Catching fire

Lionsgate (LGF) is a film studio focused on adapting popular teen novels to the silver screen. LGF is most famous for its Twilight and Hunger Games franchises. In 2012 LGF generated $1.2 billion in US box office the first time a non major studio broke the one billion dollar mark. LGF ended 2012 with 11.6% domestic box office market share ranking among the top 5 major studios. LGF is unique as it is not owned by a media conglomerate. Its competitors are subsidiaries of major companies.

Studio	Owner
Warner Bros	Time Warner
Paramount	Viacom
Universal	NBC Universal unit of Comcast
Sony/Columbia	Sony
Buena Vista	Disney
20th Century Fox	News Corporation
Lionsgate	Lionsgate!

Not just the Hunger Games

Hunger games was a hit but will the sequels do as well? LGF is releasing the next installment Catching Fire this November with plans for the final book Mockingjay to be spread over two movies in 2014 and 2015. Amazingly the Catching Fire trailer uploaded on Youtube on the 15th of April has already had 25 million hits! Jennifer Lawrence the main actor below is getting more popular with the public gaining recently winning the best actress academy award. Feel free to add to the Catching Fire viewing count with the trailer below.

Studios are notorious for hit and miss movies, similar to Disney LGF is looking to franchises to reduce this risk.  LGF minimises this risk by preselling foreign distribution rights leaving LGF with a maximum of $30 million production risk. Future franchise hopes are pinned on Divergent whose book sales are tracking ahead of the Hunger Games at similar stages of their book releases.

Libraries are good?

The major offset to production risk is LGF's backlog of over 15,000 films (increased from 13,000 in the slide). Library revenues are 25% of overall sales and are much higher on a profit basis given their costs have already been expensed. TV production is also doing well led by iconic brands such as Mad Men, Weeds and Anger Management.

Stay tuned

Who knows if the hits will keep coming but the library backlog and LGF's focus on adapting popular teen novels does reduce some of the hit and miss movie risk inherent in the studio business. 


Jason

http://www.decisiveassetmanagement.com/

Disclosure: Decisive has a position in LGF.

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