Independent films are the cat's meow at Lions Gate Entertainment. The firm, which operates as Lionsgate, is a leading producer and distributor of films such as Warrior and the horror title Saw 3D, as well as the most-talked about film of 2012, The Hunger Games. It produces TV content (including Nurse Jackie for Showtime Networks) through Lionsgate Television. Lionsgate also releases films under the Trimark brand, and owns a library of more than 1,300 movie and TV titles that it distributes to retailers, rental kiosks, and TV channels. In addition, it owns 43% of production studio Roadside Attractions. In 2012 Lionsgate acquired Summit Entertainment, producer of the lucrative Twilight series of movies.
Lionsgate acquired Summit Entertainment for some $412.5 million, reflecting a desire to reach more young adult fans. It is using its new subsidiary to help release a new series of movies based on Suzanne Collins' young adult novels The Hunger Games, the first of which was arguably the most anticipated film of 2012. All total, Lionsgate releases an average of more than 20 films each year, including recent movies such as Why Did I Get Married Too? and Kick-Ass.
Lionsgate reported a small revenue increase of 0.31% in FY 2012 thanks to a 12.5% increase in television production revenues derived from increased sales from the home entertainment category. However, this was offset by 3.2% decrease in motion pictures due to 8.4% decrease in home entertainment revenue due to a decrease in the contribution of revenues from the theatrical slates, a 14.2% decrease in television revenue due to the number and performance of titles in the theatrical slates listed with television availability windows opening in FY 2012, and a 11% decrease in international revenues due to weaker sales generated by various titles and product categories.
However, the company saw its net income increase by 29% in FY 2012, thanks to higher revenues, a cut in general and administrative expenses of 1.5% due to lower distribution and marketing costs associated with lower motion pictures home entertainment revenues (only eight theatrical releases compared to twelve theatrical releases the previous year). Other factors included a decrease in costs related to shareholder activism, and a decrease in depreciation and amortization expenses.
The Hunger Games release marked a shift in strategy for the studio, which historically has spent relatively little on marketing campaigns and new releases, instead placing more emphasis on its home video library. Previously its largest component of revenue came from home entertainment (44%), and its Saw series is the leading horror franchise in DVD history. In the television market, Lionsgate produces nearly 80 hours of programming a year, which includes a variety of one-hour dramas, miniseries, and made-for-TV movies. Recent TV hits include the hour-long drama Mad Men, airing on AMC, and the Showtime series Weeds.
A part of a diversification strategy, in 2012 Lionsgate teamed up with leading consumer entertainment products company, MGA Entertainment, to buy the home entertainment distribution rights to one of the hottest toy properties in the market, Lalaloopsy. Lionsgate will serve as the exclusive distributor of Lalaloop product for all packaged media and digital platforms in several territories, including Canada, the UK, and the US. It intends to help bring the highly successful Lalaloopsy doll line to life through the first Lalaloopsy movie.
In 2011 reports surfaced that Lionsgate may spin off its digital and TV distribution assets in order to boost its share price. These holdings include its stakes in TV Guide Channel, TVGuide.com, EPIX, and FearNet, as well as about 40% of the young-male video website Break. Lionsgate would also make such a sale to divest its non-core assets and focus on content production.
In 2011 Carl Icahn, formerly the company's largest shareholder, sold all his shares in Lionsgate, representing more than 30% of the company, for some $309 million. The Lionsgate board of directors spent the bulk of 2010 battling the takeover efforts of the Icahn, who had been steadily raising his stake in the company in order to exert more control. Icahn was fueled by dissatisfaction with current management and a desire to reduce the company's overhead. Icahn had also been pushing for Lionsgate to purchase the struggling Metro-Goldwyn-Mayer (MGM). Icahn's takeover efforts and the proposed MGM-Lionsgate merger eventually failed.
Dr. Mark Rachesky (chairman of both Loral Space & Communications and Leap Wireless) owns about 36% of Lionsgate shares through affiliates of his MHR Fund Management. Capital Research Global Investors owns 10%. – less