Eight years ago, Cinema Electric Inc. was creating wallpaper for mobile phones when handsets still came with grainy green and black screens. Five years ago, the company began delivering original media content for cell phones in the United Kingdom when American carriers lacked bandwidth technology to bring video to handsets.
Cinema Electric, an original mobile content producer, has been consistently ahead of its time. Now it is delivering content from leading media companies, such as Warner Bros. Entertainment Inc., to subscribers of 90 different phone carriers around the world.
It never became a mobile media giant, but the small company of 24 employees has quietly built a distribution network in 50 countries, through big-name carriers such as the United Kingdom’s 02 and Vodafone, Germany’s T-Mobile, Japan’s NTT DoCoMom and the United States’ Sprint and Verizon Wireless.
This means Cinema Electric’s original two- to three-minute shows produced in its in-house studio in Encino are available to 50 million subscribers worldwide. Most run in English and some are translated.
“We liken our business to HBO. We sell our network around the world,” said Josh Kaye, co-president of Cinema Electric.
With about 30 freelance producers and actors, the company produces 11 shows a day. This includes Portable Hollywood, an entertainment news show, Smashbrain, a sports program, and Mobile Laugh Network, a comedy show.
Cinema Electric boasts contracts with leading carriers in the U.S., Europe, Asia and Latin America but it by no means owns the market. This is because contracts with the carriers are not exclusive and there are hundreds of studios that produce content for cell phones.
Cingular, for example, works with 400 partner content providers, said Philippe Pouteonnet, a senior manager at QPass, digital commerce division of Amdocs Ltd., which sells operations software to telecom providers.
“Carriers love niche players because not one content provider can give you everything that’s available, from action movies to Bollywood films,” Pouteonnet said.
The mobile content production industry itself is still a niche. Only about 3.5 percent of the 185 million subscribers QPass services through domestic phone carriers downloaded videos on their phones this year, up from 1 percent last year.
Compared to 49 percent who downloaded ring-tones and 18.5 percent who bought games on their phones, the market segment is minuscule, said Pouteonnet, a senior manager at QPass.
“But the category is definitely increasing and users are interested,” he said. “While video downloading went up by 2.5 percentage points from last year, ring-tone downloads, for example, dropped by 5 percentage points.”
Hurdles remain
The limitations of companies like Cinema Electric lie not in its flair for creativity or production capacity, but in the strength of wireless antennas across the country.
Most phones in the U.S. are on a 2.5G-system, which Pouteonnet likens to a dial-up Internet connection when it comes to downloading videos. Most of Europe and Japan and South Korea are on a 3G system that feels more like DSL, he said.
“There are a lot of hurdles in place to do a mass rollout of broadband network and 3G,” Pouteonnet said. “You’d have to replace every antenna and carriers would have to overhaul their entire infrastructure.”
Adam Levin, co-president of Cinema Electric, is more optimistic.
“By 2010, there will be more video-enabled phones than TV sets, computer monitors and movie screens combined,” Levin said. “It provides a much more personal interaction, since you hold the handset in your hand.”
It helps that the company has positioned itself for the global market, which is rolling out 3G networks with more ease than the U.S. About 60 percent of Cinema Electric’s business comes from abroad.
Cinema Electric will stay global as it grows, Levin said. The company has hired a United Kingdom-based general manager, who will open a Europe headquarters. It also plans to expand its Mexico City operations.
The company’s main competitor, Sherman Oaks-based Go TV Networks Inc., is much more focused on North America. It’s also a bigger operation. Of its 100 employees, about 65 are focused in creative content production, said Thomas Ellsworth, chief operating officer of GoTV.
GoTV has about 500,000 subscribers to its program through AT & T;, Verizon Wireless, Sprint Nextel, Alltel, Helio, and Boost Mobile. Cinema Electric could not provide its subscriber numbers but said its programs are viewed 1 million times a month.
But the smaller, older company may become one of the greatest comeback stories in the industry. Three years ago, the public company became delinquent in its SEC reporting obligations.
Levin, 28, and Kaye, 27, consultants brought on to revamp the company in 2004, became presidents the next year when the board removed James Robinson, the founder.
The company has nearly completed an independent audit and plans to file a Form 10 with the SEC to get re-listed as a reporting public company in the upcoming months.
