Cineverse Corp (CNVS) 2010 Q3 法說會逐字稿

Good day, everyone, and welcome to the Cinedigm Digital Cinema Corporation third-quarter fiscal-year 2010 earnings conference call. Today's call is being recorded. Listeners are cautioned that some of the material discussed today may include forward-looking statements regarding Cinedigm's business and expected financial results. Words like anticipate, believe, estimate or expect, are generally forward-looking statements.

Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they are based on information currently available in certain functions, and there can be no assurances that they will prove correct. You should not rely on anything in these forward-looking statements, as to comments or representation as to the future results. You are encouraged to read the Company's Securities and Exchange Commission filing.

Now I would like to turn the presentation over to your host for today's call, Mr. Bud Mayo, Chief Executive Officer.

Thank you, operator. Good morning, everyone, and thank you for joining us on our third-quarter investor conference call. With me today are Adam Mizel, our CFO and Chief Strategy Officer, and Brian Pflug, our SVP of Accounting and Finance.

On this morning's call, I'm going to discuss the progress we're making in Phase 2 -- exhibitor signings, studio support, and our sales pipeline. Then I will bring you up-to-date on our entertainment group's programs and initiatives.

I will then pass the call to Adam who will update you on the commitment letters for the Soc Gen GE credit facility and the results of the quarter. When Adam is finished, I will conclude with an update on the key goals I outlined on the last call, and then open up the call for your questions.

Let me begin by reporting to you on our Phase 2 deployment plan progress. During the third quarter, the momentum that began in the second quarter has continued. Cinedigm is moving forward with exhibitor signings, various financing structures for exhibitors, and our recently agreed upon NATO CBG exhibitor buyer template, which can be used by its 6000 screen membership.

Following a year of collaboration with CBG management and Cinedigm, our exhibitor pipeline, including CBG, has grown to approximately 3000 screens, and continues to show traction. In December, we were excited to announce the first exhibitor commitment using our CBG Exhibitor-Buyer contract. R/C Theatres, owned by the previous Chairman of CBG, will add its 68 theatre screens to the 485 already included in our Exhibitor-Buyer financing structure.

In this structure, instead of providing funding for the equipment, Cinedigm acts solely as a servicer to manage the assets, and then passes through to the exhibitor its share of the Virtual Print Fees after deducting our servicer fees. This structure enables Cinedigm to leverage the years of experience we developed during the Phase 1 deployment, while highlighting our technology and services. The increased recognition for Cinedigm services provides a dual benefit, both through our cash flows and for our brand recognition.

And I'm delighted to mention this morning's announcement of the signing of B&B Theatres and its 205 screens to our CBG Exhibitor-Buyer plan, which now brings our total Phase 2 commitments to 829 and our backlog to 744. We actually installed 67 digital systems in the quarter, the highest quarterly total since Phase 2 began, and our contracted backlog for future installations grew to 539 by the end of the quarter.

As I said before, we now have 829 total Phase 2 commitments to date, including those installed earlier in the year. Our active pipeline is for an additional estimated 3000 screens and growing, which would bring us to about 8000 screens between Phase 1 and Phase 2 when signed and installed. Our plan is for the combination of Phases 1 and 2 to reach about 14,000 screens by the fall of 2012.

We also continue to add long-term contracted studio support for our deployment plans, actually both of them, Phase 1 and 2. In October we announced both Warner Brothers and Overture Films' long-term commitment to our Phase 2 plan, bringing us to 8 studios committed to Phase 2. To our knowledge, this is the highest number of VPF contracts for deployments anywhere in the world.

As you may recall, in October we announced the execution of a commitment letter with GE Capital and Soc Gen for up to $100 million. This underscores the value that Cinedigm is bringing not only to the motion picture industry but also to the financial markets. Adam will update you on its status in just a few minutes.

Moving onto our Entertainment segment, which includes CEG and UniqueScreen Media, or as we call them, USM. CEG is currently working on a program that we are calling [Movie for a Million] which refers to our ability to ensure a theatrical release of a quality independent movie for a budget of about $1 million.

