be excluded pursuant to this Section 2(b),
securities other than Registrable Securities requested to be included in such
registration, reduced, if necessary, on a pro rata basis, based on the amount of
such other securities owned by such other holders; provided, that if such
                                                   --------
registration contemplates an "over-allotment option" on the part of
underwriters, to the extent such over-allotment option is exercised and Holders
were excluded from registering any Registrable Securities pursuant to the
priority provisions of Section 2(b) or 2(c), then the over-allotment option
shall be exercised with respect to such Registrable Securities to the extent of
such exclusion, subject to the provisions of Section 2(b)(ii).

          (c)  Priority on Secondary Registrations.  If a Piggyback
               -----------------------------------
Registration is an underwritten secondary registration on behalf of any holders
of the Company's securities, by or through one or more underwriters of
recognized standing and the managing underwriters advise the Company in writing
that in their good faith judgment the number of securities requested to be
included in such registration exceeds the number which can be sold in such
offering without materially and adversely affecting the marketability of the
offering, the Company will include in such registration, (i) first, the Priority
Securities (but only to the extent the registration rights of such holders as in
effect on the date hereof so require) and the Registrable Securities (but only
to the extent the registration rights of the holders of the Priority Securities
permit the Registrable Securities to be included) requested to be included in
such registration by the Holders thereof, reduced, if necessary, on a pro rata
basis, based on the number of shares owned by any other Holder and (ii) second,
the securities owned by such other holders.

          SECTION 3.  Holdback Agreements.
                      -------------------

          Restrictions on Public Sale by Holders of Registrable Securities.
          ----------------------------------------------------------------
Each Holder agrees, if so requested by the managing underwriter of an
underwritten registration effected pursuant to Section 1 or 2 hereof in which
such Holder is selling Registrable Securities, not to effect any public sale or
distribution of any securities of the Company of the same class as the
securities included in such underwritten registration, during the fourteen (14)
days prior to the effective date of such registration and until the earlier of
(i) the end of the 90-day period beginning on the effective date of any
underwritten Demand Registration or any underwritten Piggyback Registration
(except as part of such underwritten registration, unless the underwriters
managing the registered public offering otherwise agree) and (ii) the
abandonment of such offering. Notwithstanding the preceding sentence, a Holder
may sell any or all of its Registrable Securities in a private sale, provided
that such sale is not to a direct competitor of the Company, as set forth on
Schedule B hereto.

          None of the foregoing provisions of this Section 3 shall apply to any
Holder if such Holder is prevented by applicable statute or regulation from
entering into any such agreement; provided, that any such Holder shall
                                  --------
undertake not to effect any public sale or distribution of the applicable class
of Registrable Securities unless it has provided 45 days' prior written notice
of such sale or distribution to the underwriter or underwriters.

          SECTION 4.  Registration Procedures.  Whenever the Company is required
                      -----------------------
to register Registrable Securities pursuant to Section 1 or 2 hereof, the
Company will use its reasonable best efforts to effect the registration to
permit the sale of such Registrable

                                      -4-
<PAGE>

Securities in accordance with the intended method or methods of disposition
thereof, and pursuant thereto the Company will as expeditiously as possible:

          (a)  prepare and file with the Commission as soon as practicable a
Registration Statement with respect to such Registrable Securities as prescribed
by Section 1 or 2 on a form available for the sale of the Registrable Securities
by the holders thereof in accordance with the intended method or methods of
distribution thereof and use its reasonable best efforts to cause each such
Registration Statement to become and remain effective until all such Registrable
Securities are sold by the Holders thereof; provided, however, that before
                                            --------  -------
filing a Registration Statement, the Company will furnish to the Holders of the
Registrable Securities covered by such Registration Statement, the underwriters,
if any, and any attorney, accountant or other agent retained by any such Holder
of Registrable Securities or underwriters (i) copies of all such documents
proposed to be filed, which documents will be subject to the review and comment
of such Holders, their counsel and underwriters, if any, and (ii) if requested,
financial and other information required by the Commission to be included in
such Registration Statement and all financial and other records, pertinent
corporate documents and properties of the Company customarily reviewed in
connection with an underwritten registration; and shall cause the officers,
directors and employees of the Company, counsel to the Company and independent
certified public accountants of the Company, to respond to such reasonable
inquiries and supply all information, as shall be reasonably necessary, in the
opinion of respective counsel to such Holders and underwriters, to conduct a
reasonable investigation within the meaning of the Securities Act, and will not
file any Registration Statement to which the holders of at least a majority of
the Registrable Securities covered by such Registration Statement or the
underwriters, if any, shall reasonably object;

          (b)  prepare and file with the Commission such amendments, post-
effective amendments and prospectus supplements to such Registration Statement
as may be necessary to keep such Registration Statement effective and to comply
with the provisions of the Securities Act with respect to the disposition of all
securities covered by such Registration Statement until such time as all of such
securities have been disposed of in accordance with the intended methods of
disposition by the seller or sellers thereof set forth in such Registration
Statement and take no action that results in the selling Holder of the
Registrable Securities covered thereby not being able to sell such Registrable
Securities during that period;

