Cinedigm Corp (CIDM) 2021 Q4 法說會逐字稿

Good day, ladies and gentlemen. Today, we are hosting a conference call to discuss Cinedigm's preliminary fourth quarter fiscal 2021 results. (Operator Instructions) Please note this conference is being recorded.

I will now turn the conference over to your host, Laura Kiernan, Head of Investor Relations. Thank you. You may begin.

Thank you very much. Good afternoon, everyone, and welcome to Cinedigm's fourth quarter preliminary results call. Before we begin, I would like to point out that certain statements made on today's call may contain forward-looking statements. These statements are based on management's current expectations and are subject to risks, uncertainties and assumptions. Potential risks and uncertainties that could cause the company's business and financial results to differ materially from those forward-looking statements are described in the company's periodic reports filed with the SEC from time to time.

All the information discussed on this call as of today, July 14, 2021, is -- and Cinedigm does not take -- does not intend to update until we file our 10-K.

With us today, we have Chris McGurk, Chairman and CEO; Erick Opeka, our Chief Strategy Officer and President of Cinedigm Networks; Gary Loffredo, Chief Operating Officer, General Counsel and President; Cinedigm and Cinema Equipment business and Senior Vice President of Accounting, Cheryl Odoardi, who -- as well as Yolanda Macias, Head of Content, all of whom will be available for questions following the presentation.

I will now turn the call over to Mr. Chris McGurk to begin.

Thanks, Laura. Welcome, everyone, and thanks for joining us on the call today. Before I begin, I wanted to address the delay in filing our 10-K, which we expect will be filed very soon. We're obviously not happy about it, and we apologize. We pledge to become much timelier in our financial reporting over the next few quarters because we owe that to our investors. The challenges we experienced in reporting on a timely basis are partly due to our growing pains as we have made such a major transformation in our business to streaming, which is growing extraordinarily fast organically and with 5 acquisitions that we have made over the last few months on top of that.

Given all that, we clearly need to staff up in finance to enable timely reporting, and we will fix that. And we don't want this delay to take away from the fact that we had a tremendous fourth quarter, perhaps the best in our history. So rest assured, our results had nothing to do with the delay.

So now I'll provide an update on our corporate strategy and key investment highlights. Then I'll turn things over to Erick for a more in-depth review of our streaming business results. Then Gary will cover the continued remarkable progress we have made over the last few months in eliminating debt and strengthening our balance sheet. Then we'll open the call for Q&A. And finally, I'll provide some closing remarks.

So we're thrilled to tell you about our preliminary results, which we believe represent the best overall quarterly business results in our history, with dramatic growth in our streaming revenues, a huge shift in our overall revenue compensation -- composition to streaming and the strongest balance sheet we have ever had. This performance was made possible by the entire battle-tested and capable media and technology team at Cinedigm, led by our C-suite and who all represent the single biggest asset we have at Cinedigm: our people.

To summarize where we stand now as a company. We have successfully completed the transition of Cinedigm from its legacy digital Cinema Equipment business to a high-growth, independent streaming, entertainment channel and content company. Underscored by the mix in our revenues this quarter, where our streaming and digital revenues represented 75% of total revenues versus 48% in the fourth quarter last year. And all of our key performance metrics were outstanding. Our streaming channel revenues were up 197% year-over-year. Our ad-supported streaming channel revenues were up 331% year-over-year. Our subscription streaming channel revenues were up 117% year-over-year. And we generated our fourth third quarter in a row for digital content sales to key streaming customers like Amazon and Hulu. Erick will speak to these specific results and KPIs in more detail in just a minute.

While we expect to continue this rapid growth in streaming revenues in the next fiscal quarter and beyond, we will also continue to execute our successful streaming asset roll-up acquisition strategy that should help drive revenues from our digital streaming business and an even more accelerated growth rate. This will be driven by our technological capabilities, our distribution muscle, our broad portfolio of streaming channels and our extremely strong balance sheet. We believe our strategy puts us one step ahead of potential competitors as it enables us to acquire accretive independent streaming assets while rapidly growing the business organically.

We are in an enviable competitive position as we have a multiyear track record as a digital technology innovator, a demonstrated capability as a force in launching and managing streaming channels and distributing digital content to the entire streaming ecosystem. We are long-term partners with every major media and technology player involved in streaming and have a strong track record of playing well in the sandbox with each and every one of them. I believe it is also very important to note that not only is there a huge potential market for our portfolio of enthusiast streaming channels, this targeted strategy we are implementing and our current channel portfolio itself are perfectly complementary to the big general entertainment subscription services investors are focused on like Disney+ and Netflix.

