Cineverse Corp (CNVS) 2014 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to Cinedigm Digital Cinema Corporation fiscal 2014 fourth-quarter earnings conference call. (Operator Instructions). As a reminder, this conference call is being recorded. I would now like to hand the conference over to Ms. Jill Newhouse. Ma'am, you may begin.

Good afternoon and thank you for joining today's conference call. Participating in today's call are Cinedigm's Chairman and Chief Executive Officer, Chris McGurk; Chief Operating Officer, Adam Mizel; and our new Chief Financial Officer, Jeffrey Edell.

Before I hand the call over to management, please note that on this call certain information presented contains 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 these 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 is as of today, June 25, 2014, and Cinedigm does not intend and undertakes no duty to update future events or circumstances.

In addition, certain of the financial information presented in this call represents non-GAAP financial measures. And now, I'd like to turn the call over to Chris McGurk. Chris?

Thank you, Jill, and thanks, everyone, for joining us today. I will begin with a brief update, mainly focusing on our high-potential, over-the-top digital networks business. After that, Adam will review our financial results and key growth drivers, and then we will introduce our new CFO, Jeff Edell. Then we will answer any questions you may have. So let's get started.

As we've discussed previously on these calls, we have been engaged in a three-year process to completely transform Cinedigm to take full advantage of the game-changing digital revolution. Our restructuring efforts, including the sale of two non-core divisions, the acquisition of New Video, the acquisition of Gaiam Inc.'s Entertainment unit referred to as GVE, and the complete refinancing of our balance sheet were all vital pieces of the transformation.

As a result of these strategic moves, Cinedigm is now one of the leading independent content distributors in the United States, holding direct relationships with over 60,000 physical storefronts and digital retailers, including Wal-Mart, Target, iTunes, Netflix, and Amazon, as well as all of the national cable and satellite TV video-on-demand platforms.

As the industry continues to shift to digital in theaters, to the home and mobile, and this transition is, indeed, happening much more rapidly than anyone ever expected, we have quickly pivoted the Company to be a major player in the emerging over-the-top digital networks business, a business with much higher potential margins and valuation multiples than the traditional entertainment business and one with tremendous value creation upside for Cinedigm.

We believe the strategic moves we have made to transform Cinedigm have positioned us to be a leader in this new era of digital entertainment distribution and content consumption. Audiences are now rejecting the old and outdated viewing rules established by the entertainment industry giants and instead are demanding to see the entertainment content they want whenever and wherever they want it on the digital devices of their choice. The enormous potential of this evolving digital channel entertainment ecosystem is evidenced by a plethora of recent digital network activity. The Chernin Group's $500 million deal with AT&T; AT&T's proposed acquisition of DIRECTV; Disney's up to $950 million acquisition of multichannel network, Maker Studios; the speculation about multichannel network full screens potential premium valuation; DreamWorks possibly new YouTube channel; and VICE's private auction to major media companies, to name just a few.

In the midst of this activity, we believe that Cinedigm is very well positioned to succeed in the over-the-top channel business for several key reasons: the enormous depth and breadth of our 52,000 title film and TV episode library; our digital assets; deep, long-standing relationships as launch partner with every major digital platform and device; our marketing expertise; our flexible releasing strategies where we do not play by the rules of the larger entertainment companies that need to protect their legacy businesses and old-school distribution windowing; and our strength in capital base.

And brand partners will also be a very compelling part of our OTT strategy. As evidenced by our Comic Con and Dove Foundation channel announcements, we clearly believe that partnering with strong bands is the most intelligent way to launch the OTC business. Partner brands can bring several key complementary assets, including strong name recognition within their demographic target audience; an avid and loyal customer base that can be converted to subscribers quickly and cost effectively, buy merchandise and also attract advertisers; and access to programming, duration expertise and marketing machinery and databases relevant to the target audience.

If we successfully implement our strategy with these brands, the Cinedigm digital channels essentially will become direct-to-consumer narrowcast versions of Hulu or Netflix or Amazon.