We anticipate that the program will enable CEG to more effectively market to independent producers, combining CEG and USM's capabilities. CEG's October distribution of its second independent movie, OPA!, was an excellent example of why this program is beneficial to both independent producers and to Cinedigm.

This release included a red carpet live premiere two weeks before the opening of the movie, which included a live Q&A with actors Matthew Modine, Agni Scott and Alki David, moderated by actor French Stewart, which was sent via satellite to 56 Cinedigm theatre locations. Two weeks later, the movie opened as a regularly scheduled feature in 240 theatres around the country.

Cinedigm received VPFs in most of the locations where the movie played because the digital screens were part of our Phase 1 or Phase 2 deployment plans. We also received fees for the advertising and marketing support we offered the producer.

We are now preparing for the international and other downstream distributions of this lovely movie and to Cinedigm's financial participation in each of those channels. Overall, bringing OPA! to theatres was a profitable experience for Cinedigm, and its services creating a waterfall of revenues that touch all of our business units.

In December, CEG managed the release of Dave Matthews Band concert in 3-D called Larger Than Life. While there was no life premier event, our satellite delivery services were utilized for delivery, and all of the other business units again received a waterfall of revenues. These examples are the templates for Movie for $1 Million program that I mentioned earlier, which we expect to formally launch in an upcoming movie festival to take advantage of the many quality independents looking for a way to market and show their movie as it was made to be seen in movie theatres.

Cinedigm expects to release other independent movies and alternative content in a similar manner. Now at this point, let me pause and hand the call to Adam.

Thank you, Bud. The recently completed fiscal third quarter was our seasonally strongest financial quarter, due to the compacted holiday movie release season. We took advantage of this period to develop various Phase 2 financing solutions and to expand our delivery customer base.

As we discussed on our last call, we signed commitment letters on October 28 for $100 million of nonrecourse Phase 2 financing with GE Capital's Media & Communications Group for $75 million and with Societe Generale for $25 million. These two commitments will finance up to 2133 screens in our Phase 2 deployment.

The senior facility will be paired with vendor mezzanine financing and exhibitor contributions to fund the rollout. Cinedigm Digital Cinema Services will sign a service agreement and will receive a contracted revenue share with performance incentives to provide any advisory billing, monitoring, verification and payment services, similar to those we already provide through our Phase 1 deployment.

We currently expect to close this facility by spring, and commence additional deployments funded by this facility shortly thereafter in the fiscal first quarter. We've been working closely with GE and Soc Gen as well as our movie studio partners on various consents and amendments to our Phase 2 VPF agreements, and are currently finalizing legal documentation.

The multi-job facility will be available for customer signups for 12 months, and our Phase 2 team led by Chuck Goldwater is actively speaking with the potential exhibitor customers.

In addition, we agreed to expand our loan facility with KBC Bank by $2.9 million in the quarter to complete a customer deployment, and expect to have access to additional funding from KBC in the future.

As we discussed last call, at the end of Q2, Cinedigm changed its financial reporting structure in an effort to improve transparency to investors and highlight the five unique segments of our business. These segments are described in greater detail in our 10-Q, which will be filed shortly. I will quickly review the structure as we also discuss the fiscal third-quarter results.

First, we have separated our Digital Cinema deployments into Phase 1 and Phase 2 deployment segments. These are our asset-heavy segments and include the VPF revenues, expenses, EBITDA, Digital Cinema assets and nonrecourse debt associated with the deployments. We have chosen to report Phase 1 and Phase 2 separately to highlight that in Phase 1, Cinedigm owns the Digital Cinema assets and Cinedigm owns the residual cash flows after the repayment of the GE-led senior facility.

As of 12/31, there is $169.1 million of remaining nonrecourse debt at Phase 1 and trailing 12-month EBITDA of $43.5 million at Phase 1. We believe the present value of the cash flows and residual values of the equipment exceeds the enterprise value of Cinedigm, assuming the 15% cost of capital of our [Phase 2 notes].

The up to 10,000 screen Phase 2 deployment segment has a very similar VPF revenue structure tied to 13-year contracts with the movie studios and long-term use contracts with exhibitors. However, Phase 2 is a cost recoupment model in which VPF revenues cease once the cumulative cash flow receipts of Phase 2 have equaled the all-inclusive cost of equipment, financing and servicing.