So we are not competing with those services at all. Instead, we are a complementary channel offering serving super enthusiast viewers on every key streaming device and platform.

Now I realize we have some new institutional and retail investors on this call, so I'd like to take a quick step back and provide a little background on Cinedigm to level set everyone. I think this will help put this pivotal quarter's tremendous performance into the context of the larger picture. Under an experienced senior leadership team, Cinedigm has been an innovator in the digital transformation of the entertainment industry for 2 decades now. And over the past few years, we've transformed from a digital cinema equipment company to being a leading independent streaming company of channels and content, driven first and foremost by technological innovation.

As our Digital Cinema business wound down, we invested significantly in growing a fan-centric enthusiast audience that consumes our 16 live streaming enthusiast channels while building a library of more than 35,000 film and TV assets. This strategy was implemented under the direction of our Chief Strategy Officer and President of Cinedigm Networks, Erick Opeka, who you will hear from in just a minute. Now the primary source of our revenues, 75% of the total in this fourth quarter, is our streaming and digital business segment. This business generates revenues through ad-supported streaming video-on-demand called AVOD, subscription streaming video on demand called SVOD, free streaming ad-supported linear television called FAST, and digital content sales of films and TV series to streaming service providers like Amazon, Netflix, Tubi and every other key platform. And this is all delivered through our world-class proprietary innovative streaming platform, Matchpoint, run under the leadership of Tony Huidor, our Chief Technology and Product Officer. And it's all focused on fan-centric enthusiast content, run under the leadership of Yolanda Macias, our Chief Content Officer.

As we conclude our transformation, and under the leadership of Gary Loffredo, our COO, we recently sold a large portion of our legacy Digital Cinema assets to AMC Entertainment for $10.8 million, to be paid out in chunks over 2 years. This helped our debt reduction initiative and I'd like to report, as of today, all of our debt has been entirely eliminated, and we have the strongest balance sheet in our history. That's almost a $50 million debt reduction to a 0 balance in just 15 months. We obviously believe that it's quite an achievement.

Now I would like to quickly lay out what we view as Cinedigm's key investment highlights. First, the company is leveraging a diverse enthusiast content streaming channel portfolio, with a very loyal fan base that is focused on a huge total addressable market. To name just a few of our launch and upcoming channels, we have an indie film label with Fandor; horror content with Screambox and with Bloody Disgusting; family entertainment with the Dove Channel; and iconic entertainer channels, including Bob Ross and now Elvis Presley. The total addressable market for this content is estimated to be $3 billion for the U.S. enthusiast market alone, which means we now have about a 1% share of this market and a lot of opportunity to grow our market share as we acquire the most attractive independent enthusiast content available.

The streaming category is growing at a healthy double-digit rate globally, according to PwC and Mirae Asset Securities among many others. That's being driven by AVOD and SVOD primarily, as digital advertising spending continues to increase and cord cutting by younger generations to subscribe to their favorite content rather than to unwanted packages. It's also driven by consumer preference toward third-party channels and content platforms, a rapid rise in consumption of FAST content and media consumption across multiple devices, platforms and brands.

Second, Cinedigm is well positioned in this changing media and entertainment landscape, and we are driving growth through technological innovation, which is a major competitive advantage for us. We have a world-class proprietary streaming technology platform that enables the company to deliver great streaming experiences at massive scale. Our SaaS-based distribution platform, Matchpoint, completely automates film and TV distribution while creating and curating new channels for streaming platforms. This technological advantage makes us the go-to partner for brands, content companies and cable channels seeking new streaming distribution platforms.

And finally, by executing on our key business initiatives, we expect to deliver sustained growth, thereby generating value for you, our shareholders. These key initiatives are focused around 4 main buckets: content; technology and distribution; audience; and financial performance metrics. For content, we are executing on a roll-up strategy by completing several content-related acquisitions, enabling us to super serve consumers, driving significant FAST, AVOD and SVOD growth. Erick will speak to this further in his remarks.

For technology and distribution, as I said, we've dramatically expanded our streaming content business through the Matchpoint platform, which we fully control with the recent acquisition of our India-based technology partner, FoundationTV. We plan to launch and scale our channel portfolio by ultimately building an umbrella or channel hub. We've established key partnership deals, including connected TV platforms, large OEMs, cable companies and other tech platforms. And we are licensing film and TV content to every key player in the streaming ecosystem, including Amazon, Apple, Netflix and Google.