          (c)  furnish to each selling Holder of Registrable Securities covered
by a registration statement and to each underwriter, if any, such number of
copies of such registration statement, each amendment and post-effective
amendment thereto, the prospectus included in such registration statement
(including each preliminary prospectus and any supplement to such prospectus and
any other prospectus filed under Rule 424 of the Securities Act), in each case
including all exhibits, and such other documents as such seller may reasonably
request in order to facilitate the disposition of the Registrable Securities
owned by such seller or to be disposed of by such underwriter (the Company
hereby consenting to the use in accordance with all applicable law of each such
registration statement (or amendment or post-effective amendment thereto) and
each such prospectus (or

                                       -5-
<PAGE>

preliminary prospectus or supplement thereto) by each such seller and the
underwriters, if any, in connection with the offering and sale of the
Registrable Securities covered by such registration statement or prospectus);

          (d)  use its reasonable best efforts to register or qualify and, if
applicable, to cooperate with the selling Holders of Registrable Securities, the
underwriters, if any, and their respective counsel in connection with the
registration or qualification (or exemption from such registration or
qualification) of, the securities to be included in a Registration Statement for
offer and sale under the securities or blue sky laws of such jurisdictions
within the United States of America as any selling Holder or managing
underwriters (if any) shall reasonably request, to keep each such registration
or qualification (or exemption therefrom) effective during the period such
Registration Statement is required to be kept effective and to do any and all
other acts or things necessary or advisable to enable the disposition in such
jurisdictions of the securities covered by the applicable Registration
Statement; provided, that the Company will not be required to (i) qualify
           --------
generally to do business in any jurisdiction where it would not otherwise be
required to qualify but for this paragraph or (ii) consent to general service of
process in any such jurisdiction;

          (e)  cause all such Registrable Securities to be listed on each
securities exchange on which securities of the same class as the Registrable
Securities are then listed and, if not so listed, to be listed on the NASD
automated quotation system and, if listed on the NASD automated quotation
system, use its reasonable best efforts to secure designation of all such
Registrable Securities covered by such Registration Statement as a NASDAQ
Security within the meaning of Rule 11Aa3-l under the Exchange Act or, failing
that, to secure NASDAQ authorization for such Registrable Securities and,
without limiting the generality of the foregoing, to use its reasonable best
efforts to arrange for at least two market makers to register as such with
respect to such Registrable Securities with the NASD;

          (f)  provide a transfer agent and registrar for all such Registrable
Securities and a CUSIP number for all such Registrable Securities not later than
the effective date of such Registration Statement;

          (g)  comply with all applicable rules and regulations of the
Commission, and make available to its security holders an earnings statement
satisfying the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder (or any similar rule promulgated under the Securities Act) no later
than 45 days after the end of any 12-month period (or 90 days after the end of
any 12-month period if such period is a fiscal year) (or in each case within
such extended period of time as may be permitted by the Commission for filing
the applicable report with the Commission) (i) commencing at the end of any
fiscal quarter in which Registrable Securities are sold to underwriters in a
firm commitment or best efforts underwritten offering or (ii) if not sold to
underwriters in such an offering, commencing on the first day of the fiscal
quarter of the Company after the effective date of a Registration Statement,
which earnings statement shall cover said 12-month periods;

                                      -6-
<PAGE>

          (h)  permit any Holder which, in its sole and exclusive judgment,
might be deemed to be an underwriter or a controlling person of the Company, to
participate in the preparation of such registration or comparable statement and
to require the insertion therein of material, furnished to the Company in
writing, which in the reasonable judgment of such Holder and its counsel should
be included;

          (i)  use its best efforts to prevent the issuance of any order
suspending the effectiveness of a Registration Statement or suspending the
qualification (or exemption from qualification) of any of the securities
included therein for sale in any jurisdiction within the United States of
America, and, in the event of the issuance of any stop order suspending the
effectiveness of a Registration Statement, or of any order suspending the
qualification of any securities included in such Registration Statement for sale
in any jurisdiction within the United States of America, the Company will use
its best efforts promptly to obtain the withdrawal of such order at the earliest
possible moment;

          (j)  if the piggyback or requested registration is an underwritten
registration, obtain "cold comfort" letters and updates thereof (which letters
and updates (in form, scope and substance) shall be reasonably satisfactory to
the managing underwriters, if any, and counsel to the selling Holders of
Registrable Securities) from the independent certified public accountants of the
Company (and, if necessary, any other independent certified public accountants
of any subsidiary of the Company or of any business acquired by the Company for
which financial statements and financial data are, or are required to be,
included in the Registration Statement), addressed to each of the underwriters,
if any, and each selling Holder of Registrable Securities, such letters to be in
customary form and covering matters of the type customarily covered in "cold
comfort" letters in connection with underwritten offerings and such other
matters as the underwriters, if any, or the Holders of a majority of the
Registrable Securities being sold may reasonably request;