In Phase 2, Cinedigm is the servicer and has no residual ownership. As of 12/31, Phase 2 had $10.3 million of nonrecourse debt. We expect the nonrecourse debt in Phase 2 to increase significantly in the next 12 months as we accelerate our deployments.

The third segment is our Services segment, which provides a variety of the services to our Phase 1 and Phase 2 deployments, as well as to third-party customers. As we discussed earlier, Cinedigm Digital Cinema Services provides the monitoring and billing, collection, verification and other management services to Phase 1, Phase 2 and exhibitor buyers.

This entity receives service fees from its customers. Until the existing Phase 1 debt is repaid, it receives a maximum fixed fee of up to $3 million per year from Phase 1, and as discussed earlier, receives service fees for all Phase 2 systems deployed. Currently, these revenues are small, $578,000 in the quarter, up from nothing in the second quarter. And for the time being, Cinedigm has decided to forgo its Phase 1 fees to deleverage by accelerating the amortization of the senior debt and to maintain a significant covenant buffer.

The second part of this business unit is the software group, which develops and licenses software to the theatrical distribution and exhibition industries, including our industry-leading TCC product, which is licensed to each screen in our Phase 2 deployments.

Finally, DMS is a distributor of digital content, primarily feature films and trailers in movie theatres and other venues through its unique satellite network and high-speed, high-efficiency hard drive replication infrastructure. This business unit counts its customers for either feature or trailer delivery to 4 of the 6 largest Hollywood studios and a growing number of other independent studios.

These three businesses produced a total of $5.5 million of revenues in the first nine months of the fiscal year, and are poised to grow rapidly in terms of both revenue and EBITDA as our Phase 2 deployments accelerate.

Our fourth segment, Content & Entertainment, includes our preshow advertising business, UniqueScreen Media, and our alternative content and independent film distribution arm, CEG. This segment produced $12.7 million of revenue in the first nine months of fiscal '10. The business has been negatively impacted by the recession and the across-the-board reduction in advertising spending.

Overall, the Phase 1 deployment in which Cinedigm owns the residual cash flows currently earns all of the EBITDA profit of the Company, $12.1 million in Q3, $33.5 million through the first nine months of the year.

However, this does not tell the full story, as most of the expenses related to Phase 1 and Phase 2 sits in our services company, and Cinedigm is maintaining a significant overhead investment to support the Phase 2 deployment program.

Our emerging growth businesses produced a total EBITDA loss of $3.5 million through the first nine months of the fiscal year and $1.1 million in the quarter. We believe the significant revenue and operating leverage inherent in our Phase 2 deployments over the next 12 months will drive this to positive cash flow.

To put this in perspective, we estimate that each incremental 1000 Phase 2 screens deployed will produce approximately $2 million to $2.5 million of annual incremental EBITDA to Cinedigm through service fees, software license and maintenance fees, and incremental delivery fees based on our current customer base. Hopefully, this new segment presentation will allow investors to more easily track our progress.

Now I will conclude by discussing the third quarter. Our consolidated revenues for the quarter ended December 31, 2009, were $21.8 million, which represents an increase of $1.9 million or 9.5% from our fiscal second quarter, and a decrease of $942,000 or 4% from the prior year's third quarter. This quarter is typically our seasonally strongest quarter for VPF revenues, with the holiday movie release calendar producing significant VPF and delivery revenues.

A significant portion of this year-over-year decrease in revenues is the result of the contracted 16% reduction in major studio VPF rates, which took effect last November 2008.

Phase 2 deployment revenues were $480,000 in the quarter versus only $29,000 last year. Service segment revenues remained steady at $1.7 million in each year's third quarter, with software licensing and Digital Cinema service fees higher due to the Phase 2 screens deployed, but lower DMS revenues due predominantly to reduced non-theatrical satellite services caused by general macroeconomic factors.

However, DMS has recently added several new studios as Trailer Express delivery customers who will be joining our service in late fiscal Q4 and in fiscal Q1.