And from a shareholder perspective, this OTT strategy is extremely important because for the first time it opens up three new streams of revenues and profits for us that previously were available only to the large entertainment conglomerates with all their billions of dollars of investment in infrastructure in old pre-digital distribution. These three new recurring profit streams are advertising, subscriptions, and merchandising. These new streams should create economics for us similar to those of Netflix and Hulu with double the margins of our base entertainment business. We can launch channels quickly and more cost effectively than our competitors because we already operate a profitable distribution business with the necessary infrastructure to support that the new channels. That gives us a real economic advantage, very low breakeven points and a lower risk profile versus competitors.

Importantly, Cinedigm's OTT economic advantage should quickly help build a much higher multiple business than our base distribution business as has been evidenced by the recent M&A activity in this digital channel sector that I just described.

We successfully launched our first OTT digital channel, Docurama, in May. This channel is not available on 165 million devices, and we have already had over 165,000 downloads of the Docurama app on Roku alone, and we expect that number will continue to grow as new platform partners introduce the app. Advertisers are responding very well to the channel. Our June inventory was fully sold out, and Lexus has been a key advertising partner.

Our second digital channel called ConTV, in partnership with WIZARD WORLD Comic Con, will launch in fall of 2014. ConTV will include films, TV series, and original programming targeted to the large 18- to 44-year-old fan boy and fan girl audience, including titles from our 2000-episode anime library, our horror and sci-fi collection, and other key Comic Con-oriented properties.

WIZARD WORLD has 24 Comic Cons scheduled over the next 12 months with an expected attendance exceeding 700,000 customers, each typically spending $200 to $300 at the shows. Comic Con's fans are rabid entertainment enthusiasts, collectors, and technology savants, ideally positioned to support a Comic Con-focus network. They are also the prime demographic target, so we have already received tremendous interest from potential advertisers and sponsors. The key digital platforms are all also eager for the channel's launch.

And just last week we announced plans with The Dove Foundation to launch an OTT channel targeted to families and kids seeking high-quality, family-friendly and faith-based content. The Dove Movie Channel will feature selections from Cinedigm's library in those genres, as well as acquired content and some short-form programming.

This faith-based film genre has become one of the hottest areas of entertainment programming as evidenced by the recent success of the films, Heaven is for Real, which is nearing $90 million at the box office, and God's Not Dead, which has generated $60 million at the box office. And there is a film that Cinedigm will be releasing into DVD in August and will also be included on our Dove channel.

With over 90 million self-described evangelical Christians and 76 million family households in the US, the potential audience for approved faith and family entertainment content is enormous. Historically, consumers seeking faith-based and wholesome family programming have found very limited viewing options. Our Dove movie channel will provide these audiences with the approved and rated content they want when and where they want it. These three channels are just the beginning for our digital networks business, and we expect to announce more branded OTT channels in the coming weeks and months as we build our channel portfolio.

We could not have achieved this rapid progress in the digital network space without the successful completion in March of an underwritten public offering led by Piper Jaffray that provided us with roughly $30 million. As I referenced earlier, the shift to digital and the OTT channel business is happening much faster than anyone expected, and this new capital has made it clear to our existing and potential OTT channel partners that we have the resources and commitment to quickly grow the business.

We have also utilized this capital to support several accretive new genre movie slate fundings, which will benefit our channels, and we continue to closely evaluate additional content library acquisitions, low-cost original content, and potential acquisitions in this digital area.

As always, we remain very balancing cautious in our evaluation of these acquisition opportunities, particularly since all of the recent high-profile and high-priced M&A activity in the digital network space has created a seller's market. Given the success we have already had lining up partners for our channels, we're currently focused on attractive opportunities to invest behind our own internal development, which also has the clear benefit of not having to pay those overheated multiples. However, be assured, we're positioned to move rapidly when and if the right accretive acquisition opportunity presents itself.

Now let's talk about our base business. It's important to note that during this time of historic shift to digital in the overall entertainment distribution business, Cinedigm's capabilities and off assets of content distribution from physical and digital distribution to theatrical releasing and digital networks, are entirely interrelated in a virtuous circle. They all support and feed one another.

For example, content owners want a full-service distributor that can manage the physical-to-digital transition and that is direct with all major retailers. So, even in this time of declining physical sales, our large physical footprint in partnership with Universal for physical manufacturing is a key differentiator.

We also secure superior shelf space and marketing support from our retail and digital platform partners like Wal-Mart or iTunes because our theatrical releasing business provides valuable first-run content on top of our large volumes from our library.

