Cinedigm: Holiday Disc Sales Performed Well12 Feb, 2015 By: Erik Gruenwedel
ConTV streaming service launching March 3
Independent distributor Cinedigm Feb. 12 said strong winter holiday disc sales helped narrow its third-quarter (ended Dec. 31, 2014) net loss nearly 80% to $2.3 million, compared with a loss of $10.4 million during the previous-year period. Revenue dropped 11% to $31.2 million.
It should be noted that studios and distributors' financials typically factor in amortization, or depreciation of film libraries over time. This amortization is reflected in the net results. CFO Jeffrey Edell contends a more accurate assessment of Cinedigm's financials is EBITDA, or earnings before interest, taxes, depreciation and amortization.
For the nine months ended Dec. 31, adjusted EBITDA was $35.5 million on consolidated revenue of $77.8 million.
"We have a lot of amortization and depreciation on our film library," Edell said.
Los Angeles-based Cinedigm, which is focusing efforts on creating over-the-top subscription streaming channels, said previous challenges regarding backend fulfillment issues with Universal Pictures Home Entertainment have been resolved, while assimilation of Gaiam Vivendi Entertainment (GVE) has entered the litigation phase.
“We benefited from a well-received content slate and strong physical displacement and sellthrough at our main retail partners during the holiday season,” said COO Adam Mizel on the Feb. 12 fiscal call. “In the last 90 days, we have added five more significant co-production partnerships and additional five one-off movie pickups to bolster our near-term release calendar.”
Indeed, Cinedigm Entertainment Group revenue increased nearly 79% to $16.2 million from $9 million in the second quarter. It should be noted that the aforementioned new film distribution deals and other new business signed by Cinedigm will not contribute to financial results until fiscal year 2016.
“It's interesting to note that according to our recent Nielsen videos scan report, physical sales of independent product are declining at a rate of 15% over the past year. However, Cinedigm's results reflect only a 9% decline on a net dollar basis during that same period,” said Edell.
Entertainment results included in part the day-and-date theatrical/transactional VOD release of Song One with Anne Hathaway. The movie screened at about 27 independent theaters generating $32,000 in revenue.
Cinedigm CEO Chris McGurk said the movie was distributed simultaneously online with Hathaway’s approval. He said the actress understands where movie distribution is going with the proliferation of digital technology and the fact that audiences want to view content now, and not the way Hollywood wants them to view it.
“Someone like Anne Hathaway gets that and says, ‘You know what, my goal is really to get access to as many eyeballs as I can possibly get, whether that's on an iPad or in a theater or on somebody's computer on VOD,’ they're willing to work with us and promote a day-and-date release plan and she did a fantastic job on this,” said McGurk.
Song One DVD and Blu-ray Disc releases hit retail March 24, priced at $14.93 and $19.97, respectively.
Regardless, Edell said the holiday revenue uptick couldn’t offset industrywide declines in physical sales or underperforming customer contracts inherited from GVE, such as WWE, which Cinedigm has dropped.
The distributor Feb. 12 filed a lawsuit against Gaiam seeking more than $30 million in damages from the GVE acquisition.
Finally, Cinedigm March 3 launches ConTV, a $6.99 monthly SVOD targeting fans of comic book conventions produced by Wizard World. A separate Dove Channel faith-based OTT service launches later this year.
ConTV will bow with about 1,500 hours of content, including 60% from Cinedigm’s library and 40% original fare from shows, TV series, interviews, panels and guest appearances from various conventions.
“It's going to depend on the way each channel is programmed and curated,” McGurk said.
B. Riley & Co. analyst Eric Wold said the addition of OTT channels (both subscription and ad supported) provide additional monetization opportunities in the coming years.
"Management’s goal of launching five OTT channels over the next 18 months is a clear indication of the ramp opportunities once the platform is built and utilizing the content library assembled over the past few years," Wold wrote in a Feb. 13 note.