Cinedigm CEO Likens Vivendi Acquisition to Lionsgate's Deal for Artisan13 Nov, 2013 By: Erik Gruenwedel
Following the purchase, Cinedigm seeks to widen incremental revenue opportunities with indie film retailers
Cinedigm Entertainment Group's (CEG) purchase last month of Gaiam Vivendi Entertainment is on par with Lionsgate’s 2003 acquisition of Artisan Entertainment, according to CEO Chris McGurk.
Speaking in a Nov. 13 fiscal call, McGurk said the Vivendi deal transforms Cinedigm into the second-largest distributor of non-theatrical DVDs and Blu-ray Discs in the U.S. — larger than any of the major studios. He said it makes CEG the largest digital aggregator and distributor of independent content in the world, managing more digital transactions across all digital platforms and formats than any other studio.
When Lionsgate acquired Artisan, the latter studio was still riding the coattails of The Blair Witch Project, the 1999 indie horror movie that grossed nearly $250 million on a budget of less than $23,000. Lionsgate used Artisan to help fuel a formidable home entertainment business that continues to over-index theatrical and third-party content. Cinedigm would like to emulate that for indie films.
“The real transforming event for [Lionsgate] wasn't when they did The Hunger Games and bought Summit Entertainment,” McGurk said. “It was back in the mid 2000’s when they acquired Artisan and became the 800-pound gorilla among independents and physical distribution. We'd like to compare our acquisition of Gaiam to that. We think that's our Artisan.”
Indeed, CEG is setting the groundwork for an expanded 2014 retail presence distributing independent movies and documentaries in both physical and digital channels, executives told analysts.
McGurk said in the weeks following the Vivendi deal, management has solidified its packaged media distribution agreement with Universal Studios Home Entertainment, while seeking to mine incremental revenue opportunities via digital channels. McGurk said those efforts would accelerate in the first half of 2014 after Christmas.
The CEO said revenue from Cinedigm’s content distribution business is set to approach $90 million.
“I think over the next 3 to 6 months, Bill Sondheim [president of CEG] and I are going to be going to talk to all of our customers, personally and directly, if there are ways we can find revenue, like enhancements and synergies. We've had conversations with them, with everybody on the phone and a couple of people we're meeting with, as we speak,” McGurk said.
Cinedigm said it will not release upwards of 25 titles in 2014, despite projections to the contrary by B. Riley & Co. analyst Eric Wold in Los Angeles.
Indeed, in the current quarter, Cinedigm is releasing just two films. A documentary about the music culture that surrounds the Mexican drug cartel, called “Narco Cultura,” and then in December, a family drama called The Adventures of the Penguin King, voiced by Tim Allen and David Attenborough. Neither film will have the release arc of acclaimed Short Term 12 or The English Teacher with Julianne Moore — the former released theatrically, and the latter on premium video-on-demand.
“Will we do 20-25 releases? Volume isn’t our goal here,” CFO Adam Mizel said. “Our goal is to be in the theatrical releasing business in a smart way, in a very risk advantage way and provide a steady flow of content into the ancillary markets that really ups our gain when selling our catalog to a Netflix, an Amazon or to a Walmart.”
Meanwhile, Cinedigm reported a second-quarter (ended Sept. 30) net loss of $5.1 million, compared to a net loss of $2.6 million during the previous-year period.
Deployment revenue declined by $700,000, due to the reduction in releases by studios as compared to the prior-year fiscal quarter, and longer hold periods of several blockbuster movies, limiting screen space to accommodate the numerous other wide studio releases.
CEG also absorbed timing delays of digital license fee recognition and physical good shipments into the second half of the fiscal year; as well as the delay in a major DVD shipment into early October, from late September, at the request of the retailer. Revenue topped $20 million, compared to $22 million last year.