As has often been said in this report, Cinedigm is the poster child of why a deployment entity should not have public ownership. Deployment entities are not designed to make money through the financing of equipment, with studios carefully auditing revenues against recoupment of equipment costs. For the deployment entity to generate revenue that is not counted towards recoupment, it must sell extra services. This is apparent: no deployment entity has received more complaints for the extra services it forces on exhibitors than Cinedigm.
As bleak as this simple analysis may be, there are those who see a pony in it. In March of 2009, Adam Mizel joined the Board of Directors of Cinedigm and took the role of Chief Financial Officer, replacing Kevin Farrell. In August 2009, Adam became a fulltime member of Cinedigm’s executive team. Adam’s strength through ownership was apparent by the end of 2009, as he became the only member of Cinedigm’s management team required to list his shares. Listing shares is a legal requirement when a manager owns more than 5% of the company. With strength of ownership comes control. Not too surprisingly, CEO Bud Mayo was asked to resign in June. Adam took the role of interim co-CEO, along with Gary Loffredo, who also serves as the Company’s Senior Vice President-Business Affairs and General Counsel. Bud’s exit appears to have been a quick decision, as Chuck Goldwater cancelled his annual end of June golf trip to Scotland at the last minute.
Cinedigm has missed the market in several ways. By burying high fees into its deployment deals, it has turned away its core marketplace, the exhibitor. Without more exhibitors, Cinedigm has less opportunity to grow its other areas of opportunity, such as alternative content and software services. It could market such services outside of its deployment footprint, but it hasn’t taken those steps. It bought cinema advertising aggregator Unique Screen Media, but has done little with it. It had to develop substantial in-house software to conduct its deployment operations, but up to now its model for capitalizing on this investment was unrealistically based on world dominance as a deployment entity. As other deployment entities spring up around the world, encouraged by the willingness of studios to sign international deployment deals, Cinedigm is caught unprepared to license its software to these fledgling operators. Only UK-based Arts Alliance Media has effectively built a “deployment entity in-a-box,” ready to meet this new market.
For US exhibitors, it’s unlikely that the changes in Cinedigm’s management will have any effect on its deployment offering. The fees it charges exhibitors are a prime source of non-recoupment revenue. Until the company can demonstrate an ability to generate revenue in other areas, expect little to change.
