RE: New Releases and Financial ConcernsGood analysis!
I don't think the OEM side of the business is hurting and I think they are doing the right thing by not investing to make it grow. I work for a company where we have that kind of low margin OEM side. It has other advantage and that's why we keep it (R&D, labor development, future opportunities, financial implication (fixed costs allocation, etc)).
But I get to the same kind of conclusion as you did. The expenses are way too high… I'd like to know what is the percentage of the expenses that are related to growth (creating demand) and what percentage are recurring expense (cost of operating in this business).
I guess that the costs related to growth are pretty high right now in relation to the size of the business. Putting up a mini theater (10-12 seats) in cinema and technology conventions must cost a lot of money, but might be the only way to get recognition (working so-so as of now…).
In the recurring expenses, we have to take into account that the cost of doing business in that industry (mainly in California) is pretty high. Claude McMaster once came to my class at university and was saying that he wasn't the highest paid guy on the company because if he wanted good people in California, he had to pay them good money (the salaries in the industry are pretty high…). I guess that explains a part of the high administrative expenses.
Now the question is how much does it costs to put a movie in theaters (programming and pub), and how many seats do we need to make it worth it to put out a movie. My guess is that this number is pretty high (must be near your 5k seats)… Which reinforce the need to sign a big deal with a big theaters chain.
Could they really reduce their expenses? We don't really know... It's in situation like this that I would like if more people on the board wheren't from the company (7/12 are from D-Box, so they can't really be forced to reduce their expenses...)