For audience. We are growing our monthly active users significantly across our entire channel portfolio, which is key to creating long-term shareholder value. And finally, for financial performance metrics, we are monetizing our legacy Digital Cinema business. We eliminated, as of today, 100% of our debt and have enhanced our liquidity dramatically. We are well positioned to drive our cash flow through achievable growth targets while we balance that objective with rapidly growing our top line and market share.

And with that, I'll now hand things over to Erick Opeka to speak to our streaming business and strategy. Erick?

Thank you, Chris, and thanks to everyone for joining the call today. I'll provide you with some details in a moment, but I wanted to summarize, as of June 30, we had approximately 683,000 subscribers across our subscription portfolio of streaming networks. We've seen an estimated 116% increase in ad-supported viewer growth over the last quarter, and we're setting new records with well over 1 billion minutes consumed in the prior quarter.

We saw major increases across the board in distribution, platform expansions and partnerships, and this flywheel of greater distribution, increased viewership and ultimately, monetization led to an estimated 197% increase in streaming revenues in the fourth quarter versus the prior year quarter, the fastest growth we've seen to date in the business. Our success in executing our plan is attracting high-caliber distribution platforms, top advertising partners and most importantly, premium brand and content partners.

Given this dynamic, we expect to continue our accelerated growth trajectory over the next 12 months as we focus on the rapid expansion of our business.

Let me provide you with our preliminary key business highlights during fourth quarter of fiscal 2021, which was our quarter ended March 31, 2021, as they relate to Cinedigm Networks. First, our ad-supported streaming channel, or AVOD, revenues increased an estimated 331% over the prior year quarter and an estimated 23% sequentially over the last quarter. Our subscription streaming channels revenues increased an estimated 117% over the prior year quarter and 65% sequentially over last quarter.

Our streaming digital content licensing and sales, driven by partners such as Amazon, Apple and Tubi, recorded record digital sales billings growth for the fourth consecutive quarter in a row. Our combined streaming and digital revenues increased an estimated 66% over the prior year quarter and 27% sequentially over last quarter.

Total streaming minutes in the quarter were approximately 1.16 billion, a new company record, and were up 285% versus the prior year quarter. Our total monthly ad-supported streaming channel viewers rose to approximately 23.6 million, up 248% over the prior year quarter. Our streaming advertising demand partnerships rose 178% to 64 partners, up from just 23% in the prior year quarter. Key new partner additions included Comcast's Freewheel and TripleLift. On top of that, we grew our film and television library for linear streaming, which is a key growth area for the company by 88% to 6,591 film and television titles, up from 3,502 titles in the prior year quarter. On top of that, we increased streaming platform partnerships by 82% to 31 versus 17 in the prior year quarter, including new linear distribution partnerships and increased distribution with partners like TCL, Roku, Vizio and other key OEM and smart television manufacturers.

Total streaming channel distribution deals increased 170% to 135 deals, up from just 50 in the prior year quarter. Total live streaming enthusiast channels increased to 16 brands under management and live up from 13 in the prior year quarter. Also in the quarter, we acquired Fandor, the leading global independent film subscription streaming service with the largest collection of the independent films, documentaries and international features in the market and called the Netflix for indie film by The Wall Street Journal and a "streaming rabbit hole worth falling down" by the New York Times. We also acquired Screambox, a popular enthusiast streaming service targeting the highly-lucrative horror genre and called the "Perfect horror streaming alternative to Netflix" by Tech Times and named one of the best streaming services for 2021 by PC Magazine.

We also acquired the films around the world content library, adding 150 classic feature films with perpetual licenses and remake rights into the company's content library, along with an additional 500 hours of classic audio content.

Now let me speak to some of our key business developments and recent announcements that followed the end of the quarter. As we noted, total subscribers of the company's subscription video streaming services through June 30 reached approximately 683,000 active subscribers, up 412% over the same period in the prior year. Total streaming minutes in June 2021 reached an estimated 504.1 million, the highest on record to date and the first month the company surpassed the 0.5 billion minute stream milestone. We also announced the first NFT-based film releases under the Fandor Selects label, dedicated to releasing limited editions of significant classic contemporary and world cinema. For the first month of releases, Fandor Selects has chosen 2 classic titles celebrating the company's strength in westerns and film noir, including the film The Capture from 1950 and A Life at Stake at 1955. The company will continue to release NFT products going forward that clearly support our streaming business.