Our Content & Entertainment segment's revenue increased 12% due to content distribution fees from CEG's relesae of OPA! and The Dave Matthews Band events. As a result, CEG saw a $1.8 million increase in revenues for the quarter versus last year. This was partially offset by an 18% decline in revenues from our advertising business, the bulk of which came from targeted reductions of nonprofitable customers and lower barter revenue recognized in the current period.

Local ad sales continued to suffer in the economy as well, down 14% year-over-year, though this was offset by a 22% increase in national advertising revenues generated by the partnership with Screenvision.

Our overall adjusted EBITDA was $11 million for both this and last year's fiscal third quarters, and improved from $9.7 million in Q2, a 14% increase. The strong EBITDA performance versus the revenue comparisons are due to increased service revenues earned in our Phase 2 deployments, the two CEG movies distributed in the quarter, and our continued focus on tight expense management.

Beginning in the current quarter, we have achieved a further annualized $1 million of expense savings through health benefits and headcount consolidation.

Our Services segment EBITDA loss was $503,000 last quarter versus positive $4,000 last year. This is primarily due to the reclassification of expenses from Phase 1 deployments to our services division this year as part of the new segment reporting. Going forward, increasing Phase 2 service fees from new deployments as well as Phase 1 service fees from existing deployments should improve these results.

Also, DMS's EBITDA declined year-over-year due to the revenue factors noted above, and the ramp-up costs associated with our new Trailer Express weekly trailer delivery program. This new product attracted two major studios at launch as customers, but has started slowly given the transition of those customers from previous providers, and the higher fixed cost nature of the weekly delivery program.

We recently added several smaller studios to Trailer Express as we described earlier, and we expect strong incremental margins from these new customers to improve these results in fiscal year '11.

The Content & Entertainment segment generated strong positive EBITDA of $508,000 this quarter versus a loss of $456,000 last year due to the CEG events this quarter, offset by a modest decline in USM EBITDA due to the macroeconomic factors cited above.

Our direct operating costs continue to be carefully managed. They're down 7% from last year's third quarter and are just below 31% of revenues. Our overall SG&A expenses have continued to decline versus the quarterly period last year, dropping nearly 11%, and stand at 19% of revenues this year from 21% last year.

Our interest expense totaled $9.3 million in the quarter, an increase of $2.3 million versus last year, though remember the interest expense on our new Sageview debt, which was $2.8 million, only $1.3 million of that was paid in cash and the rest was accrued as an increase to the debt and won't be paid until 2014. And that cash interest of $1.3 million was pre-funded for two years in the Sageview transaction through an interest reserve account.

Second, the cost of our current interest rate swap on our Phase 1 debt was $1 million more than last year due to the decline in LIBOR, but that will end in August when we lock in a new rate. Interest on our new Phase 2 debt, all nonrecourse, was about $200,000 for the quarter. These items were partially offset by a repayment of the old senior notes, which cost us $1.4 million in last year's quarter.

The balance sheet reflects total unrestricted cash of $12.1 million and restricted cash and investments of $16.4 million, representing the Sageview interest reserve and the Phase 1 GE facility interest reserve. This total cash and investments of $28.5 million compares to total cash of $26.6 million at March 31, 2009.

In addition to the $5 million prepayment of the GE Phase 1 debt funded by the Sageview investment, we also have voluntarily repaid an additional $3.6 million of the Phase 1 facility since August from excess Phase 1 cash flows, and intend to continue to do so as we accumulate cash at Phase 1.

Finally, a few words on the current quarter which, as you may recall, is our seasonally slowest quarter of the fiscal year. We expect Avatar will have a strong positive impact on the Company, as it has heightened public awareness and fascination with 3-D content and focused all studios on the huge box-office potential of 3-D. Since Avatar's release, the already robust 3-D pipeline, which has one to two 3-D movies released per month, has further expanded with studios repurposing existing films for 3-D and switching future production to 3-D

Cinedigm currently estimates there are in excess of 3500 3-D screens in the US. As a result, exhibitors are feeling even greater pressure to convert to digital to ensure the multiplex has not just one or two 3-D screens, but at least five or six to meet the studio and viewing public demands.