          (k)  obtain opinions of independent counsel to the Company and updates
thereof (which  counsel and opinions (in form, scope and substance) shall be
reasonably satisfactory to the managing underwriters, if any, and not objected
to by the Holders of a majority of the Registrable Securities being sold),
addressed to each selling Holder and each of the underwriters, if any, covering
the matters customarily covered in opinions of issuer's counsel requested in
underwritten offerings, such as the effectiveness of the Registration Statement
and such other matters as may be reasonably requested by such counsel and
underwriters, if any;

          (l)  promptly (but in any event, within five business days) notify the
selling Holders of Registrable Securities, their counsel and the managing
underwriters, if any, and confirm such notice in writing,

               (i)    when a prospectus or any supplement or post-effective
          amendment to such prospectus has been filed, and, with respect to a
          Registration Statement or any post-effective amendment thereto, when
          the same has become effective,

                                       -7-
<PAGE>

               (ii)   of any request by the Commission or any other Federal
          or state governmental authority for amendments or supplements to a
          Registration Statement or related prospectus or for additional
          information,

               (iii)  of the issuance by the Commission of any stop order
          suspending the effectiveness of a Registration Statement or of any
          order preventing or suspending the use of any prospectus or the
          initiation of any proceedings by any Person for that purpose,

               (iv)   if at any time the representations and warranties of
          the Company contemplated by clause (i) of paragraph (q) below cease to
          be true and correct in any respect,

               (v)    of the receipt by the Company of any notification with
          respect to the suspension of the qualification or exemption from
          qualification of a Registration Statement or any of the Registrable
          Securities for offer or sale under the securities or blue sky laws of
          any jurisdiction, or the contemplation, initiation or threatening, of
          any proceeding for such purpose,

               (vi)   of the happening of any event that makes any statement
          made in such Registration Statement untrue in any material respect or
          that requires the making of any changes in such Registration Statement
          so that it will not contain any untrue statement of a material fact or
          omit to state any material fact required to be stated therein or
          necessary to make the statements therein, in light of the
          circumstances under which they were made (in the case of any
          prospectus), not misleading, and

              (vii)   of the Company's reasonable determination that a post-
          effective amendment to a Registration Statement would be appropriate;

          (m)  if requested by the managing underwriters, if any, or a Holder of
Registrable Securities being sold, promptly incorporate in a prospectus,
supplement or post-effective amendment such information as the managing
underwriters, if any, and the  Holders of a majority of the Registrable
Securities being sold reasonably request to be included therein relating to the
sale of the Registrable Securities, including, without limitation, information
with respect to the number of shares of Registrable Securities being sold to
underwriters, the purchase price being paid therefor by such underwriters and
with respect to any other terms of the underwritten offering of the Registrable
Securities to be sold in such offering, and make all required filings of such
prospectus, supplement or post-effective amendment promptly following
notification of the matters to be incorporated in such supplement or post-
effective amendment;

          (n)  furnish to each selling Holder of Registrable Securities and the
managing underwriter, without charge, at least one signed copy of the
Registration Statement;

                                       -8-
<PAGE>

          (o)  cooperate with the selling Holders of Registrable Securities and
the managing underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing the Registrable Securities not bearing any
restrictive legends and in a form eligible for deposit with The Depository Trust
Company to be sold and cause such Registrable Securities to be in such
denominations and registered in such names as the managing underwriters, if any,
or holder of Registrable Securities may request at least three business days
prior to any sale of Registrable Securities to the underwriters;

          (p)  as promptly as practicable upon the occurrence of any event
contemplated by clause (vi) of paragraph (l) above, prepare a supplement or
post-effective amendment to the Registration Statement, or file any other
required document so that, as thereafter delivered to the purchasers of the
Registrable Securities being sold hereunder, the prospectus will not contain an
untrue statement of a material fact or an omission to state a material fact
required to be stated in a Registration Statement or prospectus or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading;

          (q)  enter into such agreements (including underwriting agreements in
customary form, scope and substance) and take all such other actions in
connection therewith as the Holders of a majority of the Registrable Securities
being sold or the underwriters, if any, reasonably request in order to expedite
or facilitate the registration or the disposition of such Registrable
Securities, and in such connection, whether or not an underwriting agreement is
entered into and whether or not the registration is an underwritten
registration:

               (i)    make such representations and warranties to the Holders of
     such Registrable Securities and the underwriters, if any, with respect to
     the business of the Company and the Registration Statement, in form,
     substance and scope as are customarily made by issuers to underwriters in
     underwritten offerings and confirm the same, if and when requested;

               (ii)   if an underwriting agreement is entered into, cause the
     same to include the indemnification and contribution provisions and
     procedures substantially similar to (and no less favorable to the selling
     Holders of Registrable Securities and the underwriters than) those
     contained in Section 6 hereof with respect to all parties to be indemnified
     pursuant to said Section (or, with respect to the indemnification of such
     underwriters, such similar indemnification and contribution provisions as
     such underwriters shall customarily require); and

