Why NCM is worth a cool billion

Many of you may have been amazed at NCM's stock market floatation at well over a billion dollars. Is this possible for a company that is responsible for what many consider to be the least popular form of advertising in the US? Yes it is and here is why, based on their own press release:

Total revenue of NCM LLC for the fourth quarter increased to $74.1 million from $44.6 million, primarily driven by the conversion of founding member legacy contracts to NCM LLC contracts, a 30.8% increase in advertising network theatre screens and a large CineMeetings multi-site event. National advertising inventory utilization was 100.2% and CPMs (cost per thousand) decreased 2.8% from the fourth quarter 2005. Net income increased to $0.7 million from a loss of $3.0 million in 2005 due primarily to the higher revenue, partially offset by increased payments to founding member theatre circuits, higher severance costs and option plan costs, and increased administrative costs associated with the digital cinema initiative and preparing the Company for its IPO. The increase in payments to founding members was driven by higher advertising revenue, as 68% of NCM LLC's advertising revenue was paid to its founding members in 2006, and 65% was paid in 2005.

Overall total revenue for NCM in the last year increased from $98.8m to $219.3m. Even if the previous year only counted nine months, that's still an adjusted near doubling!

But what is interesting is that NCM is now so rich that it cannot be in charge of digital cinema for Regal et al. Otherwise the studios would tell it to spend some of its own riches on 2K projectors and servers. Instead they set up Digital Cinema Implementation Partners (DCIP) and poached some of the smartest people from NCM as well as appointing Travis Reid.

Just don't expect DCIP to float for a coll billion any time soon.