We also -- we're very excited to announce the upcoming launch of an exclusive AVOD and linear streaming service, the Elvis Presley Channel, in partnership with Elvis Presley Enterprises and Authentic Brands Group. The channel will feature concerts, films and series celebrating the King of Rock N' Roll. We also partnered with music-television linear cable network, The Country Network, or TCN, to expand their reach by aggressively launching them into FAST and AVOD into our base of distribution platforms.

As you can see, as this exhaustive list of both financial and business KPIs indicate, we are experiencing a rapid acceleration of revenues and growth, driven by a successful strategy of expanded distribution, increased engagement and successful monetization of that engagement. Given our recent deals with YouTube TV, plus recent deals with partners like Roku, Vizio, TCL and other smart TV manufacturers, we anticipate a substantial increase in total minutes consumed for FAST and accelerated subscriber growth in SVOD. On top of that, we expect considerable growth as we launch new premium networks in the vein of the Elvis Presley Channel and anticipate adding 2 to 3 additional networks of that caliber within this fiscal year.

On the monetization front, we're continuing to leverage both technological innovation and new ad demand partnerships to maximize and optimize revenue generation from both new and existing channel footprints. Combined with this aforementioned the low to mid-double-digit industry growth due to cord cutting and continued streaming adoption, we expect to maintain the current growth trajectory as we continue to execute on our plan.

With that, I'd like to hand it over to Gary.

Thank you, Erick, and good afternoon, everyone. I'd like to cover some of our preliminary unaudited key fourth quarter results with you before we turn it over to Q&A.

Our consolidated revenues were $8.3 million, representing an increase of 6.9% versus the prior year, marking a key inflection point for Cinedigm as our streaming growth has now more than offset the expected and planned decline in our legacy Digital Cinema business revenues. This growth was driven by 25% higher content and entertainment revenues of $7.2 million and was partially offset by the expected decline in the legacy Cinema Equipment revenues. Our streaming channel revenues were up 197% versus the prior year quarter and 39% sequentially over the last quarter. Our streaming digital revenues make up 75% of the company's total revenues in the quarter versus 48% in the prior year quarter. We expect this trend to continue as streaming digital revenue approaches approximately 90% of our revenue base.

During the fourth quarter, we reached an agreement with AMC Entertainment for a sales plan for legacy Digital Cinema equipment, with net proceeds over the next 2 years -- over 2 years to the company of $10.8 million. Over the 12-month fiscal period, we have reduced our total debt by $37.3 million as of March 31, 2021, representing a 76% reduction to a balance of $11.9 million from $49.1 million at March 31, 2020. This includes conversion of $15 million of convertible notes to equity at $1.50 per share.

As of March 31, 2021, the company had cash and cash equivalents of $16.8 million compared to $14.3 million as of March 31, 2020. On April 30, 2021, the company further reduced its nonrecourse legacy Digital Cinema equipment debt by $4.3 million. On July 8, 2021, we announced that $2.2 million of loan proceeds and the associated interest previously carried under the Paycheck Protection Program was entirely forgiven and eliminated. This loan worked exactly as intended as it helped us preserve our employee base during the pandemic and now expand it as our business rapidly grows.

As of today, as Chris mentioned, we further reduced our debt to 0 by paying off all of our nonrecourse digital cinema prospect loan in its entirety, fulfilling our strategy of completely eliminating our debt balance that stood at almost $50 million at the end of the prior fiscal year in just 15 months. We currently have ample liquidity available to us to invest in our growing business.

We reached another milestone. On June 28, 2021, Cinedigm was selected for inclusion in the Russell Microcap Index. But now that we have monetized some of our digital cinema assets, as evidenced by our recent sales agreement for $10.8 million over 2 years with AMC Entertainment while eliminating all of our debt, we are well positioned to continue to execute on both our internal and our roll-up acquisition growth strategies. Additionally, by finalizing the acquisition of our advanced streaming technology platform, FoundationTV, and leveraging our industry-leading Matchpoint technology, we believe we have solidified our position as the leading independent streaming content entertainment and technology company. With FoundationTV, we have now formed a new Cinedigm India division to develop streaming services for Indian and South Asian markets, in addition to powering Cinedigm's global portfolio of streaming services.