Cinedigm's deployment pipeline is growing as a result, but the Cinedigm VPF business model benefits from screen turnover, and Avatar has not turned over. It has held in theatres for eight weeks now, since it's 12/18 opening, and is expected to continue to hold on most, if not all, 3-D screens until March 5.

This will cost us approximately $1.1 million to $1.25 million of revenues and EBITDA at our Phase 1 and Phase 2 deployment subsidiaries in the current quarter, though we still continue to expect a modestly positive year-on-year quarterly revenue comparison, even with this reduction in revenues and EBITDA from Avatar. This is clearly a one-quarter anomaly, and we have noticed that other studio releases were shifted.

As we look ahead, the announced studio release schedule for the next two quarters is modestly higher than last year and will allow the Company return to more normal revenue and earnings results. In the short, medium and long-term, the accelerating shift at 3-D reinforced by Avatar should only enhance the Company's prospects.

I will now pass the call back to Bud.

Thank you, Adam. I'm now going to update you on the items we outlined on the last call as our priorities for the upcoming year. Number one, installation of Phase 2 screens. Update -- so far, we have some invisibility on the installation of just under 2000 screens in the coming year. But we're feeling pretty good about signing many more than that.

As I mentioned earlier, our pipeline has swelled to 3000 and is growing. Our job now is simply to convert that pipeline to accrue installation backlog to go with our already 829 already in place.

Number two, expansion of our satellite network from 270 to at least 400 sites. Update -- at this time we've identified at least 100 more sites we feel are great locations, and expect to begin installation shortly.

Number three, expansion of our content delivery business, both through natural increases in the number of digital screens installed and by increasing the number of studios, large and small, we deliver content for. Update -- we've added three large independent distributors as Trailer Express customers, and anticipate more expansion in the months ahead.

Number four, increase our industry-leading theatre command center software license fees related to our own deployment, as well as part of international Digital Cinema deployments by others. Update -- we have made progress on both fronts, and we're excited about our recent partnership with Vista to distribute our products internationally.

Number five, improve the performance of our preshow advertising business by expanding our sales force and the number of screens on which we sell advertising. Update -- our sales force has grown from 43 to 50, with a target of 55 this year. And we've increased our new exhibitor customer sales pipeline by several hundred screens.

Number six, increase the number of independent movies and alternative content programs that we distribute. Update -- in the third quarter, we released the independent movie OPA!, The Dave Matthews Band concert movie, and 3 Kidtoons features. At this time, we have plans for at least four additional movie titles and 10 alternative content programs in the coming years, including more live 3-D events in conjunction with our partners at SENSIO and our sponsors.

Number seven, market our unique CineLive interactive premier and Q&A capabilities to help launch major studio releases, as well as TV and cable programs. You might recall this was in addition to our own programs. Update -- we've made actually very little progress on this during the third quarter, as other projects have been a higher priority.

Finally, number eight, drive new high-margin sponsorship revenues for all of our events and programs by using the media sales partnerships we've put in place over the past few months. Update -- we currently have proposals outstanding for more than 4 million in sponsorships and expect to begin to realize the fruits of our labors over the next year. Overall, we've had a busy third quarter and as you can see, momentum has finally returned.

Looking ahead to fiscal 2011, we plan to exploit our leadership in 3-D alternative content distribution, and seek partnerships and programs with 3-D TV manufacturers and 3-D TV channels. The emergence of 3-D TV was a major news item as many of you know at CES, and we view it as a catalyst for more content in 3-D than ever. Stay tuned for an exciting year in 3-D, with Cinedigm once again leading the way with alternative content and statistic alliances.

In closing, let me say that calendar 2010 appears to be shaping up to be the year 2008 was supposed to be for Digital Cinema and for Cinedigm. Momentum has returned. Our entire team feels it, and we are responding. Excitement over the promise of growth in every part of our company has returned. Everyone at Cinedigm is redoubling its efforts to capitalize on including all the key initiatives I just updated you on.

I thank you for your interest in Cinedigm, and I will now open the call to questions.

(Operator Instructions) Lee Giordano, Imperial Capital.

