Digital Cinema CEO Bud Mayo started his career in the film industry 26 years ago, shortly after the PG-13 rating was introduced and the trend for “blockbuster” films began to really pick up pace.
In 1987 Mayo acquired his first theater in New Jersey and continued to strengthen his portfolio, amassing 45 theaters by 1998. He then decided to take these assets public under Clearview Cinema Group, Inc., which he sold to Cablevision Systems Corp. for $160 million.
As Deal Pipeline writer Richard Morgan puts it, Mayo then worked for Cablevision as president and CEO of its cinema division for a year before exiting and “reinvent[ing] himself as the leader in converting the industry from 35-millimeter film to digital projection.”
The film industry was in the midst of significant evolution from film to digital and Mayo recognized this trend designed Virtual Print Fee (VPF) as a means for studios to fund significant upgrades needed to replace their film projectors with digital equipment and technology. By definition, VPFs are a subsidy paid by a film distributor allocated to the purchase of digital cinema projection equipment – this fee is paid in the form of a fee per booking of a movie to counter the savings from the film exhibitor not having to ship a film print.
Fast-forward to date, and nearly all U.S. and Canadian theaters are fully converted to digital, which means the VPFs in their success have nearly worked themselves out of a job. Not one to let history or opportunity pass him by, Mayo has identified another means of revenue generation: alternative programming.
Mayo believes alternative programming has the potential to boost theater revenue by 20 percent. The instrument to execute alternative programming is his current endeavor, Digital Cinema.
Founded in 2010, Digital Cinema executed its Initial Public Offering in 2012 and now has 18 theaters with 178 screens. The company’s goal is to establish a national presence with 100 theaters and 1,000 screens by year-end.
“Mayo said his deal pipeline remains sufficiently robust to sustain rapid growth and consists primarily of theater-owning families with estate-planning objectives or liquidity needs (most likely caused, in some cases, by debt assumed to facilitate digital conversion). By adding scale, Digital Cinema’s so-called Digiplex Destinations can increase efficiencies in matters as mundane as the purchase of popcorn and other cinema staples. And by limiting his deals to those with accretive possibilities, he hopes to induce capital providers to continue funding his company’s acquisition spree,” writes Morgan.
This alternative programming includes unique film features such as the May 4 boxing match between Floyd Mayweather and Robert Guerrero, which Digital Cinema beamed live from Las Vegas to 10 of his 18 theaters. The showings aren’t limited to professional fights, but do cater to “cultish offerings” such as extreme sports.
Mayo says the showing of the events is quickly gaining traction and is already tightly woven into Digital Cinema’s business plan … so much so that Mayo would like to reclaim ownership of Clearview Cinemas, which Cablevision sold to Bow Tie Cinemas LLC, reports Morgan.
To read Richard Morgan’s full article, visit: http://dtg.fm/PR2s
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