New execs lay out Image turnaround plan

By Susanne Ault -- Video Business, 4/9/2008

APRIL 9 | Image Entertainment is looking to reverse its fortunes in fiscal 2009, and during a Wednesday Webcast with analysts, new president David Borshell and new chief acquisitions officer Bill Bromiley sketched how they plan to do it.

In its fiscal 2008, ended March 31, Image expects to report a net loss of $95 million to $97 million in net revenue. However, for upcoming fiscal 2009, Image projects positive cash flow, and $115 million to $125 million in net revenue.

Bromiley outlined Image’s feature film acquisitions drive, which should deliver an additional $30 million in revenue for fiscal 2009 and increase the company’s business in the DVD rental market.

Image plans to release star-driven, direct-to-DVD titles at a rate of four to five a month. Upcoming titles include April 15 release Before the Devil Knows You’re Dead with Ethan Hawke, May 13 release Numb with Matthew Perry and July 22 release Autumn Hearts: A New Beginning with Susan Sarandon.

Previously, Image has focused its business on niche product, with the following breakdown: music/TV/special interest, 50%; Criterion Collection, 30%; Discovery Channel TV product, 10%; and stand-up comedy, 10%.

“This now puts more of a focus on rental than Image has had in the past,” said Bromiley. “We have a new sales staff dedicated to rental, [targeting] Blockbuster, Netflix and the growing kiosk business.”

To minimize risk, Bromiley said that Image will be acquiring finished film product for fees that are a fraction of the movies’ production budgets.

Also, Image is expanding its digital delivery business, anticipating earning $1.8 million in revenue in the next fiscal year. That marks a jump of more than 80% over fiscal 2008.

Burgess Wilson, head of Image’s Egami digital subsidiary, attributes the growth to aggressive deal-making, with more than 80% of the company’s new content acquisitions including the securing of digital rights.

Image also expects to enjoy ongoing operational savings by outsourcing some distribution activities to Arvato Digital, a deal it made in September 2007. Image believes it will generate $2 million in annual order processing savings and $2 million in annual freight savings.

Also, Image is negotiating to increase its revolving line of credit with Wachovia from $15 million to $20 million.

Image hoped to reassure investors that it is on firm ground. The supplier has been on a rocky road during and following failed merger attempts with Lionsgate and BTP Acquisition Company. The supplier also is involved in ongoing lawsuits with production company Relativity Media and ThinkFilm owner CT1 Holdings.

“It has been a turbulent last couple of years,” said Borshell, who replaced Image founder-CEO Marty Greenwald as the company’s top executive last month. “Image is working diligently to turn the company around and achieve financial success.”

He also added, “Image is clearly full of growth and opportunity, not death and despair.”

Image also announced an alliance with Jaguar Distribution Corp. to release its titles to the in-flight and maritime marketplace. Over the next two years, Jaguar will distribute Image’s theatrical and non-theatrical releases to airlines and merchant marines throughout North America.