Cinedigm CSO Expects Netflix to Play in ‘Premium’ AVOD Space

As Netflix tries to wield an ad-supported VOD offering (see 2204200002), “I personally don't see them having a massive material impact on the market overall in this year,” though there will be “some impact” next year, said Cinedigm Chief Strategy Officer Erick Opeka on an earnings call Tuesday for fiscal Q4 ended March 31. Cinedigm’s 30-channel streaming portfolio scored new highs for viewer engagement in the quarter, but the company’s historically low stock price is causing ongoing frustration for investors and senior management, said CEO Chris McGurk.

“Everyone's gunning for Hulu” in the AVOD space, “and that premium sector of the AVOD market is where Netflix is going to be playing, in my opinion,” said Opeka. “I don't see them playing in the value to mid-market space where we're a great competitor. I think that's where we live.” Netflix didn’t comment. It’s expected to shed additional light on its AVOD ambitions when it reports Q2 results July 19.

Cinedigm in the past three years “built a streaming platform that has a scale to compete with the largest players in the industry on a global basis,” said Opeka. The Cinedigm business in fiscal Q4 reached 87.1 million monthly viewers across its “entire footprint of web, mobile, social and connected TV viewers around the world,” a 236% increase over the year-earlier quarter, he said. “As we rapidly approach 100 million monthly viewers, which I believe we could achieve in this fiscal year, we're approaching a scale only achieved by the largest studios and streamers.”

Viewer engagement on the Cinedigm platform also is on the rise, said Opeka. Its streaming minutes in fiscal Q4 reached 2.3 billion, up 118% from the year-earlier quarter and 73% higher sequentially from fiscal quarter, he said. These were “the highest-ever numbers for minutes viewed” for AVOD in Cinedigm’s “operating history,” he said.

Cinedigm’s content and streaming business strategy “is clearly working so very well” at a time “when many players in the industry are struggling to find their footing in this turbulent macroeconomic and business environment,” said CEO McGurk. Cinedigm’s full-year revenue of $56 million was up 78% year over year, including 147% revenue growth in its AVOD business, he said.

Cinedigm plans to use its “diversified risk-advantaged portfolio approach” to content channels and revenue streams to take “the fullest advantage of every facet of the massive ongoing sea change as consumers switch their viewing habits to streaming,” said McGurk. While many players in the streaming business “have only a single streaming channel or a single revenue source, we built organically and through acquisitions a portfolio of 30 enthusiast streaming channels targeted directly at specific high-interest audiences,” he said.

The Cinedigm portfolio offering is “complementary to and not competitive with the big general entertainment subscription services like Disney+ and Netflix,” said McGurk. Headlines “blast news” about Netflix “scrambling” to enter AVOD, but Cinedigm is “already established in advertising and has been there for a long time,” he said.

With Cinedigm’s stock hovering barely above its 52-week low, “geopolitical factors and market sentiments have made it a tough start to the year for most of the capital markets and certainly for Cinedigm's shareholders,” said McGurk. “It is especially frustrating for our employees and investors that this has occurred while we are performing so very well.”

Cinedigm remains “in the strongest position we have ever been in,” said McGurk. “We clearly believe that the market is severely undervaluing our equity, and we will continue to work to outperform quarter after quarter, which we believe will ultimately address the issue.” The company also continues to “evaluate options” to boost the value of its shares, including “a potential stock buyback program,” he said. The stock plunged 14.4% Wednesday, closing at 53 cents a share, just two cents above its 52-week low.