               (iii)  deliver such documents and certificates as may be
     reasonably requested by the Holders of a majority of the Registrable
     Securities being sold and managing underwriters, if any, to evidence
     compliance with clause (i) above and with any conditions contained in the
     underwriting agreement or other similar agreement entered into by the
     Company,

it being understood that the above shall be done at each closing under such
underwriting or

                                       -9-
<PAGE>

similar agreement or as and to the extent otherwise reasonably requested by the
holders of a majority of the Registrable Securities being sold;

          (r)  cooperate with each seller of Registrable Securities covered by
any Registration Statement and each underwriter, if any, participating in the
disposition of such Registrable Securities and their respective counsel in
connection with any filings required to be made with the NASD; and

          (s)  use its reasonable best efforts to take all other steps necessary
to effect the registration of the Registrable Securities covered by the
Registration Statement contemplated hereby.

          Each Holder agrees by acquisition of such Registrable Securities that,
upon receipt of written notice from the Company of the happening of any event of
the kind described in Section 4(l)(ii), (iii), (v), (vi) or (vii), such Holder
will forthwith discontinue disposition of such Registrable Securities covered by
such Registration Statement until such Holder's receipt of the copies of the
supplemented or amended Registration Statement contemplated by Section 4(p) or
until it is advised in writing (the "Advice") by the Company that the use of the
                                     ------
applicable prospectus may be resumed, and has received copies of any additional
or supplemental filings that are incorporated or deemed to be incorporated by
reference in such prospectus, and, if so directed by the Company, such Holder
will deliver to the Company (at the Company's expense) all copies, other than
permanent file copies then in such Holder's possession, of the prospectus
covering such Registrable Securities current at the time of receipt of such
notice.  If the Company shall give any such notice, the time periods mentioned
in Section 1 hereof shall be extended by the number of days during such periods
from and including the date of the giving of such notice to and including the
date when each seller of Registrable Securities covered by such Registration
Statement receives (x) the copies of the supplemented or amended prospectus
contemplated by Section 4(p) hereof or (y) the Advice, as the case may be.

          SECTION 5.  Registration Expenses.
                      ---------------------

          (a)  All expenses incident to the Company's performance of or
compliance with this Agreement, including without limitation (i) all
registration, filing fees and expenses (including fees with respect to filings
made with NASD (including, if applicable, the fees and expenses of any
"qualified independent underwriter", as may be required by the rules and
regulations of the NASD), (ii) fees and expenses of the Company's compliance
with securities or blue sky laws (including reasonable fees and disbursements of
one (1) counsel for the underwriters or selling shareholders in connection with
blue sky qualifications of the Registrable Securities and determinations of
their eligibility for investment under the laws of such jurisdiction as the
managing underwriters or Holders of a majority of the Registrable Securities
being sold may designate), (iii) printing expenses (including printing
certificates for the Registrable Securities to be sold and the Registration
Statements), messenger and delivery expenses, duplication, word processing, and
telephone expenses, (iv) fees and disbursements of counsel for the Company, and
(v) fees and disbursements of all independent certified public accountants of
the Company incurred in

                                      -10-
<PAGE>

connection with such registration (including the expenses of any special audit
and "cold comfort" letters incident to such registration), underwriters
(excluding discounts, commissions or fees of underwriters, selling brokers,
dealer managers or similar securities industry professionals relating to the
distribution of the Registrable Securities) and other persons retained by the
Company (all such expenses being herein called "Registration Expenses"), will be
                                                ---------------------
borne by the Company regardless of whether a Registration Statement becomes
effective.

          (b)  To the extent any expenses of registration are not required to be
paid by the Company, each holder of securities included in any registration
hereunder will pay those expenses allocable to the registration of such holder's
securities so included, and any expenses not so allocable will be borne by all
sellers of securities included in such registration in proportion to the
aggregate selling price of the securities to be so registered.

          SECTION 6.  Indemnification.
                      ---------------

          (a)  Indemnification by the Company.  The Company agrees to indemnify,
               ------------------------------
to the fullest extent permitted by law, each Holder, each affiliate of a Holder
and each officer, director, employee, counsel, agent or representative of such
Holder and its affiliates and each Person who controls any such Person (within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act) against, and hold it and them harmless from, all losses, claims,
damages, liabilities, costs (including, without limitation, costs of preparation
and attorneys' fees and disbursements) and expenses, including expenses of
investigation (collectively, "Losses") arising out of, caused by or based upon
                              ------
any untrue or alleged untrue statement of material fact contained in any
Registration Statement, or any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading (a "Misstatement/Omission"), except that the Company shall not be
               ---------------------
liable (i) insofar as such Misstatement/Omission is based upon and in conformity
with information furnished in writing to the Company by a Holder expressly for
use therein and (ii) to the extent that any such claim arises out of or is based
upon a Misstatement/Omission made in any preliminary prospectus, (x) to the
extent such Misstatement/Omission is corrected in the final prospectus and (y)
having previously been timely furnished by or on behalf of the Company with
sufficient copies of the final prospectus, such indemnified Person thereafter
fails to deliver such prospectus prior to or concurrently with the sale to the
Person who purchased a Registrable Security from such indemnified Person and who
is asserting such claim. In connection with an underwritten offering, the
Company will indemnify such underwriters, selling brokers, dealer managers and
similar securities industry professionals participating in the distribution,
their officers and directors and each Person who controls (within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange Act) such
underwriters to the same extent as provided above with respect to the
indemnification of the Holders. This indemnity shall be in addition to any other
indemnification arrangements to which the Company may otherwise be party.

