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Image Cuts Q3 Loss, Moving Past Failed Deal

14 Feb, 2008 By: Erik Gruenwedel



Image Entertainment's attempt to turn the page on its failed purchase by BTP Acquisitions Co. LLC received a boost of sorts when the distributor narrowed its third-quarter loss.

Image cut its third-quarter loss 41% to $2 million for the period ended Dec. 31 from a $3.4 million loss during the same period the year before.

Revenue increased 12.2% to $27.3 million from $24.3 million due to strong catalog DVD sales. Top sellers included Deadliest Catch: Season 2 and Mythbusters Collection 2 (Discovery Channel) and Criterion Collection's Berlin Alexanderplatz.

In a call with investors, Image CFO Jeff Framer said 80% of the loss included costs associated with the merger and termination of a distribution facility in Las Vegas, among others.

“It sounds big, but a $499,000 adjusted loss is better than $2 million,” Framer said.

Despite the positive spin, one analyst called out Image president and CEO Martin Greenwald for overseeing a “$50 million” loss in shareholder value during the past two years, which included scuttling a $4 per share acquisition offer from Lionsgate, a failed output deal with Relativity Media and the scuttled BTP purchase.

“You need to look in the mirror and shoulder a bit of the responsibility,” said the analyst.

Greenwald said Lionsgate was looking to acquire Image's catalog and shutter the company. He said management felt the offer undervalued the company.

“We felt our business was growing,” Greenwald said. “It wasn't. It was contracting. We are all disappointed in the stock [decline].”

Image executives said they were upbeat about the Chatsworth, Calif.-based distributor's future, which includes renewed focus on acquiring feature films for DVD rental, sellthrough and electronic distribution.

Digital distribution revenue from Egami Media in the quarter increased 54% to $519,000 from 337,000 the previous year.

Image believes a key to its turnaround is a feature film and catalog distribution agreement with CT1 Holdings. CT1 is parent of ThinkFilm, Capitol Films and BTP and headed by financier and producer David Bergstein.

Image said it reached a deal with CT1 whereby it would continue distributing — despite the failed merger with BTP and demand for a $4.2 million business interruption fee — previously agreed-upon new and catalog titles.

The first ThinkFilm movie in the agreement, Before the Devil Knows You're Dead, streets April 15 on DVD ($27.98), Blu-ray and HD DVD ($35.98).

“We are excited and giddy about it,” said COO David Borshell.

He said the feature-film initiative expanded beyond CT1 to include as many as 50 releases on DVD, including both theatrical and direct-to-video titles. This includes a three-film DVD distribution agreement with Paris-based independent producer Celluloid Dreams.

The titles include biopic The Color of Freedom, originally released at the Berlin Film Festival as Goodbye Bafana, with Joseph Fiennes, Dennis Haysbert and Diana Kruger; action thriller Far North, with Michelle Yeoh, Sean Bean and Michelle Krusiec; and World War II prison camp saga Emotional Arithmetic, starring Susan Sarandon, Gabriel Byrne, Max Von Sydow and Christopher Plummer.

Freedom streets May 20 on DVD.

“It gives an opportunity to grow revenue,” Borshell said.

Thomas K. Arnold contributed to this story.

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