Sonic Solutions to Buy CinemaNow

Sonic Solutions, maker of the Roxio line of media applications and Qflix DVD-burning software, said today that it has agreed to buy privately held online movie distributor CinemaNow. Financial terms of the deal were not disclosed, but CinemaNow is probably breathing a sigh of relief. While the company has been around for almost a decade, and even had the financial backing of big names such as Microsoft (s msft), Cisco (s csco) and Lionsgate, it just couldn’t capitalize on its first-mover status in the movie download business.

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As part of the deal,CinemaNow will be combined with Sonic’s (s snic) Qflix team to form a new Premium Content Group that will be focused on broadening the distribution of CinemaNow’s storefront on to PCs and other consumer electronics devices as well as expanding the adoption of the Qflix software. Sonic and CinemaNow were already partners, with a collaboration to enable downloading and burning of movies through new DVD drives from companies such as Dell (s dell) (though we found the movie selection to be quite limited).
Recently, CinemaNow has been less focused on being a destination site, instead working to get its store onto devices such as HP (s hp) MediaSmart Connect and TiVo as well as through some Dish Satellite (s dish) boxes. Qflix software can be found on devices from Dell and Plextor, and Roxio software runs on a variety of chips in Blu-Ray DVD players from manufacturers like Samsung. Sonic will retain the CinemaNow brand and plans to have the CinemaNow store powering a whole range of devices over the next couple of quarters.

The deal gives Sonic instant access to a catalog of digital content from 250 partners, including all the major studios. With all those contracts and distribution mechanisms in place, Sonic doesn’t have to build those relationships from the ground up. Additionally, it helps move the company beyond DVD burning, which is a nice stopgap, but the industry is moving towards a physical format-less future, so this positions Sonic to at least be in the game when that happens.
When talking about reasons for acquiring CinemaNow, Mark Ely, executive vice president of strategy at Sonic Solutions said, “Our interest was primarily due to their infrastructure and operational expertise, less about the amount of content they’re moving. The margin on Hollywood content is slim, we aren’t doing it for revenue.”
So it appears CinemaNow was not exactly a moneymaker. I spoke with the company a few months ago, and it wouldn’t divulge any kind of numbers, so it’s hard to gauge how popular the service is, but CinemaNow has been in business since 1999, and had raised over $40 million. While it has some partnerships, it’s also seen the direct delivery content market get crowded with the likes of Apple (s aapl), Netflix (s nflx), Amazon (s amzn) and even Blockbuster (s bbi.b).
That’s some pretty hefty competition for Sonic and CinemaNow, but Ely seemed unfazed. He thinks Netflix’s subscription model will relegate to mostly back titles, though he believes you’ll see Netflix and CinemaNow on the same devices. Ely admits that while Sonic “won’t get people with Apple devices to purchase content,” he thinks Apple content and players are so restrictive that Sonic can “leverage Apple-like services for people who don’t produce Apple products.” Amazon is actually a Qflix customer for its custom DVD burning product. Ely also thinks that some retailers will be hesitant to promote a rival retailer like Amazon in their stores.
CinemaNow will will not move into Sonic’s Santa Clara offices, but stay in Marina Del Ray, Calif. CinemaNow CEO Tom Frank, who presided over set-top box maker Akimbo’s final death rattle, is out, while David Cook, its COO and president will stay on as general manger of the new Premium Content Group. Ely said the majority of CinemaNow’s staff will stay on as well, though he anticipates some redundancies on the operational side.