Market Insight

Cinedigm acquires New Video to become independent digital studio

May 01, 2012

David Hancock David Hancock Director – Research and Analysis, Cinema & Home Entertainment
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 Cinedigm has taken a further step down its strategic path to become an integrated independent digital studio by acquiring US distributor New Video. Deal is for an initial $14m ($10m in cash and $4m in Cinedigm stock) with a potential additional $6m dependent on Cinedigm's financial results over next few years. Acquisition builds on a previously announced acquisition partnership for around 12 films a year, an opportunity 'to date before marriage'. Cinedigm says it is paying about 5.6x New Video's 2011 earnings before interest, taxes, depreciation and amortization (EBITDA). It concurrently announced an upcoming secondary offering of shares with B. Riley & Co. and Merriman Capital co-managing.

New Video was founded in 1991 and since then has developed into a leading distributor of independent film, TV shows and specialty content to movie theaters and physical and digital domestic consumption. The company, which has the digital rights to 3,500 feature films and 6,000 TV episodes has built up relationships with most of the leading digital services and calims to contribute approx 12 per cent of the video content available on iTunes. Cinedigm wants to release at least two movies a month into its newly combined theatrical and home entertainment digital pipelines, and is also looking at developing a movie-streaming service.

Acquisition positions Cinedigm as an end-to-end distribution outlet for independent content, a strategy in place since arrival of new CEO Chris McGurk, a former vice chairman of Metro Goldwyn Meyer, in 2011. Cinedigm continues to be the leading VPF-backed digital cinema roll-out company, in US and also now abroad, and continues to provide software to facilitate operational management in digitised cinemas, as well as delivering alternative content to cinemas, but this deal provides the platform for Cinedigm's revenue stream once the digital conversion of cinemas is complete.

The resulting company can be considered the first digital indie studio, with expertise in acquisitions, digital cinema (finance, roll-out, operations, film and alternative content delivery) and downstream digital media (DVD, VOD, mobile). The level of integration should considerably bolster company's ability to acquire films for all media.

Cinemas are also having some success with TV on screens (such as Strictly Come Dancing Live in 3D which sold out across Apollo Cinemas in UK) and New Video may also bring some interesting television content to US cinemas. Savage and New Video co-founder Susan Margolin will serve as co-presidents of Cinedigm's Film Entertainment Group, overseeing exploitation of a catalog that includes feature and non-feature fare from Tribeca Films, A&E, The History Channel, Major League Baseball and Scholastic.

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Cinedigm New Video
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