Cinedigm shares are up 8.7% in after hours trading following the announcement of a deal that clarifies the company’s growing focus on digital entertainment that exhibitors can show at times when many have trouble filling seats. Cinedigm will continue to help theaters install digital projectors, CEO Chris McGurk tells me. But it’s turning over to Technicolor the part of the business that delivers digital entertainment to theaters via satellite or hard drives. “More and more our focus will be on software and content” says McGurk who ran Anchor Bay Entertainment before moving to Cinedigm in January.
Indeed, over the next two months he says he’ll begin to announce deals with theater owners who’ll let Cinedigm program venues like a TV network. “Monday could be action sports night,” he says. “Tuesday could be opera night. Wednesday could be Broadway night.” He says theaters could sell tickets on a subscription basis. One incentive to sign on: “We’re going to cut exhibitors in on the downstream VOD, DVD, pay TV and free TV sales from content that debuts in their theaters. I don’t think anyone has ever offered that in exhibition before.” Cinedigm also will continue to offer one-off events similar to the 3D showing in April of a live concert by Foo Fighters.
Meanwhile McGurk says Cinedigm is looking for other deals to help clarify its new direction. “The company is in five different businesses and has had a confusing story to the investment community,” he says. “We’re looking to rationalize our businesses other than software and content.”
Here’s the announcement of the deal with Technicolor:
Hollywood, CA, July 27, 2011 – Cinedigm Digital Cinema Corp. (NASDAQ: CIDM) and Technicolor today announced they have entered into a binding letter of intent for Technicolor to acquire the assets of Cinedigm’s physical and electronic distribution business, as well as to create a strategic software design partnership between the two companies. The transaction is expected to close within 45 days, subject to the execution of definitive documentation. The arrangement is expected to provide superior service and value, with greater scale and functionality, to the combined studio distribution customers of each Company.
Technicolor will also become a strategic software design partner with Cinedigm, supporting the development of next generation entertainment industry software products to leverage the opportunities created by the rapidly accelerating global digital cinema conversion. The initial phase of the software partnership will commence with Technicolor’s global licensing of the Cinedigm digital distribution software platform. Additionally, the companies will evaluate opportunities to jointly market Cinedigm software products to Technicolor’s software customers in key existing and emerging territories worldwide.
On the delivery side, Technicolor will become the preferred content servicing partner for Cinedigm’s growing alternative content and independent film distribution business. The companies intend to expand their delivery agreement as Cinedigm’s content distribution business grows organically and through acquisitions.
Financial details of the deal and partnership were not released.
“Technicolor is the market leader and highly respected in the delivery business, with strong customer relationships both domestically and internationally that will allow Cinedigm to expand our software and content distribution businesses faster and more effectively,” said Chris McGurk, Chairman and CEO of Cinedigm. “Simultaneously, by providing Technicolor access to Cinedigm’s leading software and delivery tools like CineXpress, Technicolor will enhance its position as a global innovator and become an even stronger player in its core delivery business. This is a perfect strategic alliance.”
“We are particularly eager to partner with Technicolor’s strong management team,” continued McGurk. “Claude Gagnon, Curt Behlmer and Dave Elliott are highly respected executives and we look forward to working with them to grow our software business, as well as to expand our content distribution business.”
“This agreement re-emphasizes Technicolor’s commitment to investments in digital services,” said Frederic Rose, CEO of Technicolor. “This transaction will allow our Digital Cinema business to expand its market leading electronic distribution footprint while continuing to provide the highest level of quality and security to our studio clients.”
As part of the arrangement, Technicolor will purchase certain assets of Cinedigm’s feature and trailer distribution delivery business based in Chatsworth, CA.