This has emerged as a hot question for the TV business in the Q3 earnings season: As DVRs become more popular, and time-shifting more common, should ads be sold on the basis of the number of people who view them up to seven days after they first air instead of the current three? CBS’ Les Moonves made the case on Wednesday, and Disney’s Bob Iger added his support yesterday. Lionsgate CEO Jon Feltheimer has indicated that he likes the idea — but his support is qualified: “If it’s a movie coming out in three days…we’re not going to get the benefit of those [additional] viewers,” he told analysts in a call to discuss earnings. In that case, “we’ll have to look at those numbers and get some kind of adjustment.” Lionsgate has options if that doesn’t happen — or even if it does. “There’s no question that we are seeing significant amounts of awareness from social media and the Internet, and that’s going to give us a tremendous opportunity to reduce our overall marketing spend,” he says. But while a shift to what’s called C7 ratings might create problems for the movie side, Lionsgate’s TV unit could benefit. Its new show Nashville, which airs on ABC, is “one of the most time-shifted shows on television,” he says.
The Lionsgate CEO gently touched some cable industry hot buttons in a speech today to marketing execs. He said that cable could be left behind as viewers increasingly turn to mobile devices such as smartphones and tablets for entertainment unless operators improve user interfaces, offer dynamic ad insertion for on-demand shows, and begin to sell movies and programs directly to consumers. “These days, an educated consumer may not be our best friend because an educated consumer knows that if you and I don’t give him what he wants, there are a million other places he can get it,” Jon Feltheimer told the Cable & Telecommunications Association for Marketing. “And nobody has to tell you that once a consumer has left your ecosystem, it’s very hard to get him back.”
The production company’s shares dove more than 8% in initial after-hours trading — but recovered to a more modest loss later — after it released what appears to be a dreary report. Lionsgate had a net loss of $1.7M in the last three months of the year vs a $6M loss at the end of 2010, on revenues of $343M, down 23.6%. Analysts expected revenues to be much higher, at $358.8M. The company’s net loss, at 1 cent a share, also contrasts with the 9 cent profit that the Street anticipated. Lionsgate says that revenues suffered from the lack of a wide theatrical release in the quarter; last year it had three. As a result, motion picture revenues fell 28.6% to $233.3M. TV production was down by 6.8% to $89.7M. Home entertainment also struggled with revenues from movie releases of $128.9M (-28.8%) — slightly offset by $34M for TV shows (+108.6%). Lionsgate said it made $7.3M from its 31,2% stake in EPIX, an improvement from the $11.1M loss on the investment in the same quarter in 2010. But that was somewhat offset by the $2.1M loss on its 51% of TV Guide Network a slight increase from the $2M loss last year.
The film and TV company had a net loss of $24.6M, an improvement from its $29.7M loss in the quarter last year, on revenues of $358.1M, down 21.5%. That revenue figure was far below the $421.5M that analysts expected. And the net loss, at 18 cents a share, was below the 13 cent loss the Street had forecast. The bottom line could have looked even worse: Lionsgate included the $11.0M it collected from its sale of Maple Pictures. The company also was able to add $6.1M from its 31.2% stake in EPIX vs a $19.8M loss from last year’s quarter. Lionsgate says that it suffered from “underperformance of theatrical films in the quarter” — where releases included the Conan The Barbarian remake, Warrior, and Abduction – as well as “timing of DVD releases which offset gains in the Company’s television and digital businesses.” The movie operation generated $218.9M in revenues, down 36%.
Lionsgate said in a regulatory filing today that Mark Rachesky, the former Carl Icahn protege and the mini-major’s largest shareholder, has been appointed co-chairman of the board, a title he will share with current CEO Jon Feltheimer. The …
Lionsgate CEO Jon Feltheimer sure talks as though the company’s looking to create a TV channel around Tyler Perry — Tyler TV – even though he says he “can’t comment” on a report about it. He told analysts this morning that “we strongly support” the idea of bringing Perry to “exciting new platforms.” That could include a “not fully distributed (cable) channel that we could buy” or nesting Perry at “a channel we already have. … We have a lot of options if we choose to go down that path.” The New York Times says this morning that the company is considering rebranding its struggling TV Guide Network, buying a channel such as Gospel Broadcasting Network, or teaming with Comcast, which promised federal officials who approved its acquisition of NBCUniversal that it would beef up programming for minority audiences.