Movie producers value our scale and our digital channel distribution as a unique offering compared to our competitors. Our digital networks benefit from our growing library, our new releases, and our ability to monetize this content across all physical and digital platforms and not just for an OTT channel. And so this cycle continues.

To feed this pipeline, during fiscal year 2014, we released 14 movies theatrically; acquired the distribution rights to 10 independent movies; and have plans to release at least 10 movies in fiscal year 2015. Kelly Reichert's film, Night Moves starring Jesse Eisenberg and Dakota Fanning, was released subsequent to fiscal year end, and we have five movies now in our upcoming release slate, including Open Windows starring Elijah Wood, and Song One, starring Anne Hathaway.

Additionally, subsequent to fiscal year 2014, we announced several Slade upwood deals and are finalizing several more as we add this new line of original movies to our platform. This is another example of how we're putting our strengthened balance sheet to work, and Adam will speak more about this in just a moment.

As we discussed on our last call, our base business is not without its challenges, particularly over the short term as we accelerate our digital OTT pivot. We continue to deal with the overall market decline in physical sales by focusing on more commercial product and aggressive marketing.

We also are refilling our sales pipeline, which was largely dormant for a year at GVE while the division was up for sale by their parent company. And we need to complete the transition of our back office to Universal, a very involved and complex process that unfortunately has already caused some shifting in reporting issues.

Finally, as I mentioned previously, this shift to digital is happening much more rapidly than anyone anticipated. So we will accelerate our investment in OTT now; quickly launch a portfolio of channels and grab beachfront real estate in this space immediately while we have the competitive first mover advantage versus our less nimble, but larger and more well capitalized potential competitors. All of this will put pressure on our near-term financial results, but ultimately all this short-term activity should help strengthen our base distribution business and create a strong and sustainable OTT business with doubled margins and higher potential valuation multiples from all of our new recurring revenue streams.

Finally, we're very pleased that entertainment industry veteran, Jeff Edell, has joined us in the role of Chief Financial Officer. Having worked closely with Jeff at DIC Entertainment while I was a director there, I know he can create an effective financial operation and manage a first-class financial effort at a public company. He is a classically trained CFO holding a CPA that he earned while working at KPMG and with significant private and public company experience, as well as a deep track record in finance and accounting, reporting, systems, M&A activities and business development. He has extensive experience in new media and technology, which will also serve us well over the long term. I know Jeff will be a great addition to our management team, and he will introduce himself later in the call.

And now Adam will review our financials and discuss key growth drivers.

Thank you, Chris. I will begin with a brief review of our financial results and then discuss our general expectations for the fiscal year ahead.

Revenues for the fourth quarter were $31.7 million, a 61% increase from $19.6 million in the year-ago quarter. Adjusted EBITDA from continuing operations for the quarter was $16.9 million in comparison with $15.3 million in the year-ago period. Non-deployment revenues for the fourth quarter were $20.3 million, a 206% increase with $10.4 million of this revenue growth attributable to revenues of GVE.

Adjusted EBITDA from non-deployment operations for the quarter is $6.1 million, up from $2.7 million in the year-ago period. Growth in non-deployment EBITDA was offset by lower virtual print fees as 30 wide releases were released in this quarter as compared to 36 in the prior fiscal year.

Now to discuss the fiscal year 2014 total results. Revenues increased 29% to $104.3 million during the fiscal year as the CEG business expanded by $27.3 million or 170% year over year, of which $21.3 million is directly attributable to revenues of GVE earned from October 21 through the end of our fiscal year. Organic CEG growth was driven by expansion and distribution fees earned from one, the recent acquisitions of physical and digital distribution rights of home entertainment titles; two, expanded fee revenue and modernization of our library of now over 52,000 movies and television episodes; and three, revenues from theatrical releases that have reached the home entertainment window. This growth was partially offset by a $4 million decrease in our non-controllable deployment services revenues due to, as we discussed a little bit earlier, a reduce releasing calendar as 118 wide titles was released this year as compared to 135 wide titles in the previous fiscal year; constrained booking patterns on many tent pole and wide studio releases as those 118 wide titles were crowded into the peak summer and holiday seasons and confronted limited screen spaces; and three, several underperforming blockbusters received smaller releases than historically common given the constrained screen environment.