Hi, good morning, everybody. Just a couple of questions for you. First off, can you just -- I might have missed this, but can you clarify how should we think about the screen deployments over the next year, either on a quarterly basis, and how quickly is the backlog going to be deployed? Thanks.

The 829 that I mentioned that includes a backlog of well over 600 will be installed primarily in 2010. There are a few that will drift into 2011, but there is a clear sense of urgency about installation. So once we sign an exhibitor, we get to work putting an installation plan together and generally, that's a fairly compressed installation plan.

To date, most exhibitors and most of the screens that are in our pipeline are really very much geared to get something done in 2010 -- calendar 2010.

Great.

I don't have quarterly numbers for you. I understand the question, but that is a moving target a bit, but you can reasonably assume that they are spread out fairly evenly. Adam may have --.

Yes, Lee, as we've discussed, there is always a little bit of seasonality in the actual deployment timing, as exhibitors do not want to do much business on the installation side from Memorial Day to Labor Day, the busy summer movie season when the multiplexes are full.

So most of our deployments -- that doesn't go to zero, but exhibitors will certainly have pressure to do a lot of installations before Memorial Day, and then significantly between Labor Day and kind of before Thanksgiving, then you get the holiday season and then, again, January to March. So there are two seasonally slower periods for deployments, just given the nature of the movie exhibition business.

Great. And then you talked about how Avatar has been a game changer for the industry, and it seems like this is going to be definitely beneficial for you guys. Can you talk about the negotiations that have been happening ever since this occurred? Has it been easier for you to negotiate deployments, and how is this really going to benefit you over the next 12 months to two years and beyond?

Well, there is no question that the momentum has shifted. Avatar has certainly been a contributor to that. First of all, anticipating Avatar, the number of 3-D screen conversions increased dramatically. And now that Avatar has been such a huge success, and the pipeline for 3-D distributions and movies of all kinds and some of the content that we will be putting out, is another driver for exhibitors and another reason for them to convert.

As I've said before, Digital Cinema is not about technology. It's about what you do with it, and what we're seeing now is an example of that. Avatar is a shining example of why exhibitors need to change to digital so they can play 3-D movies like Avatar and the 50 to 60 movies that are now in production, and coming down the pike for their theatres at premium prices and with attendance that is breaking all records.

So we're seeing momentum like we have never seen before. I mentioned earlier our pipeline is now about 3000 screens and growing. We've already signed 820. So, obviously, we are looking forward to a major surge over the next year of signings and followed by, of course, the installations and the revenue streams that are generated from each of those screens.

I mean what it highlights is the interim strategy or the interim approach of exhibitors in light of the recent credit environment of out of their own pocket funding one or two screens in 3-D in their multiplex, so that they could show the Avatars or the occasional 3-D movie. That is not enough.

There is just too much content and you need to have five or six or you won't be able to show all of the 3-D movies that are out there. To do that, they have no choice but to accelerate their conversions of the full multiplex to digital, which requires support from us, financing, the VPF arrangements, all the things that we do.

So it just puts more urgency in that pipeline, as Bud alluded. The other thing that it does is it certainly leads to more and more, not just theatrical 3-D content, but more and more emphasis on 3-D in the home market. The recent Consumer Electronics Show, all of the major TV set manufacturers were announcing and pushing aggressively new flat screen 3-D TVs for the home. And that is their new push starting kind of -- they are going to be rolling out between March and September.

There have been the creation of 3-D broadcast networks for those eventual home TV sets. But in the interim, the movie theatre is the best place to show that content. So more and more content, whether it's live sports, whether it's things like the Discovery Channel announced, will be created in 3-D with a very narrow home venue and a very interesting and logical theatrical venue to show the content and market the TV product.

So that creates more momentum on the content business side, and where as a result in a lot of conversations on ways in which we can take what's being produced or will be produced into theatres.

And let me just remind everyone, Cinedigm has the only 3-D broadcast live capability in the country, and we are going to exploit that in connection with some of these alliances and partnerships.

Great. And lastly, can you talk a little bit more about the international opportunity that you see in the partnership with Vista, how that is going to benefit you?