          (b)  Indemnification by Holders.  In connection with any Registration
               --------------------------
Statement in which a Holder is participating, each such Holder will furnish to
the Company

                                     -11-
<PAGE>

in writing such powers of attorney, custody agreements and letters of direction
and other information and affidavits as the Company reasonably requests for use
in connection with any such Registration Statement, and each such Holder agrees
to indemnify, to the fullest extent permitted by law, the Company, its directors
and officers and each Person who controls the Company (within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange Act)
against, and hold it and them harmless from, any Losses resulting from any
Misstatement/Omission, but only to the extent that such Misstatement/Omission is
based upon and in conformity with information furnished in writing by such
Holder expressly for use in such Registration Statement; provided, that the
obligation to indemnify will be individual (several and not joint) to each
Holder and will be limited to the net amount of proceeds (net of payment of all
expenses) received by such Holder from the sale of Registrable Securities
pursuant to such Registration Statement giving rise to such indemnification
obligation.

          (c)  In case any action, claim or proceeding shall be brought against
any Person entitled to indemnification hereunder, such indemnified party shall
promptly notify each indemnifying party in writing, and such indemnifying party
shall assume the defense thereof, including the employment of counsel reasonably
satisfactory to such indemnified party and payment of all fees and expenses
incurred in connection with the defense thereof. The failure to so notify such
indemnifying party shall not affect any obligation it may have to any
indemnified party under this Agreement or otherwise except to the extent that
(as finally determined by a court of competent jurisdiction (which determination
is not subject to review or appeal)) such failure materially and adversely
prejudiced such indemnifying party. Each indemnified party shall have the right
to employ separate counsel in such action, claim or proceeding and participate
in the defense thereof, but the fees and expenses of such counsel shall be at
the expense of each indemnified party unless: (i) such indemnifying party has
agreed to pay such expenses; (ii) such indemnifying party has failed promptly to
assume the defense and employ counsel reasonably satisfactory to such
indemnified party; or (iii) the named parties to any such action, claim or
proceeding (including any impleaded parties) include both such indemnified party
and such indemnifying party or an affiliate or controlling person of such
indemnifying party, and such indemnified party shall have been advised in
writing by counsel that either (x) there may be one or more legal defenses
available to it which are different from or in addition to those available to
such indemnifying party or such affiliate or controlling person or (y) a
conflict of interest may exist if such counsel represents such indemnified party
and such indemnifying party or its affiliate or controlling person; provided,
                                                                    --------
however, that such indemnifying party shall not, in connection with any one such
action or proceeding or separate but substantially similar or related actions or
proceedings in the same jurisdiction arising out of the same general allegations
or circumstances, be responsible hereunder for the fees and expenses of more
than one separate firm of attorneys (in addition to any local counsel), which
counsel shall be designated by such indemnified party.

          No indemnified party shall be liable for any settlement effected
without its written consent.  Each indemnifying party agrees, jointly and
severally, that it will not, without the indemnified party's prior written
consent, consent to entry of any judgment or settle or compromise any pending or
threatened, claim, action or proceeding in respect of

                                     -12-
<PAGE>

which indemnification or contribution may be sought hereunder unless the
foregoing contains an unconditional release, in form and substance reasonably
satisfactory to the indemnified parties, of the indemnified parties from all
liability and obligation arising therefrom.

          (d)  The indemnifying party's liability to any such indemnified party
hereunder shall not be extinguished solely because any other indemnified party
is not entitled to indemnity hereunder.

          (e)  The indemnification provided for under this Agreement will remain
in full force and effect regardless of any investigation made by or on behalf of
the indemnified party or any officer, director or controlling Person of such
indemnified party, and will survive the transfer of securities.

          (f)  Contribution.  If the indemnification provided for in this
               ------------
Section 6 is unavailable to, or insufficient to hold harmless, an indemnified
party under Section 6(a) or Section 6(b) above in respect of any Losses referred
to in such Sections, then each applicable indemnifying party shall have an
obligation to contribute to the amount paid or payable by such indemnified party
as a result of such Losses in such proportion as is appropriate to reflect the
relative fault of the Company, on the one hand, and of the Holder, on the other,
in connection with the Misstatement/Omission which resulted in such Losses,
taking into account any other relevant equitable considerations. The amount paid
or payable by a party as a result of the Losses referred to above shall be
deemed to include, subject to the limitations set forth in Section 6(c) above,
any legal or other fees or expenses reasonably incurred by such party in
connection with any investigation, lawsuit or legal or administrative action or
proceeding.