The Company reported adjusted EBITDA including its Phase 1 and Phase 2 subsidiaries of $55.7 million for the fiscal year, down 1% in comparison to $56.4 million last year. The approximately $4 million reduction in DPS and service fees we discussed previously all directly reduced adjusted EBITDA dollar for dollar, offsetting the solid growth in CEG EBITDA.

Adjusted EBITDA from non-deployment business was $9.5 million during the fiscal year, increasing 59% from $5.9 million for the previous year. We also repaid $41.1 million of our nonrecourse debt from the recurring VPF cash flows we continue to use to delever.

As Chris outlined earlier, we have a tremendous opportunity to leverage our core content distribution business to drive shareholder value creation as we pivot into the digital networks arena. OTT digital networks offers Cinedigm the opportunity to build a high-growth, recurring revenue entertainment business with expected 40% to 50% EBITDA margins on top of our 15%-plus margin distribution infrastructure. We believe we can launch each of our channels efficiently with approximately a $2 million upfront fixed investment due to our existing infrastructure and deep content library. Then upon a successful channel launch, each channel can and hopefully will require an additional marginal investment to increase content rights, which we can also uniquely modify as both on the channel and in our core physical and digital distribution markets and to accelerate customer acquisition and marketing expenses. Our goal is to launch channels that each can't within two to three years, command 200,000 to 1 million subscription video-on-demand subscribers each paying us $4 to $10 per month, depending on the channel and content, as well as hundreds of thousands to 2 million-plus of advertising video-on-demand viewers generating strong $10 to $20 CPMs.

Some examples of successful OTT channels include Glenn Beck's direct-to-consumer Blaze TV. This channel is rumored to have 450,000 to 500,000 subscribers all paying $9.95 a month to access curated and conservative political content, generating roughly $60 million in annual revenues.

The Chernin Group paid approximately $100 million for 60% of Crunchyroll, an anime channel with approximately 350,000 estimated subscribers each paying $6.95 a month and generating $25 million to $30 million annually of revenue.

The potential for our OTT business is huge and real. Just like Netflix, Amazon and Google, we will invest to achieve this high value recurring revenue subscriber base. As such, we currently maintain very flexible budgets to respond to market opportunities. We have already announced three channels with one to two more in the pipeline design. Our required investment in aggregate will be higher than what we assumed just 60 days ago, and we are thrilled because of the great opportunities these new channels represent. We can make these aggressive and value-creating decisions because of our strong capital base.

In addition, as we look forward into fiscal year 2015, we continue to expect our solid base content distribution business and our stable recurring revenue digital cinema servicing businesses to provide strong and increasing cash flow to Cinedigm as they have in the past, as well as a platform to support our digital channels. That said, as we discussed during our last call, we immediately focused post-closing the GVE acquisition on rebuilding a relatively barren new sales pipeline that was neglected during an almost 12-month corporate sales process. We're seeing results already. 15 new customers signs since January representing over $30 million of annual gross revenues. But a limited amount of this revenue within business will flow into fiscal year 2015. New distribution label customers typically do not contribute to revenues for five to seven months post-signing due to long lead times in securing retail shelf placements and clearing/negotiating digital licensing and rental platform shelf space.

In addition, our new content production partners like Rapid Eye, Viva, and VMI plan to each produce three to five movies a year for our multiplatform distribution. But, again, they need to make those movies first. Revenues will typically arrive nine to 12 months after signing a deal.

We're purposely seeking to diversify our content slate outside the traditional festival acquisition circuit of quality new releases we can distribute in all channels. Our key customers, like Wal-Mart, Netflix, Amazon, and iTunes, to name a few, place a high value on these new releases, and we can increase our revenue diversification.

As Chris mentioned earlier, we are securing these new customers because our strengthened balance sheet enables us to credibly make multiple full-year financial commitments. In addition to these already-closed producer contracts, we expect to add two to three more in the relatively near term. We generally expect each of these partnerships to add $1 million to $2 million of EBITDA per annum at full volume, very meaningful to the performance of our base business. In particular, they will start to contribute later this fiscal year, but even more so next year as these partners reach full production scale. This area is and will continue to be an accretive and important use of our capital raise.

