Digital cinema projection is hitting its stride, and none too soon for ailing movie theater chains like Cinemark (NYSE: CNK ) , Regal Entertainment (NYSE: RGC ) , or Carmike Cinemas (Nasdaq: CKEC ) . Access Integrated Technologies (Nasdaq: AIXD ) has a big hand in that slowly unfolding revolution, and it looks like economies of scale are about to kick its results into the ionosphere.
AccessIT just reported almost three times the quarterly revenue of the year-ago period, cutting its net loss from operations nearly in half. Management pinned the smaller loss directly to the revenue increase. The company had installed 2,851 digital cinema systems at the end of the quarter, and plans to add a staggering 1,150 new systems in the next quarter to hit the 4,000-installation mark. That's what I call a tipping point, folks.
Theater operators have plenty of incentives to upgrade to a digital system. It's not just the bragging rights of state-of-the-art equipment, either. Tell me which you would rather do as a cinema operator: Download The Bourne Ultimatum from GE's (NYSE: GE ) Universal Studios over AccessIT's secure link, add in commercials and previews with a few mouse clicks, and splash it onto your screens in all its scratch-free digital glory ...
... or ...
... order the requisite number of film reels from the studio, unload the 50-pound film canisters from a truck, splice in ads and such by hand in a four-hour process per copy, and then live with smudges and scratches on the 35-mm print? Tough decision? I thought not.
In addition, digital projection gives you the flexibility to show anything on the silver screen -- pay a license fee and pipe in the Super Bowl, for example, or hold business meetings in a theater with 30-ft. PowerPoint slides. The commercial possibilities are endless, and they might just be the medicine for what's ailing the movie industry: profitable filler for those low-traffic times at the cinema.
AccessIT isn't the only company installing digital systems, of course, but it is a true pioneer. Thomson (NYSE: TMS ) subsidiary Technicolor is testing a digital distribution plan now; Ron Perelman's Deluxe already has a solution in production; and three of the largest theater chains have started National Cinemedia (Nasdaq: NCMI ) , with an eye to non-movie monetizing of those projection assets.
But the exploding installation orders tell me all I need to know about AccessIT's competitive position -- the market is clearly large enough to give this little fish a comfortable home. You can grow a long, long way from a $215 million market cap and $18.2 million quarterly revenues.
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Fool contributor Anders Bylund holds no position in any of the companies discussed here, and he doesn't have the time to see enough movies these days. You can check out Anders' holdings if you like, and just imagine Foolish disclosure in digital projection and theatrical surround sound!
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