There is a dramatic shift underway in the entertainment world as cord-cutting consumers rapidly shift to streaming television. Starring in lead roles are companies like Netflix and Disney. But given the massive market opportunity, the supporting cast is extensive. One of the lesser-known players is Cinedigm (NASDAQ:CIDM).
Based in Los Angeles, Cinedigm is the nation's top independent entertainment studio focused on digital content distribution and related technology services. It provides streaming distribution solutions for any type of content and has a leading 20% market share among independent studios based on digital and physical revenue.
The company reported fourth-quarter and full-year results before the market open on July 6th. Revenues were $39.3 million for the full year.
Streaming Channel revenues were up 59%. This was driven by a 466% surge in advertising revenues which are derived from free ad-supported linear television (FAST) and ad-supported video on demand (AVOD) ad sales.
The company's Digital content licensing business is not growing quite as fast at 31% year-over-year but accounts for approximately 60% of overall revenue. Together, the two complementary divisions make represent a unique way for investors to play the fast-growing digital media space.
From Zero Viewers to Millions in 15 Months
Cinedigm's core streaming and content distribution business is profitable from an EBITDA perspective. It posted fourth-quarter and full-year adjusted EBITDA of $0.7 million and $6.0 million, respectively. The full-year EBITDA figure marked a 76% improvement over fiscal 2019.
Another key metric for the business is monthly ad-supported streaming viewership which swelled to 9.7 million by the March 31st fiscal year-end amid the increasing consumer interest in digital entertainment. With people spending more time at home, the COVID-19 outbreak helped bring this total to 13.2 million viewers by the end of May 2020. To put this figure in perspective, Cinedigm had a grand total of zero viewers just over a year ago.
But aside from having more downtime during the pandemic, why are consumers and advertisers suddenly taking an interest in Cinedigm?
For starters, it owns a portfolio of streaming networks that is seemingly growing by the day. Now with 16 networks in its stable, it recently signed an agreement with All3 Media to launch a pair of streaming channels focused on drama series (called So…Dramatic) and reality programming (So…Real). It also introduced a 24/7 comedy channel called Comedy Dynamics. Other recent network launches have been centered around faster-growing niches like e-sports, Japanese anime, and the surprisingly popular Bob Ross (yes, the TV painter guy) Channel.
Cinedigm also produces content of its own that includes well known Hollywood talent like Trace Adkins, Mira Sorvino, and Steven Seagal. Its digital library includes over 32,000 feature films, TV show seasons, and other premium content.
Much of its success is due to its appeal to a wide range of audiences. It targets the release of at least 8 to 12 theatrical releases per year and last year released movies in the action, thriller, Western, and sports genres.
Not only is the number of viewers taking off, but viewers are becoming more engaged. In FY20, viewing hours were up 43% and total viewing sessions were up 77%.
With the surging viewership has come increased interest from advertisers. It has signed on an impressive slate of 26 advertising demand partners which includes AT&T's Xandr, Verizon Media, and Beachfront Media.
Growing lineup of distribution partners
At first glance Cinedigm may look like another small media company that will eventually be squashed by industry giants like Amazon and Apple. But while there is no denying the roughly $100 million market cap company is small, it does not directly compete with the big streaming platforms.
In fact, they are partners. Cinedigm has relationships with over 40 of the world's largest technology platforms, OEM's, and cable companies. This list includes not only Amazon and Apple, but Comcast, Dish Networks, Roku, Samsung, and Vizio.
Combined these partnerships give Cinedigm access to a global addressable market of 670 million streaming devices. With more than 60,000 digital and retail storefronts in the form of Netflix, YouTube, hulu, and others, this means it can reach around 93% of the world's connected devices
A major narrative in Cinedigm's growth story centers around its ambitions in China. The company is the first independent entertainment studio to establish a presence in the Chinese market. Although China's online video market faces macroeconomic and regulatory challenges, it is expected to be one of the world's biggest hotspots for streaming growth.
With established relationships and a location in Beijing, Cinedigm is well-positioned to capitalize on this opportunity. It recently launched a streaming movie network called Bambu which features popular Chinese theatrical films and event television.
Building Momentum Suggests There Will be a Happy Ending
Cinedigm's four-pronged revenue model is focused on the launch of new channels, an increased distribution footprint, viewership growth, and expanded advertising partnerships. What's compelling about the company is that all these areas are experiencing growth.
This is giving Cinedigm the scale to effectively monetize its asset base. As the fourth quarter and full-year results confirmed, it is starting to be reflected in its financial performance. The monetization is likely to accelerate as it continues to build out its streaming capabilities from multiple angles.
Led by CEO Chris McGurk, a former President at both Universal and Disney Motion Pictures, Cinedigm's reputation in the industry appears to be picking up steam. The up and coming media company appears poised to be an under-the-radar beneficiary of the global shift from cable to streaming television.
Companies Mentioned in This Article
Compare These Stocks
Add These Stocks to My Watchlist
10 Buy and Hold Stocks to Add to Your Portfolio
“Set it and forget it” are words many investors don’t want to hear. Even the most venerable brokerage houses are encouraging their clients to actively trade so they can beat the market. Buy and hold is a relic, they say. It doesn’t reflect the reality of today.
In other words, “this time it’s different”.
As the ongoing volatility in the market shows you, it’s not different. It’s not even close to being different. The simple fact is that many active traders lose money by being too aggressive and too active for their own good.
And while it’s true that the market won’t always be this choppy, and certain stocks may be a great buy in months to come, right now investors are looking for safe harbors. One of the safest ways to invest is to find stocks that you can feel comfortable holding on to even in the worst of times. Frequently that can be because the stocks offer an attractive dividend. But sometimes, it’s also because they are in a market that is always in demand.
But that doesn’t mean you have to limit yourself to defensive stocks. You can find some quality buy-and-hold stocks that offer some attractive growth prospects.
View the "10 Buy and Hold Stocks to Add to Your Portfolio".