Fortunately, several of our recent labels, including the National Hockey League and others, are signed with enough lead time to contribute to the all-important Q3 holiday season. As a reminder, our first two fiscal quarters are always the seasonally slowest quarters in the fiscal year with much lower sales and earnings than the holiday Q3 and Q4. Given this seasonality, the issues with Universal that Chris mentioned on the physical conversion and the normal course of six to 12 months of leadtime to see the impact of newly signed business on our financial results and the launching of a digital channels commencing this fall, our growth will clearly be in the second half of our fiscal year. We're focused on the opportunities ahead as we lead the landgrab in digital channels and revitalize our content distribution engine.

I will now turn the call to our new CFO, Jeffrey Edell, to make a few comments.

Thank you, Adam. I am very pleased to be part of the Cinedigm team, and I appreciate the confidence Chris, Adam, and the board have put in me during this very exciting time at Cinedigm. To reiterate what Chris said, Cinedigm is exceedingly well positioned to succeed in the quickly transforming entertainment distribution landscape, and a growing organization of this size and ambition will require an ever more sophisticated financial organization backed by cohesive systems and financial reporting processes.

We are committed to making the appropriate investments in people and systems to achieve this goal. We need to be on top of our financial game, and I'm confident my extensive experience and track record will help get us there.

My background in new media, including my role as Chairman of Intermix Media, the parent company of popular social networking giant, MySpace, as well as my venture capital experience in the social media and entertainment arenas, provide me with deep experience and insights that should contribute great added value to Cinedigm.

I'm excited to be here at Cinedigm, and I look forward to taking a more active role on these calls in the future.

And now I will turn the call back to Chris for some closing comments.

Thank you, Jeff, and thanks, Adam.

The digital revolution that Cinedigm has been preparing for and facilitating is officially here in full force, and I am pleased that our efforts over the last three years have positioned the Company so well for this moment. As we have just reviewed, our digital networks business is moving forward full steam ahead with three over the top channels already announced and more in the pipeline. For this new channel business, content will be king, and strong brands will dominate, and Cinedigm's strategy revolves around both of those key elements. We look forward to growing this high margin and potentially higher multiple OTT business significantly over the next year, opening up three new recurring streams of revenues and profits for the Company.

We will also expand our physical and digital distribution business during this time of challenging industry change.

Cinedigm is now positioned strategically as the only small-cap public entertainment company poised to take full advantage of the valuation upside potential from the industry shift to digital. We believe that is a very strong hand to play for our shareholders.

We thank you for your support, time, and attention today and look forward to sharing our continued progress on next quarter's call. And we're now happy to answer any questions you might have.

(Operator Instructions). James Marsh, Piper Jaffray.

Thanks very much, gentlemen. I've got three quick questions here.

First, Chris, you talked a lot about the advantages of rolling out over-the-top networks. Can you talk about some of the challenges to rolling those networks out and, specifically, what you guys are doing to avoid those potential pitfalls?.

Secondly -- I will just rattle these three off -- on The Dove Channel, could you just remind us what the timing there is and whether that will be a subscription or an advertising-based channel?

And then just lastly, Chris, I think you mentioned that the Universal shipping and reporting issues, was hoping to get a little bit more color on that front.

Okay. Well, the easy one first is The Dove Channel rollout. We are looking at probably toward the end of the first quarter of next calendar year for that rollout, and we're going to launch it similar to the way we're going to launch the Comic Con channel, which really is a hybrid channel. It will be both advertising and subscription-based. They will be a pay wall in it.

The second question, the Universal issue, we have had a huge volume of both film and television content in our library of rights since we acquired GVE and transitioning all of that over to the back office at Universal, transitioning into their systems, into their reporting, et cetera, et cetera, we knew it was going to be a huge challenge from the beginning. And I think it would have been highly unlikely for us to get through that without normal transitionary issues, and we have experienced some in the last couple of weeks. We're not sure of the magnitude of those issues yet which will impact this quarter, not last quarter, and we will have a better idea of that within the next couple of months.