          The relative fault of the Company, on the one hand, and of the Holder,
on the other, shall be determined by reference to, among other things, whether
the relevant Misstatement/Omission relates to information supplied by the
Company or by the Holder and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such Misstatement/Omission.

          The Company and each Holder agree that it would not be just and
equitable if contribution pursuant to this Section 6(f) were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to above.  Notwithstanding the
provisions of this Section 6(f), a Holder shall not be required to contribute
any amount in excess of the amount by which (i) the amount (net of payment of
all expenses) at which the securities that were sold by such Holder and
distributed to the public were offered to the public exceeds (ii) the amount of
any damages which such Holder has otherwise been required to pay by reason of
such Misstatement/Omission.

          No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.

                                     -13-
<PAGE>

          The indemnity and contribution agreements contained in this Section 6
are in addition to any liability that the indemnifying parties may have to the
indemnified parties.

          SECTION 7.  Rules 144 and 144A.
                      ------------------

          The Company shall timely file the reports required to be filed by it
under the Securities Act and the Exchange Act (including but not limited to the
reports under sections 13 and 15(d) of the Exchange Act referred to in
subparagraph (c) of Rule 144 adopted by the Commission under the Securities Act)
and the rules and regulations adopted by the Commission thereunder (or, if the
Company is not required to file such reports, it will, upon the request of any
holder of Registrable Securities, make publicly available other information) and
will take such further action as any holder of Registrable Securities may
reasonably request, all to the extent required from time to time to enable such
Holder to sell Registrable Securities without registration under the Securities
Act within the limitation of the exemptions provided by (a) Rule 144 and Rule
144A under the Securities Act, as such Rules may be amended from time to, time,
or (b) any similar rule or regulation hereafter adopted by the Commission. Upon
the request of any holder of Registrable Securities, the Company will deliver to
such Holder a written statement as to whether it has complied with the filing
requirements of this Section 6.

          SECTION 8.  (a)  Limitation on Obligations to Register.
                           ------------------------------------
Anything in this Agreement to the contrary notwithstanding:

               (i)  The Company may defer the filing of any registration
          statement one time if (i) the Company is engaged in active
          negotiations with respect to the acquisition of a "significant
          subsidiary" as defined in Regulation S-X of the Commission which would
          in the opinion of counsel for the Company be required to be disclosed
          in the proposed filing; (ii) in the opinion of counsel for the
          Company, the proposed filing would require the inclusion therein of
          audited financial statements other than those in respect of the
          Company's most recently ended full fiscal year and any preceding full
          fiscal year, and the Company may then, at its option, delay the
          imposition of its obligations pursuant to this Agreement hereof until
          the earlier of (A) the conclusion or termination of such negotiations,
          or the date of availability of such audited financial statements,
          whichever is applicable, or (B) 120 days from the date of the
          registration request, or (iii) the proposed filing would be made
          within 180 days from the date of effectiveness of any registration
          statement that could have included the Registrable Securities.

          (b)  Participation in Underwritten Registrations.  No Person may
               -------------------------------------------
participate in any registration hereunder which is underwritten unless such
Person (i) agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Person or Persons entitled hereunder
to approve such arrangements and (ii) timely completes and executes all
questionnaires, powers of attorney, customary indemnities, underwriting
agreements and other documents required under the terms of such

                                      -14-
<PAGE>

underwriting arrangements; provided, that no Holder included in any underwritten
                           --------
registration shall be required to make any representations or warranties to the
Company or the underwriters other than representations and warranties regarding
such Holder and such Holder's intended method of distribution.

          SECTION 9.  Definitions.
                      -----------

          "Commission" means the Securities and Exchange Commission or any other
           ----------
Federal agency at the time administering the Securities Act.

          "Common Stock" means the Company's Class A Common Stock, par value
           ------------
$.01 per share, or any other shares of capital stock or other securities of the
Company into which such shares of Common Stock shall be reclassified or changed,
including, by reason of a merger, consolidation, reorganization or
recapitalization. If the Common Stock has been so reclassified or changed, or if
the Company pays a dividend or makes a distribution on the Common Stock in
shares of capital stock, or subdivides (or combines) its outstanding shares of
Common Stock into a greater (or smaller) number of shares of Common Stock, a
share of Common Stock shall be deemed to be such number of shares of stock and
amount of other securities to which a holder of a share of Common Stock
outstanding immediately prior to such change, reclassification, exchange,
dividend, distribution, subdivision or combination would be entitled.

          "Exchange Act" means the Securities Exchange Act of 1934, as amended
           ------------
from time to time, or any similar Federal statute, and the rules and regulations
of the Commission thereunder, all as the same shall be in effect at the time.

          "NASD" means the National Association of Securities Dealers, Inc.
           ----

          "Person" means any natural person, corporation, partnership, firm,
           ------
association, trust, government, governmental agency, limited liability company
or any other entity, whether acting in an individual, fiduciary or other
capacity.

