Cinedigm Digital Cinema Corp., which helps theaters finance the costly conversion to digital projection, earns its money when studios release their movies.
But with a number of studios pushing back key releases – including mob movie “Gangster Squad,” which Warner Bros. moved from September to January – Cinedigm’s quarter took a hit. The company recorded a loss of $2.6 million, compared with a loss of $230,000 for the same quarter last year.
But Joel Achramowicz, an analyst who covers the company at Merriman Capital in San Francisco, shrugged off the loss, pointing out that those movies will be released eventually. In the meantime, the company is generating enough cash from the studio deals to pay down its debt load.
“This is a cash flow story, not an earnings story,” said Achramowicz, who personally owns Cinedigm shares. “As they pare down the debt, the value of equity will increase.”
When converting a theater’s projection system, Cinedigm must coordinate with movie theaters, tech companies and studios. The studios cover much of the costs by making payments to Cinedigm when they release movies, since they’re saving considerable money by distributing digital files rather than shipping bulky 35 millimeter film reels.
For each 1,000 digital screens the company deploys, Cinedigm, which is based in Woodland Hills and Morristown, N.J., expects to recoup $2 million of operating income in the first year and $1 million in recurring operating income in subsequent years.
Most domestic screens now have digital projectors, and the remaining holdout theaters, such as drive-ins, are expected to do their conversions soon, since the studio agreement to subsidize conversions is set to expire at the end of this year.
Management gave a positive outlook for the rest of the year during a conference call to announce the quarterly results, touting the company’s 875 digital screen installations during the last quarter, which was the company’s second best three-month number to date. Cinedigm has installed a total of about 11,000 digital cinema systems.
Despite the loss last quarter, the company increased revenue 7.5 percent to $22.6 million, due in part to other lines of business, such as servicing digital equipment; selling software; and distributing movies, including documentary “The Invisible War,” about rape in the U.S. military.
Breaking Ground?
Los Angeles City Council gave the go-ahead this month for NBCUniversal’s plan to develop property on the company’s Universal City back lot, in a decision that could pave the way for the project to break ground.
The plan includes the construction of two 500-room hotels, new production facilities, offices, theme park rides, retail stores and restaurants.
But it has been hotly contested in the San Fernando Valley since 2008 and has weathered years of public hearings with nearby residents concerned about negative impacts of the development, such as increased traffic.
In response, NBCUniversal earlier this year dropped plans to develop some 3,000 residences on the property. Other concessions have included funding bike paths along the Los Angeles River to the tune of $3 million.
After those compromises, the project won approval in September from the city Planning Commission before going to the City Council this month.
The project’s boosters say it will create tens of thousands of jobs, generate $1.6 billion for the local economy and be a particular boon to the local production industry.
“NBCUniversal is an economic engine for the San Fernando Valley and the entire Los Angeles region,” said Councilman Tom LaBonge, whose 4th District includes part of the San Fernando Valley property, in a statement.
About 75 percent of the property lies on Los Angeles County land and the project is still awaiting a vote by the Board of Supervisors.
Lone Ranger
Most of the six major studios joined together recently to make their movies available on a digital platform called UltraViolet.
The lone dissenter, Walt Disney Co., has been working to establish a competing platform of its own – though the Burbank entertainment giant hasn’t found the right formula yet.
Last week, Disney announced that it will shutter its sparsely trafficked online movie portal, Disney Movies Online, at the end of this year.
The platform has allowed users for the past three years to purchase and watch movies through their Web browser and also to stream movies that they had purchased on physical discs.
The service, however, has not allowed consumers to access the content on connected devices.
That might change with the company’s next attempt. Disney is reportedly working on a new platform to be called Disney Movies Anywhere.
Staff reporter Jonathan Polakoff can be reached at [email protected] or (323) 549-5225, ext. 226.