Finally, you asked me about the challenges and pitfalls of launching these channels. I think the biggest issue that we have is, as we said, our strategy is to match up our library of content. We have branded partners that can bring an audience to the table. I think probably our biggest issue is trying to sort through really the literally tens if not hundreds of opportunities we have in this space and really try to hone and focus on those channels that we can launch in the most effective way, grab that beachfront real estate that we talked about and grow our subscriber and our advertising base as quickly as possible. That really is the challenge that we are facing right now. We think that the three channels that we have announced so far have huge potential and really leverage our library and our brands. We've got a couple of announcements probably coming in the next 60 days, and those announcements we have honed in on after having evaluating tens of opportunities out there in the marketplace.

So our biggest challenge, again, is to identify those opportunities that we can jump out, be a first mover, secure an audience, leverage our library and create a sustainable stream of those revenues that I talked about.

James, this is Adam. The only thing I would add on that last set of points that Chris made is that, as we have always said, the two most expensive pieces of launching new channels are the content and the customer acquisition. And so I think when you look at risk, they should be in those two areas. We bring a lot of content, so that reduces risk. We are often creating original content and/or at a low cost or acquiring some additional library content to broaden the offering so that we have what we believe is a compelling offering at launch. And so we need to do that and do that on a timely basis. And then on a cost-effective basis, get those customers in the door, both on an AVOD and SVOD signup. That is why we have gone the branded partner route because we think that minimizes that risk because our partners bring an embedded customer base and relationship set that we can market against very quickly. And I think getting that momentum in critical mass on the customer side, which generates revenues, that makes the next five steps a lot easier because you are investing your revenues. You are not investing your capital.

So doing both of those things are really the key focus, and doing them well for a launch is what we have to get right. And right now we have a lot to do, and we won't launch these channels until we have those two things right. Because if you do -- if you launch it too soon, then you only have one chance to make that first impression.

And so that is where we are focused, and I think those are the risks and the opportunities, and we think we structured them appropriately to mitigate the risks.

And one other thing that just jogged in my mind about it -- bandwidth is very important to us here, too. We're not a giant studio. We are not General Electric. We've got around 100 employees in total. And we're very mindful of the fact, as opposed to some of our competitors out there who are saying they're going to do hundreds of channels, hundred of niche channels in this OTT space, we think we have got a strategy that makes a lot of sense in partnering with brands that bring a ready audience to the table. We will be happy with 10 or less channels as long as those are the right channels that are very effective against audiences that we have targeted. And our goal is to release probably ultimately between five to 10 of these channels as opposed to hundreds of channels out there because it's more important for us to launch the right channels and get them right and not stretch our bandwidth too thin.

That is very helpful. Thanks, guys. Appreciate the color.

(Operator Instructions). Andrew D'Silva, Merriman Capital.

I just have a few quick questions for you. First off, could you break out your segment revenues for the quarter, as well as what services revenues were for the fourth quarter and full year of fiscal year 2013 since software is no longer included in the historical figures?

I don't know if I have it at my fingertips. They will all be in the 10-K that will be filed, I believe, tomorrow. But, as we said quickly in the comments, the non-deployment revenues for the quarter were $20.3 million. So that is the combination of servicing and content. I'd have to dig them all out. I am happy to look for it, but why don't you keep going because that may take me a couple of seconds.

Okay, that is fine. Could you then provide a little context on where you are in your J curve for theatrical content acquisitions? Should we start to see it smooth out since you already had a pretty strong release schedule last year with 14 films? And then do you have an estimate on how many theatrical releases we should expect fiscal year 2015?

I think our goal this year is 10 to 15 releases. One of the reasons we're entering these production partnerships that we talked a bit in our another comments is they will provide for us a very steady, predictable stream of theatrical releases with three to five new movies from each of these producers every year, most of which we do theatrical and every other ancillary market. In addition to what we may acquire at a festival or a screening, we will have a steady stream at that point hopefully 12, 14, 15, 16 movies that we supplemented with one-off acquisitions.

So this is that transition year where we will continue to release movies that we have been acquiring, and as we said, we think at least 10 of those. And then the question for us is, how many come out of our production partners really in the last fiscal quarter because they are gearing those up as we speak? And there are a couple of people that we're talking to now who have some movies more or less in the can that we may find ourselves releasing this fiscal year if we get a deal done with them.