          "Registrable Securities" means (i) any of the shares of Common Stock
           ----------------------
issuable upon the exercise of the Warrant and (ii) any securities issued or
issuable with respect to such Common Stock referred to in clause (i) above by
way of stock dividends or stock splits or in connection with a combination of
shares, recapitalization, merger, consolidation, or other reorganization or
otherwise. As to any particular Registrable Securities, such securities will
cease to be Registrable Securities when they have been distributed to the public
pursuant to an offering registered under the Securities Act or are eligible to
be sold to the public through a broker, dealer or market maker in compliance
with Rule 144 under the Securities Act or any successor rule. For purposes of
this Agreement, a Person will be deemed to be a "Holder" whenever such Person
(x) has acquired such Registrable Securities or (y) has the right to acquire
directly such Registrable Securities upon conversion or exercise in connection
with a transfer of securities or otherwise, but disregarding any restrictions or
limitations upon the exercise of such right, whether or not such acquisition has
actually been effected (any such Person, a "Holder").

                                     -15-
<PAGE>

          "Registration Statement" means any registration statement under the
           ----------------------
Securities Act of the Company that covers any of the Registrable Securities
pursuant to the provisions of this Agreement, including the related prospectus,
all amendments and supplements to such registration statement, including pre-
and post-effective amendments, all exhibits thereto and all material
incorporated by reference or deemed to be incorporated by reference in such
registration statement.

          "Securities Act" means the Securities Act of 1933, as amended from
           --------------
time to time, or any similar Federal statute, and the rules and regulations of
the Commission promulgated thereunder, all as the same shall be in effect at the
time.

          "Warrant" shall mean and include the Warrant.
           -------

          Unless otherwise stated, other capitalized terms contained herein have
the meanings set forth in the Warrant.

          SECTION 10.  Miscellaneous.
                       -------------

          (a)  Remedies. The parties hereto agree and acknowledge that money
               ---------
damages may not be an adequate remedy for any breach of the provisions of this
Agreement and hereby agree to waive the defense in any action for specific
performance or injunctive relief that a remedy at law would be adequate.
Accordingly, any party may in its sole discretion apply to any court of law or
equity of competent jurisdiction for specific performance and for other
injunctive relief in order to enforce or prevent violation of the provisions of
this Agreement.

          (b)  Amendments and Waivers.  Except as otherwise provided herein, the
               ----------------------
provisions of this Agreement, including the provisions of this sentence, may be
amended, modified, supplemented or waived with the prior written consent of the
Company and the Holder or the Holders of a majority of the Registrable
Securities.

          (c)  Successors and Assigns.  All covenants and agreements in this
               ----------------------
Agreement by or on behalf of any of the parties hereto will bind and inure to
the benefit of the respective successors and assigns of the parties hereto
whether so expressed or not. In addition, whether or not any express assignment
has been made, the provisions of this Agreement which are for the benefit of the
Purchaser or Holders are also for the benefit of, and enforceable by, any
subsequent Holder of Registrable Securities. Notwithstanding any other provision
hereof, no Holder may assign or transfer this Agreement nor any rights hereunder
to any Person or entity that directly competes with the business of the Company,
as set forth on Schedule B hereto.

          (d)  Severability.  In the event that any one or more of the
               ------------
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in

                                     -16-
<PAGE>

any way impaired or affected, it being intended that the rights and privileges
of the parties hereto shall be enforceable to the fullest extent permitted by
law.

          (e)  Counterparts.  This Agreement may be executed in any number of
               ------------
counterparts, any one of which need not contain the signatures of more than one
party, but each of which when so executed shall be deemed to be an original and
all such counterparts taken together shall constitute one and the same
Agreement.

          (f)  Descriptive Headings: Interpretation.  The descriptive headings
               ------------------------------------
of this Agreement are inserted for convenience of reference only and shall not
limit or otherwise affect the meaning hereof. The use of the word "including" in
this Agreement shall be by way of example rather than by limitation.

          (g)  Notices.  All notices, demands or other communications to be
               -------
given or delivered under or by reason of the provisions of this Agreement shall
be in writing and shall be deemed to have been given when delivered personally
to the recipient, sent to the recipient by reputable air courier guaranteeing
overnight delivery (charges prepaid), mailed to the recipient by certified or
registered mail, return receipt requested and postage prepaid or sent by
facsimile. Such notices, demands and other communications shall be sent to the
Purchaser at the address indicated below the Purchaser's name on the signature
pages hereto and to the Company at the address indicated below:

          Video Update
          3100 World Trade Center
          30 East Seventh Street
          St. Paul, MN 55101

          Attention:  Daniel A. Potter,
          Chairman and Chief Executive Officer
          Tel: (612) 222-0006
          Fax:(612) 229-9661

or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party, Any
notice, demand or other communication given hereunder will be deemed to have
been given as of the date so delivered; as of the first business day after being
delivered to an overnight air courier guaranteeing overnight delivery; on the
fifth business day after being mailed; when answered back, if telexed; when
receipt acknowledged, if telecopied; as the case may be.

