Press Release January 16, 2007

Journalists and Selected Retail Buyers Attending the 2007 Consumer Electronics Show Get First Peeks at HandHeld Entertainment’s New ZVUE 260 Personal Media Player

At close to an ounce lighter than a video iPod, HandHeld Entertainment’s ZVUE 260 will feature a thinner/lighter design, brighter 2.5-inch screen, built-in speaker, SD starter cards in 512MB and 1GB configurations, with prices starting at under $100

SAN FRANCISCO – Jan. 16, 2007 – HandHeld Entertainment™ (NASDAQ: ZVUE, ZVUEW) today announced that it unveiled a prototype of its next generation, entry-level personal media player – the ZVUE™ 260 – to journalists and targeted buyers from major retailers at last week’s Consumer Electronics Show.

At 4.16- X 2.4- X 0.5-inches and 3.93 ounces, the ZVUE 260 PMP is comparable to the video iPod in thickness (6/100ths of an inch longer and 7/100ths of an inch thicker), yet weighs close to an ounce less (3.98 ounces versus 4.8 ounces, respectively). The ZVUE 260 is also the smallest and lightest ZVUE yet.

The ZVUE 260 features a 2.5-inch active matrix TFT backlit screen and supports videos running at up to 30 frames per second (fps) at resolutions of up to 320X240 pixels. The ZVUE 260 is also the first ZVUE player to feature a built-in audio speaker.

“We wanted to build a portable media player that is not only as sexy and useful as any player on the market, but is affordable as well,” said Jeff Oscodar, president and chief executive officer of HandHeld Entertainment. “We think we have accomplished these goals by creating the ZVUE 260.

“The top tech journalists in the world who attended the Showstoppers media reception during CES saw the debut of the ZVUE 260. Last Tuesday afternoon the ZVUE 260 was featured on CNN by Jim Louderback, editor-in-chief of PC Magazine, and CNN anchor, Renay San Miguel, both of whom commented on the player’s value/price proposition. (See www.zvue.com.) The ZVUE 260 was also featured on last Wednesday’s online broadcast of DL.TV (Digital Life Television) [see Episode #129 at www.dl.tv], and we look forward to more coverage and interest in the ZVUE 260 in the weeks and months ahead.”

As with earlier ZVUE models, HandHeld Entertainment will continue its practice of using secure digital (SD) memory as the storage media for the ZVUE 260. The ZVUE 260 will be available initially with at least two different SD memory configurations (depending on SD pricing at the time of launch). Entry level configurations should have a $99 suggested retail price, although actual retail prices and configurations will be determined by retailers when the product becomes available. The ZVUE 260 is expected to be available in mid-2007.

“We think consumers should be able to take advantage of the decline in the price of memory,” Oscodar said. “As a result, we ship our players with low-cost SD cards and allow consumers to add more storage capacity later as prices decline. That’s not possible with hard drive-based players.”

Featuring a rechargeable lithium-ion battery, the ZVUE 260 will also be compatible with Windows Media Player 10 with Microsoft’s secure Digital Rights Management (DRM) and support both Windows Media Video (WMV) and Windows Media Audio (WMA) formats, as well as other video, audio and image formats.

Held early each year, the 2007 edition of CES (www.cesweb.org) was held January 8-11 and attracted more than 140,000 attendees from around the world to multiple exhibiting locations throughout Las Vegas, Nevada, the annual home to the largest technology tradeshow in North America.

The ZVUE 260 and other ZVUE models are supported by HandHeld Entertainment’s network of Web sites that contain a total of nearly 12,000 videos. These include premium music videos, anime features, television shows, movies, cartoons, independent films, documentaries, news, entertainment and sports programs from companies ranging from Sony BMG to IMG Media and from Canadian Broadcast Corp. to Fun Little Movies, as well as free user-generated and user-submitted video selections and other forms of media. Customers can also select from millions of songs that can be played on a ZVUE through HandHeld Entertainment’s relationships with eMusic and Rhapsody (see http://www.zvue.com/html/music.php).

About HandHeld Entertainment, Inc.

HandHeld Entertainment is a digital-media-to-go company with a family of mass-market portable media players priced at mass-market prices as well as its own online video content store. Its ZVUE portable media players are available for purchase online and in retail locations across the U.S., while portable video lovers can visit HandHeld Entertainment’s premium video content store at www.zvue.com to buy pay-per-download videos. Customers can also download free user-generated videos and other media from the Free STUFF! section of ZVUE.com™, as well as from Dorks.com™, FunMansion.com™ and YourDailyMedia™.com, wholly owned subsidiaries of HandHeld Entertainment. HandHeld Entertainment’s common stock and warrants are traded on the NASDAQ Capital Market (ZVUE, ZVUEW) and Boston Stock Market (HDE, HDEW). For more information, visit www.hheld.com/ir or call 415-495-6470.

“Safe Harbor” Statement Under the Private Securities Litigation Reform Act of 1995

This release contains forward-looking statements. To the extent that any statements made in this release contain information that is not historical, these statements are forward-looking. These statements are subject to risks and uncertainties that cannot be predicted or quantified and, consequently, actual results may differ materially from those expressed or implied by these forward-looking statements. These risks and uncertainties include, without limitation: HandHeld Entertainment’s dependence on contract manufacturing of its products; its reliance on a single major mass-market retailer; its ability to develop and market successfully and in a timely manner new products and services; its ability to predict market demand for, and gain market acceptance of, its products and services; the impact of competitive products and services and of alternative technological advances; its ability to raise additional capital to finance its activities; its limited and unprofitable operating history; its ability to operate as a public company; its ability to reduce product return rates; the affect of inventory and price protections required by major retailers; the availability and affordability of digital media content; its ability to protect its proprietary information and to avoid infringement of others’ proprietary rights; its ability to attract and retain qualified senior management and research and development personnel; the reliability and security of its information systems and networks; and other factors described in HandHeld Entertainment’s filings with the Securities and Exchange Commission, including Current Reports on Form 8-K. These forward-looking statements are made as of the date hereof. HandHeld Entertainment does not undertake any obligation to publicly update any forward-looking statements. As a result, investors should not place undue reliance on these forward-looking statements.

MEDIA CONTACTS:

David Politis, Politis Communications, 801-523-3730 (wk), 801-556-8184 (cell), dpolitis@politis.com or
Jonathon Bacon, Politis Communications, 801-523-3730 (wk), 801-660-7820 (cell), 801-523-3750 (fax), jbacon@politis.com.

INVESTOR CONTACT:

Robert Prag, The Del Mar Consulting Group, Inc., 858-794-9500, bprag@delmarconsulting.com

HandHeld Entertainment, ZVUE, ZVUE.com, Dorks.com, FunMansion.com and YourDailyMedia.com are trademarks of HandHeld Entertainment. All other trademarks are property of their respective owners.