Cinedigm, formerly Access Integrated Technologies (AccessIT), was the first to sign virtual print fee (VPF) financing agreements and to execute a significant volume of digital cinema installations. To date, it has been the largest installer of systems anywhere in the world, around 3800. Cinedigm’s early model was to become a distribution gatekeeper for its installations, collecting fees for the distribution of content and security keys to its sites. While the studios welcomed its willingness to install digital cinema, they would not support its gatekeeper model. The result was disastrous for the company. Cinedigm’s shares dropped from $10 two years ago (a high of $14 over the past 3 years) to less than $.40 at the end of December, leaving it with a market cap of just $9.4M.
Cinedigm diversified by buying a satellite distribution operation, an alternative content company, a cinema advertising company, and a software company specializing in content distribution forecasting and sales. Outside of those that it purchased, the only assets developed have been its Theatre Management System (TMS) and associated content distribution and management systems for theatres. While these additional operations have helped with the bottom line, they have not reversed losses. It is difficult to read their balance sheet, which does not separate VPF “revenue” from revenues generated from operations. In addition, the company has a pile of debt, with reported interest payments adding up to around 30% of sales.
Cinedigm announced Phase 2 VPF deals in March for up to 10,000 screens with four of the major studios. But two majors remain to be signed up (Sony and WB), and it is in no shape to score a loan of $700-800M to underwrite the installation of 10,000 screens. However, it recently raised $8.9M to install 137 screens for Premiere Cinemas. (The $8.9M will go towards equipment purchases, and not towards operations.) In addition to Premiere, an installation agreement with Dickinson Theatres was announced. Cinedigm says it has so far signed up approximately 500 screens for its Phase 2.
The development of new content channels to theatres is an attractive area where Cinedigm and companies such as NCM compete. Making a move on the 3-D front, Cinedigm entered an exclusive deal with Canadian-based 3-D compression company Sensio, allowing it to broadcast live 3-D content over satellite using 2-D satellite channels. (For those interested, Sensio’s technology is not patented, and the known methods for compressing left/right images into a single 2-D frame are public domain.)
