Microspace is a satellite communications provider for business communications, digital signage, and digital cinema. It is wholly owned by Capitol Broadcasting Company, a privately owned company that owns and operates radio and television stations.
Private ownership by CBC has not allowed Microspace to take on equity partnerships in the industry, even though such partnerships could insure a successful entry into the cinema market. Instead, Microspace jumped in feet first, investing its own capital in satellite receiver infrastructure in cinemas. It first took on Cinedigm’s own cinema installations, finding a ready and willing exhibition customer in Carmike. It has since expanded its installation base to include 3500 screens in North America, and continues to grow.
Microspace’s “build it and they will come” approach appears to be working. It has priced its delivery services to be just under that of hard drives, which has been its prime competition. But other satellite services promise to encroach on its business, including those of Cinedigm, Deluxe, and Technicolor, bringing new price competition.
Microspace is playing a risky game. It does not have the depth of business relationships that older players such as Technicolor and Deluxe have. It does not provide a full service, one-stop-shop operation, which would include hard drive duplication and delivery as backup. Microspace may score business today based on pricing that leaves it with a healthy margin, but as competition grows, it may be faced with lower margins than it needs to continue operations.
This leaves one to ponder what the company’s Plan B is. Microspace’s inability to take on an equity partner leaves that possibility off the table. All of the value-add is in its networks operation center (NOC) and satellite uplinks in Raleigh, which cannot be sold without selling the rest of its business. This leaves only the field infrastructure available for sale, should it be necessary to pull out of the cinema business. Such a sale would result in a poor return for all of its effort.