Are you still able to acquire, though, the content or at least help reduce the content at favorable terms? A year ago we were talking about between $250,000 to $750,000 for an acquisition cost for a theatrical release film.

Yes, we are looking at very similar things. And, in fact, one of the reasons we are creating the partnerships with various producers is -- and I think, Andrew, you and I talked about this in the past, in some ways if you liken it to the general, call it the venture investment cycle, there is C round, which I think in the film world would be funding a script, all the way to pre-IPO, which in the film world would be buying a movie at a film festival. We think it is prudent to have movies coming from multiple stages along that spectrum because at different points there's greater or lesser levels of inefficiency effectively in the pricing. And one of the reasons we are moving into these producers deals is we can secure a much more predictable stream of product.

We also think the economics right now are good -- are better than going to a festival and competing with lots of buyers at a screening. I think that festival dynamic is already starting to change, and pricing is becoming a little more attractive, and a year from now we may be more aggressive in the festival side. So we want to be able to move the levers where we see the best economic opportunities.

Again, emphasizing, our per-film investments in these multi-picture deals are about the same as what we were investing before in the festival circuit. And here we have the ability to have more input into the commercial elements in the film, the casting and those kind of things, and in the genre, which is going to improve, hopefully, the revenue profile of these pictures for us at the same level of investment.

Got it. And that makes sense. Then the last question I have, other than segment revenue breakouts, is, can you provide some metrics for out here? I believe you said you had 165,000 application downloads. Do you know how many unique visitors have actually viewed films off the application, and then could you give a little bit of color on some CPM metrics you are able to obtain at this point?

We really only have four weeks of data, and it is coming in right now. So I think in the next call, in August, we will have three, four months of data, and we will be able to lay that out for you. It's not really meaningful right now.

Okay. That's all I have for now, guys.

And just to your first question, the content in the entertainment segment had $17.5 million of revenues in the fourth quarter; the services segment, $2.8 million, rounding it off; and then the deployment segments were the rest -- $8.5 million in Phase 1 and $2.8 million in Phase 2.

Perfect. Thanks, guys. I will hop back in queue.

Michael Coolik, Bootleg Island Entertainment.

Chris, recently I was reading what went on at the Gabelli conference and reading about what Bud Mayo had to say and the possibility of Mondays through Thursday nights in the cinemas streaming in the live concerts, religious shows, sporting events to try to create some cash flow for the theaters when they are dark, during the week. And the idea came -- I just wondered if you have ever been approached with Broadway shows -- of possibly buying that content and creating a channel for Broadway shows after they have closed, taping them in HD and doing those through some of these other channels or networks, platforms and/or directly through your service division into Carmike and Regal, and some of the theaters on those Mondays through Thursday nights. The possibilities. I just wondered if anybody in your organization has looked at that. Because it already has built-in advertising, exposure and for all of these people around the country who cannot afford to go to New York or to pay those expensive tickets to the shows, and it would give a revenue stream to the shows after they have closed. And I just wondered if that's anything you all have ever looked at.

Thank you, Michael. That is a very good question. This whole area of alternative content in theaters Monday through Thursday remains a big upside opportunity for the business. And other than the Metropolitan Opera, I don't think anyone has really figured it out yet in an economic way that that can create a lot of value. We think there is an opportunity that exists there.

And I will tell you, this whole area of bringing Broadway to theaters is something we have talked about, and it is one of the channel ideas that we are having a conversation about. The issue specifically for Broadway is there are a lot of union issues and things like that that make it difficult to really pump that content into theaters in a profitable way. But that's not to say that we can't work that out and figure a way to do that. So it is something that is on our development list and we are working on.

I do think that for the channels we have already announced, once they reach critical mass, there may be an opportunity to bring those over-the-top channel presentations back into theaters. I think Comic Con is a perfect example where you could in markets where the Comic Cons don't go with their live conventions, you could designate Monday or Tuesday night, the first Monday or Tuesday night of every name month as ConTV night in your local theater. Encourage people to come in the same way they go to the Comic Cons, dressed up in their Star Trek and Star Wars outfits and do a couple hour presentation, maybe a mix of a live presentation from a Comic Con with some recorded shows that may be run on the Comic Con channel, and just create regular programming in theater on an ongoing basis. And I think that might be a perfect way down the road to fill that void in theaters during the weak. I know theater owners would love the idea, and it would be a way for us basically to further monetize our channel, drive subscribers and interest advertisers in the Comic Con concept.