What Vista is doing is marketing our software, the theatre command center software that is the heart and soul of all of the installations we've done and continue to do. We get license fees for each of those, and it's very much of a software model. That license fee is about $800 per screen and then an ongoing maintenance fee, annual maintenance fee, which comes to about 18% of the license fee, or about $144 per year for the entire term, which goes out for about 10 years.

There is some customization and other opportunities for the software group there, but what we're doing here, of course, is setting the standard because we've got this installed in about 4000 screens and keyed up for thousands more.

The global acceptance of that software, which is vendor neutral, and the architecture that it allows in theatres is of great interest to theatres all over the world. And the version that we have currently is internationalizeable in every language and every currency, and we're marketing it through Vista currently.

Great. Thanks a lot.

(Operator Instructions) Marla Backer, Hudson Square.

Thank you. I have a few questions. First of all, you talked before about Avatar being on screens for eight weeks and still holding. Can you talk a little bit about where we are on turns overall? Where we were going into Avatar and where you expect to be in 2010?

Sure. Our overall screen turns have been rising slightly ahead of Avatar to somewhere depending -- somewhere between the mid-13s to 14 screen turns per year. Avatar, as I said, will basically for this quarter that we're currently in, in essence reduce that by on an annualized -- if you would spread it over the year -- by 50 basis points.

It's really a one-time anomaly. So overall, what we're seeing is a consistent pattern of studio releases and, in fact, a wider -- generally wider release pattern amongst movies consistent with more and more tentpole movies being made.

From our perspective, two things drive turn -- lots of things drive turn, but a couple major things. One, the number of releases, which is down overall in the industry. But more importantly than that is how wide they go and/or how long they stay.

What we're seeing is a trend to more and more wider releases on the major releases from the major studios, and then more smaller independent type films that don't play as long in a multiplex. Both of those are, in our view, good for screen turns over time. In the near term, we see pretty -- the ability to slightly increasing screen turns.

Okay, great. Alternative content, this has been something that you guys have talked about for a while. I've been a big believer and I've heard a lot of big exhibitors talking about their disappointments, that they are not going to get the -- or they didn't get the BCS game again this year.

Do you see opportunities -- you know, you had The Dave Matthews concert. Do you see opportunities for additional sports content, opera, concerts, games? All the things you talked about a while back, now with an improving economy, do you see opportunities to start accelerating the release of alternative content?

Well, I think, Marla, that was the key phrase, with this improving economy. Because so much of this sponsorship driven and sponsors, as you know, are pulling back or have pulled back. We are seeing significant change in that, and obviously led by the 3-D TV manufacturers and others to take advantage of our unique capabilities.

So I can tell you that we have every reason to believe we will be doing some live events very shortly. And as far as 3-D concerts are concerned, we have about 30 in the can captured in 3-D at four festivals. And what we're doing now is taking individual feature releases in the spring and looking to do the best of each of those festivals also programmatically during the year; just as we did Dave Matthews, which went to a record number of 520 theatres around the country.

So we're very excited about the prospects, but understand that it is very key to the economic realities of the sponsors themselves who have to allocate some of their advertising and marketing dollars to these sponsorships in order for them to happen.

And with respect to the BCS and the NBA, we didn't quite get there this year for exactly that reason, but we have other exciting events that are coming. And I don't want to jump the gun here and announce anything, but we are very close to doing some things in the spring that I think everybody will be very excited about as well.

Okay. And then my last question, sort of a housekeeping one. Rave was one of your early exhibitor partners. Now with the recent acquisition that Rave did, that sort of complex, convoluted acquisition of several of the National Amusement theatres, do you see an opportunity there to go back and retrofit digital systems for Rave?

We absolutely do. They are a great partner. We have a great relationship over many years, and there is every reason to expect that we will be doing things with Rave in the very near future.

Thank you.

(Operator Instructions) Sir, I am showing no further questions in the queue.

Well, thank you, everyone. Have a great day. Stay warm for those of you who've been caught in the snowstorm that just passed here in Morristown. So thank you, and look forward to the next call.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may all disconnect. Everyone have a great day.