          (h)  Governing Law: Submission to Jurisdiction.  This Agreement shall
               -----------------------------------------
be governed by and construed in accordance with the internal laws of the State
of Delaware Each of the Company and each Holder hereby irrevocably submits to
the jurisdiction of any state or federal Delaware court in respect of any suit,
action or proceeding arising out of or relating to this Agreement and the
Registrable Securities, and irrevocably accepts for itself and in respect of its
property, generally and unconditionally, jurisdiction of the aforesaid courts.
Each of the Company and each Holder irrevocably waives, to the fullest extent it

                                     -17-
<PAGE>

may effectively do so under applicable law, any objection which it may now or
hereafter have to the laying of the venue of any such suit, action or proceeding
brought in any such court and any claim that any such suit, action or proceeding
has been brought in an inconvenient forum. Nothing herein shall affect the right
of any Holder to serve process in any other manner permitted by law or to
commence legal proceedings or otherwise proceed against the Company in any other
jurisdiction.

          (i)  Entire Agreement.  This Agreement is intended by the parties as a
               ----------------
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein.  This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.

          (j)  Attorneys' Fees.  In any action or proceeding brought to enforce
               ---------------
any provision of this Agreement, or where any provision hereof is validly
asserted as a defense, the prevailing party, as determined by the court, shall
be entitled to recover reasonable attorneys' fees in addition to any other
available remedy.

          (k)  No Inconsistent Agreements.  The Company will not hereafter enter
               --------------------------
into any agreement with respect to its securities which is inconsistent with,
adversely affects or violates the rights granted to the Holders in this
Agreement.  The Company has not previously entered into any agreement with
respect to its securities granting any registration rights to any Person other
than as set forth in Schedule A attached hereto.

          (l)  Certain Restrictions.  The Company will not, without the consent
               --------------------
of the Holders representing at least a majority of all Registrable Shares issued
and on the date of determination, permit any amendment to the Company's
Certificate of Incorporation or By-laws, if such amendment would alter the
powers, preferences or special rights of the shares of any class of capital
stock of the Company so as to affect the Registrable Shares adversely in any
material respect.

     IN WITNESS WHEREOF the parties hereto have or have caused this Registration
Agreement to be duly executed as of the date first above written.

                                    VIDEO UPDATE, INC.

                                    By:/s/ Daniel A. Potter (CEO)
                                       --------------------------
                                    Name:  Daniel A. Potter
                                    Title: Chairman and Chief Executive Officer

                                    INGRAM ENTERTAINMENT INC.


                                    By:/s/ W. Donnie Daniel
                                       --------------------
                                    Name: W. Donnie Daniel
                                    Title: Senior Vice President

                                     -18-
<PAGE>

                 SCHEDULE A: PRIORITY HOLDERS/PRIORITY SECURITIES
                 ------------------------------------------------

1.   Registration rights assumed under any registration rights or similar
agreement of Moovies, Inc., acquired by the Company in March 1998.

2.   Registration rights relating to 50,000 shares of Class A Common Stock
issued in connection with the Company's acquisition of Video View, in January
1997.

3.   Registration rights relating to 25,000 shares Class A Common Stock issued
in connection with the Company's acquisition of Video Warehouse, in January
1997.

4.   Registration rights relating to 11,500 shares Class A Common Stock issued
in connection with the Company's acquisition of Tigre Holdings in March 1997.

5.   Registration rights relating to 50,000 shares Class A Common Stock issued
in connection with the Company's acquisition of Superior Video, in April 1997.

6.   Registration rights relating to the Unit Purchase Options granted by the
Company to D.H. Blair Investment Banking Corp. and its designees on July 27,
1994.

7.   Registration Rights relating to the Unit Purchase Options granted by the
Company to D.H. Blair Investment Corp. and its designees on April 17, 1995.

8.   Registration of Warrants issued pursuant to the Warrant Agreement between
the Company, American Stock Transfer & Trust Company and D.H. Blair Investment
Banking Corp., dated as of July 20, 1994.

9.   All warrants and underlying securities issued in connection with the Credit
Agreement among the Company, certain lenders and Banque Paribas, as Agent, dated
March 6, 1998, as amended


<PAGE>

                      SCHEDULE B: COMPETITORS OF THE COMPANY
                      --------------------------------------


     The proposed transferee or assignee of Holder must represent and warrant to
both Holder and the Company that he/she/it is not one of the following entities,
a subsidiary or affiliate (as defined in Rule 144 promulgated under the
Securities Act of 1933, as amended) thereof, or a holder of a minimum of 25% of
the outstanding stock thereof, for purposes of Sections 3 and 10(c) of this
Agreement:

     1.  Blockbuster, Inc.
     2.  Viacom, Inc.
     3.  Hollywood Entertainment Corporation
     4.  West Coast Entertainment Corporation
     5.  Video City, Inc.
     6.  Hastings Entertainment, Inc.
     7.  Movie Gallery, Inc.
     8.  Rentrak Corporation

                                     -20-