So that is an idea for the future for our current channels. We're going to continue to look at the idea of bringing Broadway plays to the middle of the country, and we will see how that develops.

Well, thank you. I am in talks with some people in Broadway that have three shows running now, Tony-winning shows, and we're putting our heads together and seeing what we can come up with. And it is -- yes, diverse content for the theaters. Well, thank you very much.

It is a good idea. And get in touch with us for the shows that you have and we can have a conversation.

Mike Coolik, Bootleg Island Entertainment. Remember that one.

We got it.

I got it. Thank you.

[Steve Rod], [Saber Capital].

A question about Docurama. How are you going about building awareness for that channel, and how far in advance are you selling the ad inventory?

The last question, basically the ad inventory, we are working an ad network partner, and it is generally sold anywhere from I think spot to 30 to 45 days in advance. As Chris said, we have been sold out so far, so it is getting sold reasonably well in advance. That is one.

In terms of advertising and marketing it, we really rely upon good press, good word-of-mouth. We're not spending high dollars on the marketing of it. We are getting good placement from the platforms like Roku, and we will be live on Android and iOS very shortly with very good placement. So we are relying on that to start.

We are having a number of interesting conversations with branded partners to join us in the Docurama effort. We decided to launch that channel in advance of having a partner because we had such an extensive library and an established albeit modest brand. We wanted to get out there, get it going, and we thought that would be the right way to attract the right partner and results, having a number of very interesting conversations with very interesting partners to join that effort. And I think that will be the next step up in terms of marketing and energy because we would be leveraging that brand and that customer base. So that is one we have done in a different order than the other channels, and in some ways I think that was because it was first.

Got it. And so I take it then there's no thought about putting real marketing dollars behind us, just let it grow word-of-mouth, organically, and through partners.

Yes, I think it gets, to James' earlier question, what is the risk around the channel? Well, you start to incur much more significant risk if you have to invest millions of dollars in marketing and customer acquisition. Our strategy is to partner with the brand who brings customers, content, relationships that will effectively reduce that upfront marketing investment. We would rather share ownership and have economic alignment through an ownership share with a brand who can bring customers than to say we have to go spend significant dollars to try to acquire customers to break through the noise.

We think that is the right trade both short and long run, and that is what we are approaching all of these channels in that model.

Got it. And then last question, you explained and relates to the guidance you gave for the fourth quarter in February, you explained on the deployment side part of the shortfall. But what was the big driver on the non-deployment side of the business where you were short of the guidance you had given in mid-February?

We were spot in the range of our EBITDA guidance for the non-deployment business at $6.1 million. We had said $5.8 million to $7.1 million, I believe. The revenue variance, as we have talked about many times, can often depend upon the mix of licensed and effectively own the product where we consolidate all revenues, expenses, including having royalty expense out to our content owners, versus a distributed product where we are just the distributor, and the only thing that hits our financials is our fee. So the mix of what we sell can impact revenues. Ultimately they have similar dollars of margin. They can have obviously different percentages of margin because of what I just described.

So on our non-deployment business, we were right where we expected to be in our guidance from an EBITDA perspective.

Okay. Got it. Thanks.

Quinn Goldman, Park City Capital.

It sounds like very clearly you are going to be wrapping up your investment in growth. So I was wondering if that is going to detract from the debt paid down plan you guys have guided for like $40 million a year or so. Thanks.

No, because all the paydown of our non-recourse debt is driven by the virtual print fee revenues and the deployment businesses, which are effectively as we have talked in the past, the kind that is wrapped in a separate subsidiary that is nonrecourse to the Company. That all happens. So we should be paying down that $40 million to $45 million of non-recourse debt every year as we have been for the past couple of years, and we will keep doing that until we pay that down. So that won't change.

Okay. Perfect. Thanks.

Thank you. And I'm showing no further questions at this time.

Okay. Well, this is Chris. Thank you all for your support. We look forward to updating you on the next call. Thank you.

And ladies and gentlemen, thank you for participating in today's conference. This concludes our program. You may all disconnect, and have a wonderful day.