This concludes our formal updates. Operator, please open the line for questions.

(Operator Instructions) Our first question is from Dan Kurnos of The Benchmark Company.

First off, I just -- Gary, congratulations on being debt-free. That's quite a milestone. It's quite a turnaround over the last it would have been 18 months, I guess, really here. So certainly, kudos for that.

Erick, I guess for me first, just on some of the trends. Look, we obviously saw the headlines out of the recent upfront. We saw positive headlines from Roku in terms of upfront. We saw that Tubi and Pluto had really good numbers. CPMs are kind of through the roof right now. I'm just curious what you think sort of sustainability is, particularly on the AVOD side. How much you're benefiting from that. What you're doing in terms of trying to create or generate more inventory in those channels. And then I'll follow up after that.

Sure. Thanks for your question. So I definitely agree that -- so what's compelling for us right now is, as you see, add the -- there's a massive and direct correlation, obviously, from the rapid rise of our available inventory to ad revenue. For us, just given the heavy growth, one of the strategies that we've deployed is really to maintain what I'll characterize as value-based CPM and solid volume today rather than command -- try to command top market CPMs.

I think the strategy works out really well for us right now, because just the sheer volume and increase of available ad inventory that we have, it's that balance between keeping it full and charging a higher rate. We think we found the maximized mix by coming in at slightly below the market and having a higher fill rate rather than a premium CPM at a lower fill rate. We think that gets advertisers in and used to working with us, which will set us up well for when we rise -- raise the rates later in Q4. So -- but even with that, I think our rates are up 15% to 20%, even with us sort of playing the volume game on the programmatic side. We're still up 15% to 20% on CPMs over the same period last year, at least in June that I was most recently looking at.

Got it. That's helpful. And that makes sense. It's kind of interesting, perhaps you guys then become sort of an outlet that was looking for inventory since we know that there are some constraints with some of the larger players that they've been running into in terms of avails.

But just to follow up, maybe just talk about some expanded distribution opportunities that you have, that you're looking at in this marketplace. It's been really interesting to see both the consolidation as well as some of the new services really pushing hard, like the Vizio SmartCast, not that they haven't been around forever, but making more noise about it anyway. So maybe talk about that.

And then I'll just finish off with on the international front, you guys have been making a lot more noise lately, obviously, getting some personnel in place. And it looks like you're really starting to ramp operations there. I'm sure you'd love to get some more content going in that arena, but even beyond that, just how should we think about international starting to become a bigger contributor to the equation?

Yes. Great question. So first, on sort of outlook for the ad-supported and FAST market, which I think is a big piece of our growth, it's certainly the highest percentage growth for us, I see a couple of key trends. One is obviously the continued shift of ad dollars from cable to FAST and other ad-supported, I think, advertisers. I've seen lots of reports, and this is anecdotal, but that the comfort level with FAST is rapidly increasing. The results are coming in, and they like what they see. So I think you're going to see that sort of -- that long-term trend is just going to continue.

The second big thing, I think, is as we see, clearly the market is starting to consolidate around some the platforms and key leaders. We're looking to players like Google with Google TV, similar to what we saw with mobile devices, how Google, other players like Apple, had big leads domestically. But then in aggregate, globally, Android became the dominant platform. I think we are seeing sort of a shift already overseas. And I think we could see Google start to become a big player. Amazon, just given their investments in the IMDb TV platform, we think, is a big growth opportunity for us there.

So -- and then obviously, on the international side, for us, I think all of the revenue you're seeing here today is predominantly domestic. We have a little bit of international revenue, but it's very, very incremental at this stage. We think we're seeing some trends. Obviously, Europe is a comparable and mature advertising market relative to the U.S. But we are seeing markets such as South Asia, where the sheer number of users and the rapid adoption of connected TV in that market as prices come down and the offerings have vastly improved. We're starting to see that market become sustainable from a CPM basis.

And LatAm, which has had a pretty decent ad-support environment on the mobile side for many years, we are starting to see that market to really become a market with good ROI. So long term, we're going to look at those big billion-plus user swaps that we can start to attack. Having a base and a team in India that knows the market, knows the players and is already working on securing deals for us, we think that the future there is pretty bright in the coming quarters and years.

Great. Appreciate it. And [carry on], okay, you had us beat by $1 million on the top line. So it seems like a pretty good way to finish off the year.

We appreciate that comment. Thank you.

