Lionsgate shares are down about 3.4% in after-hours trading after it surprised investors by reporting a net loss for the quarter that ended in June. The independent studio lost $44.2M, down from a $10.3M profit last year, on revenues of $471.8M, +80.6%. Revenues exceeded the Street’s forecast of $447.3M. But the loss of 33 cents a share contrasts with the consensus forecast for a 9 cent profit. The company says that the operations are doing just fine with strong returns from The Hunger Games, Cabin In The Woods, and What To Expect When You’re Expecting as well as — surprise! — “strong revenue gains from the Company’s home entertainment business.” Motion picture revenue was up 111% to $406.5M. That includes theatrical sales of $137.6M, up fivefold, and TV revenue of $37.1M, -14%. Home video sales also were up fivefold to $137.6M. Meanwhile, TV production revenue was -5% to $65.3M as home video sales from the 6th and 7th seasons of Weeds and the 5th season of Mad Men didn’t outweigh the drop in the number of syndicated shows. But Lionsgate spent $90M more on marketing this year as it promoted five film releases vs just one in the same quarter last year. All of the films “are anticipated to be profitable on an ultimate basis,” the company says. The earnings statement also says that costs for stock-based compensation soared due to the increase of Lionsgate’s trading price (+59.3% so far in 2012). In addition, the company shouldered expenses to integrate Summit Entertainment, which it bought this year. And it had to pay interest on the part of the Summit term loan debt that it retired early. With “two-thirds of the profitability of the first Hunger Games film still ahead, we anticipate that the combined benefits of our Summit acquisition, the strength of our young adult franchises, and the continued evolution of our television business will translate into significant and growing contributions for the balance of our three-year plan,” CEO Jon Feltheimer says. Lionsgate will talk to analysts about earnings tomorrow morning.
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Wow! So not only does Lionsgate Marketing do a terrible job, but they spend a lot of money to f*** up Lionsgate’s films?
“But Lionsgate spent $90M more on marketing this year as it promoted five film releases vs just one in the same quarter last year.”
Ummm… shouldn’t that have also netted (at minimum) a 3-4x increasing in theatrical revenue (5 films released versus 1). They make it sound like marketing was saddled with having to spend more for marketing, but (as usual) there’s no accountability for making sure that spending translates into appropriately increased box office. And there’s no mention that MOST of that theatrical revenue was generated by The Hunger Games (the marketing costs of which were blamed on last quarter’s losses).
And while they had 5vs1 releases this quarter, I don’t know why people continue to tip-toe around the fact that LG marketing botched almost all of them. “What to Expect” made $41M on a $40M production budget. Is that considered successful, with that cast? “Safe” made $17m on a $30M budget. “Cabin in the Woods” had more anticipation and goodwill going into it’s theatrical release than most films released in the spring (especially on the eve of Whedon’s Avengers) and it opened at #3 behind THE THREE STOOGES?!?!? Is there any other studio in town that would be happy with consistently opening movies in the $12-$15M range?
Bradley, you are assuming that Lionsgate are after immediate returns and that’s not how the film industry works.
If a film makes $100million off a $100million budget domestically then it is a success.
The production company will receive ~45% of the domestic profits as well as any tie in promotion associated with the film, tax cuts from filming.
But then tv rights are sold generally between 10-15% of the total domestic gross + home video and rental profits.
So a break even movie can be incredibly profitable especially when you add ~35% for the $30million overseas gross and the fact that the movie is added to their library to make them money for the next few years/decades.
As crazy as this may seem they don’t just want to make movies, they are a buisness that will make money.
No Mark, I get that. My point was that they seemed to pin the loss on the fact that theatrical spending increased because they had 5 movies to promote this quarter compared to one last year while not acknowledging that the theatrical intake they spent all that money to promote did not increase by the same percentage with the box office from 5 movies this quarter compared to just 1 last year. Basically they’re saying they spent 5x as much to market and got back 2x in return. Last quarter they blamed the losses on marketing costs for HG and the Summit acquisition and next quarter they’ll blame it on marketing costs for Expendables and Dredd. And sorry, while making your production budget back on theatrical makes home video and TV profitable, that doesn’t mean the theatrical department is doing a bang up job. Ask the makers of Tron Legacy if making back your budget is considered a success. Basically what you’re suggesting is that the theatrical departments only exist to make their films a success in the secondary markets. That’s wrong. The secondary markets (especially at Lionsgate) have to over-perform to overcome the shortcomings in theatrical. There’s a reason why Lionsgate has one of the best home video to theatrical ratios in Hollywood and it’s not because they release better films. It’s because their theatrical numbers are always disappointing. Kick Ass, Warrior, Devil’s Double, Crank/Crank 2, Gamer, Rambo, Safe, What to Expect, Conan, One for the Money, Abduction, The Next Three Days, Saw 6 and Saw 3D, Killers, From Paris with Love, Battle for Terra, The Spirit, Punisher, Punisher: War Zone, Transporter 3, Repo: The Genetic Opera, W, War, and the list goes on. LG marketing hasn’t been cutting it for years, but nobody seems to want to say it out-loud.