This agreement gives ZVUE users and visitors to ZTV (www.zvue.com) access to one of the largest downloadable music video libraries in the world, featuring artists and recording acts from more than 20 labels, in genres ranging from hip hop, R&B and pop to country, rock and alternative

San Francisco, CA -- (ReleaseWire) -- 07/07/2006 --HandHeld Entertainmentä (OTC BB: HNDH), the company behind the ZVUE™ family of mass-market portable media players and the zvue.com download store, today announced that it has signed a video distribution agreement with SONY BMG MUSIC ENTERTAINMENT.

Under terms of the agreement, HandHeld Entertainment now has the rights to distribute Sony BMG music videos via download through the ZVUE.com download store, where consumers will be able to purchase and download individual videos for replay on portable video players and personal computers. The ZVUE.com download store employs the Windows Media DRM.

About Sony BMG Music Entertainment
SONY BMG MUSIC ENTERTAINMENT is a global recorded music joint venture with a roster of current artists that includes a broad array of both local artists and international superstars, as well as a vast catalog that comprises some of the most important recordings in history. SONY BMG Music Entertainment is 50 percent owned by Bertelsmann A.G. and 50 percent owned by Sony Corporation of America.

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 approximately 1,800 retail locations across the United States, while portable video lovers can visit ZTV™ (HandHeld Entertainment’s video content store at www.zvue.com) to buy pay-per-download videos or download thousands of free media titles. For more information, visit www.hheld.com or call 415-495-6470.

HandHeld Entertainment, ZVUE and ZTV are trademarks of HandHeld Entertainment. All other trademarks are property of their respective owners.

“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 Annual Reports on Form 10-KSB, Quarterly Reports on Form 10-QSB and 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 FOR HANDHELD ENTERTAINMENT:
Russell Page, Politis Communications, 801-523-3730(wk), 801-787-8435(cell), rpage@politis.com or
David Politis, Politis Communications, 801-523-3730(wk), 801-556-8184(cell), dpolitis@politis.com
INVESTOR CONTACT FOR HANDHELD ENTERTAINMENT:
Robert Prag, The Del Mar Consulting Group, Inc., 858-794-9500, bprag@delmarconsulting.com