Our next question is from Brian Kinstlinger of Alliance Global Partners.

What a great quarter for streaming OTT, which by my calculation is $6 million in the fourth quarter. I think it really solidifies the transformation of your company overall. So while those numbers are fantastic, I believe you really hadn't even hit your stride, given the ad render rates have been so low, I think, in the past. So can you talk about your partnership with Amagi, if I said that right, Amagi Solutions? How it's all ready and will continue to drive stronger monetization of your viewership? And then as a result of that, the better fill rates, are brands returning more often to -- for additional campaigns?

Yes, yes. Great question. Yes. So Amagi has been one of the -- one of our sort of cornerstone partners in North America. I think Amagi is really powering the FAST linear revolution globally. I think they're managing hundreds of channels now. And one of the -- and I think we were their first customer in North America, just to show -- we'd like to think we were early to the market getting this established. But we've been building with them along the way.

And Amagi, one of the challenges you face in connected TV advertising is there's a lot of technical challenges to -- from when an ad call is made from a consumer at their home in front of their screen to being actually able to fulfill it, you need to be able to do that in record time. And that's at the heart, without getting too technical, of what the render rates mean.

In the past, we had struggled with render rates just simply because it's one of the first tackles you have to -- one of the first challenges you have to tackle in this business. Amagi, recently, we piloted some new technology with Amagi in this -- in our -- in the prior quarter -- in the quarter after the end of this fiscal year, but before the -- up through today, so I would say in April, May. And we've seen some pretty dramatic results in our ability to rapidly render advertising.

What that means is our ability to capture more revenue and more ad opportunities off of the same inventory and base is really going to enable us to accelerate and win bids and opportunities. So from that perspective, while we're -- so even though we're in the slowest ad period of the year, we've seen pretty dramatic results. I don't have those quantified for you today, but I would say anecdotally, those results have been quite impressive. And we expect, as we continue to work on that technology, both technology with Amagi.

But also, I wouldn't discount the technology of our partner at SpringServe. That was recently acquired by Magnite due to just how well they do and work with connected TV partners. So between Amagi partners like SpringServe and others, we think the big opportunity for us is not only are we -- as we're scaling inventory through new channels and scaling our footprint plus the secular trends in growth plus rising CPMs, increasing fill rates and improving render rates, we have a lot of levers to squeeze a lot more revenue out of the existing business. But when you add on all the other channels and other distribution that we're doing, there really is a lot of growth opportunity for us here that just hasn't been fully taken advantage of yet, even with all of the success we're demonstrating here.

So you have 16 channels, I'm not sure how many in production. You talked about the Elvis Presley Channel. How many of the 16 plus, the ones that are in production or being built right now, have that home run capability that you see like Bob Ross? How many can hit those peak numbers or the upper echelon of your revenue targets?

Sure. Well, one thing that I kind of look at this business, it's not an exact parallel business, but I think it's a good comparison. In broadcast, there's the .net or diginet business. That business has been around about 8 or 9 years really at maturity. If you look at what a top-performing channel in that sector and that space does, I would say it's in the $50 million to $60 million range. So that's 8 to 10 years into it.

My take in this space is the top-performing channels, when this business gets mature over the next 3 to 5 years, will probably be in the 50% to 60% range. That's what we're anticipating of what a top channel could do. Obviously, that's -- that could change depending on how the business evolves or the market evolves. So our goal is to have as many channels as possible at the level I would consider a top echelon channel. Today, obviously, we feel Bob Ross could fit that bill. It's -- the proof will be in the sustained ability to keep growing and driving revenue. But our -- but now that we really understand the dynamics and drivers of what makes these channels work, we're really 100% focused on those types of channels now.

So I think you will see from us as we move forward, if and when we announce new channels, it will be Bob Ross, it will be more of Elvis, more of Bob Ross. And we'll still take chances on start-up or new conceptual ideas, if they have a good brand and good content base. But overall, we're looking for big brands, broadly recognizable content, strong strategic partnership with major enterprises like we did with authentic brands, like we do with all 3 media and American public television. So that's going to be the par for the course going forward, less speculative channels.

It leads to my next question. In the past, a year ago, maybe 1.5 years when we first sat down, you guys targeted $2 million as a successful cash channel. Lots have changed, you've learned so much. Can you comment today on what would be the low-level threshold of a successful channel for you today?

