Cinedigm Sells Unique Screen Media to Screenvision

The companies have also partnered their alternative content businesses.

Continuing to re-invent the company, Cinedigm Digital Cinema Corp. has sold Unique Screen Media, its cinema advertising division, to Screenvision, the New York based company which already has the largest North American private video network providing pre-show advertising messages to movie theaters.

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Cinedigm and Screenvision have also entered into a deal to partner their alternative content businesses. That means Cinedigm will acquire content that can be distributed on the Screenvision platform, which reaches 15,000 theaters currently. Cinedigm will also market that content to other theaters and plans to develop an ancillary after market for much of it.

Among the content that Cinedigm has delivered for showing in theaters recently was the Sarah Palin documentary The Undefeated, as well as the FIFA World Cup games and musical concerts featuring Foo Fighters, Phish and others. Cinedigm now plans to ramp up this activity.

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Screenvision becomes our partner giving us access to their relationships, sponsors, advertising time and their platform,” says Chris McGurk, who became CEO of Cinedigm this past January. “And we are going to give them a piece of the upside on the business as well. We think it’s going to dramatically enhance our plan to develop the alternative content business.”

Not only is the business plan to share revenue from in-theater special event programming with Screenvision, but McGurk says they are also making deals to share the back end revenue with the theater owners.

Only 5 percent of seats in theaters are full from Monday through Thursday and we think there is a huge upside if we can increase that capacity utilization,” says McGurk. “Until now, most of (the alternative content presentations in theaters) has been theatrical. Nobody is focusing on building ancillary value. The key to our strategy is to build and control that ancillary value and to share a piece of it with our exhibition partners, which for the first time will give them a cut of the back end on content being released on their screens.”

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McGurk says the plan is to create “channels” going forward with specific types of content, some of which can be sold on a subscription plan. In other words there would be a night in the movie theater when they show action sports or philharmonic music or pop concerts, which would be delivered by Cinedigm, and promoted on the Screenvision network, in theaters and in other ways. Cinedigm would also bring in outside sponsors and brands to help support the programs.

It aligns the incentives of the exhibitors and distributors and the content providers,” says McGurk.

This is the second transformative deal for Cinedigm this summer. In July, they sold their division which delivered physical and electronic content to theaters to Technicolor. In return, Cinedigm got some cash and a deal with Technicolor to use Cinedigm’s digital cinema operational software. Technicolor also became Cinedigm’s preferred content servicing partner for postproduction and distribution services.

In the Technicolor deal we sold hard assets of our delivery business which was a very capital intensive business,” says McGurk. “We were number three in that business behind Technicolor and Deluxe. In return we cut a long-term software deal with Technicolor where were a software and technology provider to them, so it helped enhance our software business.”

In both deals, with Screenvision and Technicolor, “we sold the assets of a non-core business and got cash,” says McGurk, “and did a deal to enhance our core businesses.”

Cinedigm, a public which had sales of about $79 million last year, continues to operate its biggest division, which provides services to convert movie theaters from analog celluloid technology to digital screens and presentation. Cinedigm serves as a kind of general contractor lining up equipment suppliers, arranging financing and setting up the virtual print fee deals with major movie distributors. They have made deals for over 9,400 screens so far and expect to have as many as 13,000 screens by the end of 2012.

What Cinedigm is not doing is investing in the production of the alternative or theatrical content themselves, at least not yet. They put up marketing dollars and provide the distribution and access to the theatrical platform. “Over time we hope to invest in content as well,” adds McGurk, who says they are also actively looking for acquisitions that will build the company even faster in the areas of software and alternative content distribution.

We believe the business of delivering alternative content to theaters is going to be a huge billion dollar plus global industry,” says McGurk.