Also on the call, Lionsgate executives talked up their plans for The Hunger Games. The first film in what’s likely to be a four-film series completes principal photography on Labor Day weekend ahead of a March 2012 release. But the studio says it won’t release the second film until Thanksgiving 2013 because it wants to take advantage of the big holiday season audiences — and to give itself time to work on the script and marketing plans. The productions won’t necessarily be filmed back-to-back, although there’s a chance that the second and third installments will be.
Lionsgate executives told Wall Street analysts this morning to expect big things from The Hunger Games, a series of four action films that the studio will release from the trilogy written by Suzanne Collins. COO Joe Drake said it was “the highest-selling film we’ve ever had” at the Cannes Film Festival and that overseas exhibitors consider it “the movie that can change their company.” Although Lionsgate wouldn’t disclose its budget for the films, Drake says Hunger Games could become an “outsized success” for Lionsgate. The studio says it bought the rights before the books became runaway bestsellers, and it has “retained the majority of the upside” in its talent and distribution deals.
On other matters following the company’s earnings report yesterday, Lionsgate says that it isn’t concerned about the public’s waning interest in 3D. “We never thought of 3D as a one-size-fits all solution to the movie business,” CEO Jon Feltheimer says. He added that Lionsgate’s recent deal to syndicate reruns of Mad Men to Netflix reflects his view that Internet streaming services can be “partners, not adversaries.” He hopes to “replicate these kinds of deals around the world.”
BREAKING: A press conference is skedded for tomorrow morning, with Lionsgate co-chairman/CEO Jon Feltheimer and Grupo Televisa chairman/CEO Emilio Azcarraga. Lionsgate will team with Spanish-language media company Televisa to launch Pantelion Films, a joint venture that will target the fast-growing market of Hispanic moviegoers and release 8 to …
Welcome to the real-life game of Survivor: Wall Street. Lionsgate management tonight is trying to outwit, outplay, and outlast Carl Icahn before he effects a hostile takeover of the movie/TV studio for his son Brett. Lionsgate tonight announced it’s putting into place a “Shareholder Rights Plan” — i.e. a poison pill defense — to cap Icahn at 38% of its stock (he is currently at 37.9%) so he can’t do a “creeping bid” through open market purchases like he did today or private market transactions. ”If he wants control of the Company, he should make a bid that is fair to all shareholders along the lines of a permitted bid described in the press release below,” a studio insider tells me.
Today, Icahn’s stake rose to 37.9%, or 44.8M shares, of Lionsgate. With 12+% more stock, he can become its majority stockholder. And then Lionsgate’s 12-member board, and the studio’s management team of Jon Feltheimer and Michael Burns, all have a target on their backs. Icahn’s $7 a share tender offer expired at midnight Wednesday, and left him with a 33.9% stake in Lionsgate. (Icahn Now Owns 33.9% Of Lionsgate) Today, he acquired an additional 4% more of the company by buying on the open market. Lionsgate’s immediate reaction was effectively to enact a poison pill defense. But it enacted a poison pill months ago — to prevent Icahn from accumulating over 20% of Lionsgate stock through his tender offer — and Canadian regulators nixed that measure. Can that happen again?
Here is tonight’s Lionsgate statement:
SANTA MONICA, Calif., and VANCOUVER, British Columbia, July 1, 2010 — Lionsgate (the “Company”) today announced that its Board of Directors has adopted a Shareholder Rights Plan that is designed to encourage the fair and equal treatment of Lionsgate’s shareholders in connection with any initiative to acquire effective control of the Company.