Well, it really depends if you're looking at this as a sort of a multi-platform play, right, like as our look is go forward. So today, we have channels that are brands that both have a subscription component, an ad-supported component as well as a linear component. My take is our goal going forward is we really don't want to do channels that we don't think have mid- to high seven-figure potential in the near term, 18 to 24 months. That doesn't mean, obviously, every channel we launch, we'll do that. But I do think that in the near term, that's what we're -- what we strive for.

I do think that one of the key factors is always will the channel -- if the channel can secure the appropriate carriage and distribution, then those numbers are achievable. I think what we -- the market is obviously getting more competitive for carriage. I think we've been a party that's paving the way, proving the market. So obviously, success begets competition. As we've seen, we see other studios and others entering the market. But I think our strategy is to heavily differentiate ourselves and have offerings that the studios won't be unable to compete with and that can't be easily replicated by other parties. So that's really our model going forward. And I do think that the base of both channels we've recently announced and we'll announce in the future, sort of fit that paradigm.

Great. Last question I have is related to the movie theaters opening. You had a big order from AMC on the legacy business that obviously helped clean up the balance sheet. First of all, how do you see that order, I think it was $10 million-ish, being recognized over the next couple of quarters, next couple of years? How should we think about revenue? And then outside of that order, how should we think about that business going forward? Is it this is the last order? Or now that you have no debt, you'll continue to run this, although it's not a focus, high level the strategy of that business?

That would be Gary. And Gary, you wanted to comment on that?

Yes. Yes. So the $10.8 million from AMC, as we said, will be recognized over 2 years from the date that we signed the agreement. We're not giving specific dates, but it will be recognized in the quarter that we receive it. And there are additional systems out there that we can sell, and we are talking to exhibitors. We expect to be at CinemaCon this year and starting to talk to exhibitors about purchasing systems. Obviously, they've all been focused on the pandemic. And now coming out of it, they're -- we're reengaging with those discussions.

And as you said, the theaters are starting to open up, and we expect all the movies that were pushed off to come into movie theaters now, and that business will come back. But as we've said, that is our -- we planned and we expect that business to decline. And it will continue to decline. So it's not going to be -- it's not the focus of our growing business.

Our next question is from Laura Martin of Needham.

So the debt number, Dan, congratulations, awesome. My question is on normalized debt. So as you think about you guys doing acquisitions going forward, should we assume you'll do those all for equity? Or are you willing to bring the debt up somewhat to sort of lower the average cost of capital? How do you think about normalized debt level over maybe a 1- to 2-year time frame for starters?

Chris, do you want me to tackle that?

Yes, if you want to, but I think the short answer is it depends. But go ahead, Erick.

Yes, I think...

And we want to keep our options open. We have plenty of options and being debt-free gives us the option. Depending on the acquisition, if it can support some debt, we will consider that, but we want to be smart about it.

Yes. I think opportunistically, we do -- as we look at the landscape out there, we do see a lot of enthusiasm for our equity. I think from potential -- from the prior deals we've done we would expect that could be a component of future deals. But I do think having a debt-free balance sheet gives us a lot of flexibility structurally to do deals that we wouldn't have been able to do even a couple of years ago.

So frankly, it attracts -- it's a very attractive situation for people to be coming into as if they're looking to become a part. But we'll optimize the cost of capital by pulling whatever levers we think we have to pull to get -- to optimize and improve the ROI on a deal.

Okay. And then my second question is it's very rare to find a company that was AVOD, FAST and SVOD. So 3 questions about that, like cross ownership of so many streaming choices. One is are you -- we're sort of writing out here on Wall Street that SVOD will sort of relinquish consumers and consumer time to AVOD. Are you seeing that? Any kind of consumer shifts as the economies reopen?

Building on that, when you think about data advantages or other sort of hidden value, the upsides from owning all 3 pipes, could you sort of talk about that? And then when I think about organic growth, as you think about those 3 services over the next 12 months, which one do you think is going to grow its revenue faster organically?

Sure, sure. So our -- the basis of our strategy has always been to provide the consumer the ability to enjoy our brands, no matter what device, no matter what their economic station is in life, no matter their predilection. So what we're finding with a lot of our brands -- and by the way, this has been our strategy since 2015. I see a lot of companies today are sort of backdooring their way into the ad-supported. We launched all of our services with the idea that this was sort of a staple. And I'd love to say we were the first guys thinking of it, but Hulu really set that trend years ago, and we've always loved that model. We think it opens the tent broadly to consumers to experience and discover the brand and the content.

