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Cinedigm Q4 Profit Declines

29 Jun, 2015 By: Erik Gruenwedel

Distributor acquires minority stake in Shout! TV over-the-top video service

Cinedigm Corp. June 29 announced fourth-quarter (ended March 31) pre-tax non-deployment earnings of $900,000 compared with pre-tax earnings of $6.1 million during the previous-year period.

Los Angeles-based Cinedigm cited the loss of several packaged-media retailers as well as investment in four over-the-top video services for the earnings decline.

Cinedigm Entertainment Group (CEG) reported revenue of $15.7 million, down nearly 30% from revenue of $20.3 million. The company cited terminated contracts with certain retailers that did not meet “minimum financial return requirements” and continued lower consumer demand for DVD and Blu-ray Disc. The impact was partially offset by growth in digital distribution revenue.

That said, the company expressed satisfaction at the "strong performance" at Walmart in the fourth quarter year-over-year on packaged-media releases. New-release placements are up 7% year-over-year.

Cinedigm remains embroiled in litigation with Gaiam Inc. from its $51.5 million acquisition of Gaiam Vivendi Entertainment in 2013. Cinedigm is seeking more than $30 million in damages, alleging Gaiam “materially breached” financial details within GVE, including working capital. The two companies are currently involved in working capital arbitration.

Last week, Cinedigm and Shout! Factory announced plans to expand a strategic partnership with a minority investment by Cinedigm in Shout! TV, and plans to re-launch the OTT video service as both a subscription and ad-supported streaming service.

"This new relationship benefits all aspects of Cinedigm's business and adds Shout! Factory's classic pop culture-themed OTT channels to our digital network roster that includes CONtv, Docurama and the upcoming Dove Channel,” CEO Chris McGurk said in a statement.

McGurk declined to divulge financial details of the investment, saying only that there exist myriad cross-marketing and content opportunities between CONtv and Shout! TV.

“We thought [the investment] was a really, really good deal for the company,” he said on the June 29 fiscal call, adding that Cinedigm extended its distribution deal with Shout! for three years.

Cinedigm said it has generated almost 1 million free app installations for both CONtv (333,000 app installs) and Docurama (601,000) — the former launched in March 2014. 

CFO-COO Adam Mizel said user engagement in CONtv has been positive, with users on average watching one ad-supported program. He said the company is attempting to transition app installations into higher-margin paying subscribers.

“I think when you’re doing a good job, you would hope to get at least the low double-digit percentage of your ad-VOD users converting to SVOD,” Mizel said.

Finally, Cinedigm continues to finalize plans to launch faith-based Dove Channel later this year. It also hired consultant Korn Ferry to spearhead a formal search for up to four new directors, including a new non-executive chairman of the board.

The move comes following a partial shareholder exodus when management instituted a poorly-received (by some investors) private debt offering of $64 million. With the stock trading below $1 per share, management believes the new directors could appease investors.

"We expect to emerge from this process with a terrific board of experienced entertainment industry leaders and shareholder representatives who can add strategic and financial insights and relationships that will help propel Cinedigm forward," McGurk said.

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