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Lionsgate drops digital downloads

Sonic Solutions buys CinemaNow service

Another studio has exited the digital download biz.

Digital software firm Sonic Solutions has acquired CinemaNow, a 9-year-old video download store partially owned by Lionsgate, for a paltry $3 million. Minimajor’s exit from the download biz comes a year after five studios sold Movielink to Blockbuster for $6.6 million.

Since the Movielink deal, however, Apple has aggressively stepped up its movie download and rental biz, making it harder for independents like CinemaNow to compete against it plus rivals such as Amazon.com and Microsoft’s Xbox Live. Longtime CinemaNow topper Curt Marvis exited the company to head Lionsgate’s digital media biz in April.

Sonic plans to use the acquisition to grow its download-to-burn business. It will form a Premium Content Group headed by Mark Ely, Sonic’s exec VP of strategy, whose focus will be on embedding CinemaNow onto devices and expanding the adoption of the company’s Qflix DVD drives in the process.

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“CinemaNow is a very logical fit for Sonic,” asserted Sonic prexy-CEO Dave Habiger, who maintains that digital delivery of premium content “is at a tipping point.”

CinemaNow now offers more than 6,000 movies and TV shows for digital distribution over a variety of platforms, and Habiger expects to ramp up existing offerings considerably.

“We hope to have twice that number at this time next year,” he said.

Lionsgate had a 21% stake in the Marina del Rey company, which had secured more than $40 million in investments over its lifespan, as well as content deals with all the majors. Despite the backing of EchoStar, Cisco and Microsoft, the company struggled to make a profit.

According to Sonic, CinemaNow has been generating around $1 million-$1.2 million per quarter in revenue on expenses of $1 million-$1.5 million. Company, founded in 1999, first offered digital movie rentals, later expanding to downloads when studios allowed that. As it struggled to turn a profit in a tiny market, the service added more profitable softcore adult pics. Nonetheless, it never found much of an aud and, more recently, had a hard time competing against companies like Apple, Amazon.com and Microsoft, which have much greater brand recognition and an ability to leverage existing business with digital distribution.

More recently CinemaNow had shifted its strategy from Web destination toward a device-centric strategy. And Sonic said that made the company an extremely attractive acquisition since it will give it a chance to leverage software and distribution.

CinemaNow, which has 30 employees, will remain based in Marina del Rey.

Sonic publishes professional software used to author DVDs and Blu-ray titles. It also publishes software for the consumer market, including DVD Decoder and Easy Media Creator.

(Ben Fritz contributed to this report.)

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