And so we look at -- for example, we have FAST linear channels that allow users to sample our brands and content. I kind of -- it kind of reminds me of another era when HBO would have the free HBO weekend that I recall very fondly from being a teenager decades ago, that expose you to the brand, let you sample it and then -- for free and then let you subscribe. So I think that sort of lineage of sampling brand exposure really does a fantastic job for not only elevating the brands and putting the brands in front of -- I would, for example, Docurama, Dove, CONtv, these are now house brands that when tens of millions to hundreds of millions of people, when they turn on their smart TVs around North America, are exposed to the brand daily as they're browsing through the channels, as they're sampling the content.

So I think that piece of it is undeniably a great lift. I think we like to maintain the subscription side. One, I think the recurring predictable revenues, especially on a distributed strategy, really provides a nice smoothing effect against the seasonality of the ad-supported business. And we do have the ability to push users back and forth between those buckets. I do think that one area that I do agree with you that we -- and we're investing more this year is in our platform and data. And that's predominantly because we do think having that direct-to-consumer relationship provides you that granularity of data and insights that you can't get from distributed channels and properties in that ecosystem or through licensing.

So -- and to answer your question about which platform we're most excited about for this next year, we're really excited about Fandor, which we acquired in January of this year. We think, as with WarnerMedia having shut down FilmStruck a few years ago, we really think that, that space is underserved. And globally, it could be quite a substantial audience. We're not looking at it just domestically, right? We're looking at it through the lens of how will this service work in South Asia, how will it work in Latin America. And so we're really going to be pushing hard for every enthusiast service that we launch for it to have a global footprint.

And the last bit on that is, we think, a premium blue chip global cinema streaming service could have very significant potential if we were to enter into telco distribution deals and other deals in territories like India and Malaysia and others. So we think that provides just a really significant growth opportunity. And so that's the one I'm probably the most excited about, but I wouldn't say Dove is no slouch just given how -- the dynamics of the family audiences that we've seen really uptake. And we're making a lot of content investments in that brand and channel over the next year.

We have reached the end of the question-and-answer session. I will now turn the call back over to Chris McGurk for closing remarks.

Thank you. And first, thanks to Laura, Brian and Dan for those questions. They were great. So again, thanks, everybody, for joining us today and for your interest in Cinedigm. And as I stated in my remarks, this quarter's preliminary results, I think, clearly demonstrate that we've completed our multiyear transformation to become a leading independent streaming company of channels and content. And all of that leverages our industry-leading digital technology and independent content distribution capabilities.

As part of this transformation, we made huge progress in transitioning our mix of revenue, with streaming digital revenues now making up 75% of the total. That trend is expected to continue towards nearly 100% of our revenues in the coming months and years. And as Erick stated, we expect to see very rapid growth ahead in the streaming category. Additionally, not only is there a huge potential market for our portfolio of enthusiast streaming channels, we have an enviable competitive position as this strategy and our channels are perfectly complementary to the big general entertainment subscription services like Disney+ and Netflix.

This, along with our relatively low content and marketing costs in the ad-supported business, plus partnering with and launching established brands like Bob Ross and Elvis Presley, enables Cinedigm to take a portfolio approach to our channel business, not betting the ranch on any one mega channel but adjusting our portfolio based on market response in a very efficient, high-margin manner.

Cinedigm represents a unique investment proposition situated squarely in the middle of the best part of the business, growing rapidly, both organically and via our roll-up acquisition strategy. And we also have a huge opportunity, as Erick mentioned, to grow very meaningfully overseas. And I want to again emphasize that we're fully committed to fixing our timeliness issue and we're appreciative of our investors' patience. We're confident that our preliminary numbers reflect our very strong results and are extraordinarily pleased about the state of our business being 100% debt-free while growing our streaming business like wildfire.

Finally, I want to thank our amazing team at Cinedigm for making this performance all possible. Not only the leadership team, including Gary, Erick, Yolanda, Tony and Cheryl, but also every team and Board member that has worked so hard in extraordinarily challenging conditions over the last couple of years. I want to sincerely thank all of our team members for their effort as well as our long-term investors, who have patiently watched our business transformation unfold and now finally arrived.

Please follow up with Laura Kiernan and the team at High Touch Investor Relations with any other questions you may have. She can be reached at cinedigm@htir.net. We look forward to speaking with you again soon. Thank you all.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.