I wanted to pose a friendly challenge on one angle that might deserve a bit more caution: the “recurring revenue” framing.
While royalty revenue is definitely more scalable than hardware, it’s still usage-based, not subscription-like. In a recession or slowdown in discretionary spend, royalties from both theaters and sim racing could take a real hit. Unlike SaaS or fixed licensing models, there’s no guaranteed floor — if usage drops, revenue drops with it! That dynamic has kept me on the sidelines.
Yes, and thanks for pointing that out. The royalty stream is high-margin, usage based, passive, and repeatable, but not contractually recurring like SaaS or subscription models. I should have been more precise there. I'm going to update the language in the post.
While there's no need for an additional sale or customer acquisition on their part, there's no guaranteed monthly or annual payment. If nobody sees the movie, D-Box gets nothing. Cinemark or other partners could, in theory, remove D-box seats or otherwise reconfigure, although as of now they are doing the opposite and the royalty revenue is looking more durable and trending up. I'm not on the sidelines but I wouldn't make this a large position either.
D-box does have some revenue that is truly recurring through their Sim racing and industrial segment but it's such a small part of that segment that it isn't material.
Thanks for taking the time to comment, it improves my writing and my thinking and it's one of the main reasons I'm writing publicly.
I wanted to pose a friendly challenge on one angle that might deserve a bit more caution: the “recurring revenue” framing.
While royalty revenue is definitely more scalable than hardware, it’s still usage-based, not subscription-like. In a recession or slowdown in discretionary spend, royalties from both theaters and sim racing could take a real hit. Unlike SaaS or fixed licensing models, there’s no guaranteed floor — if usage drops, revenue drops with it! That dynamic has kept me on the sidelines.
Yes, and thanks for pointing that out. The royalty stream is high-margin, usage based, passive, and repeatable, but not contractually recurring like SaaS or subscription models. I should have been more precise there. I'm going to update the language in the post.
While there's no need for an additional sale or customer acquisition on their part, there's no guaranteed monthly or annual payment. If nobody sees the movie, D-Box gets nothing. Cinemark or other partners could, in theory, remove D-box seats or otherwise reconfigure, although as of now they are doing the opposite and the royalty revenue is looking more durable and trending up. I'm not on the sidelines but I wouldn't make this a large position either.
D-box does have some revenue that is truly recurring through their Sim racing and industrial segment but it's such a small part of that segment that it isn't material.
Thanks for taking the time to comment, it improves my writing and my thinking and it's one of the main reasons I'm writing publicly.