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Lionsgate Looking at New Windows

9 Aug, 2011 By: Erik Gruenwedel

Minimajor is testing bowing select movies digitally before and after their theatrical releases — and well ahead of traditional home entertainment window

Lionsgate in December will bow yet-unreleased theatrical title Abduction, starring “Twilight” actor Taylor Lautner, for a two-week period digitally priced at $6.99. The action film launches in theaters nationwide Sept. 23, and on home entertainment in 2012.

Santa Monica, Calif.-based Lionsgate also is making available Kevin Smith’s horror film, Red State, starring Oscar winner Melissa Leo, on premium VOD 30 days before its Oct. 19 theatrical release. No studio has ever bowed a major movie on premium VOD before its theatrical release, said CEO Jon Feltheimer in an Aug. 10 call with analysts. The title will rent for $9.99.

“It’s not just that the digital platforms offer alternative windows, but new and modified windows, variable pricing and on-the-run marketing changes, we can customize our product offerings to specific affinity audiences,” Feltheimer said.

The CEO said Lionsgate would continue to work with traditional distribution partners while continuing to meet “the needs” of its new distribution partners.

Feltheimer said that as digital license fees increase, players in the market such as Netflix are increasingly looking for exclusive content — a tact previously avoided.

“We do want to see competition in this place and not end up with one dominant [digital] player,” he said, adding that he prefers dealing with multiple digital and traditional distributors. “We want to keep the terms as short as possible and maximize the value within that term.”

At the same time, Lionsgate president and co-COO Steve Beeks said the July release of The Lincoln Lawyer, starring Matthew McConaughey, over-performed on disc sales and on transactional VOD.

Beeks said that two years ago digital revenue comprised about 13% of home entertainment revenue, with that amount to reach 25% this year.

“That shift is even more dramatic when you look at the operating contribution,” Beeks said.

Meanwhile, television programming and pay-TV platform Epix contributed to Lionsgate reported first-quarter (ended June 30) net income of $12.2 million compared to a loss of $64.1 million during the previous-year period.

The income included $4.8 million from Epix, which Lionsgate co-owns with Paramount Pictures. The platform lost $12 million last year.

Santa Monica, Calif.-based Lionsgate appeared to put the brakes on its film business, which saw revenue drop nearly 30% ($65 million) to $192.6 million. During the quarter, the minimajor reported home entertainment revenue from both motion pictures and television of $92.9 million — a 32% decrease from last year.

Notably, there were no new wide-release theatrical titles released on DVD/Blu-ray Disc and digital in the quarter compared to three new wide- release theatrical titles released on disc and digital in the prior year’s first quarter.

Indeed, Lionsgate released just one theatrical movie, Tyler Perry’s Madea’s Big Happy Family, nationwide compared to three films (Kick-Ass, Killers and Why Did I get Married Too?) during the same period last year.

Lionsgate, in a statement, said the reduced release slate reflected timing of new theatrical and home entertainment movies than a reduction in production.

Feltheimer said Lionsgate could expect to generate about $12 million annually in incremental revenue from license deals with a growing number of subscription video on demand services such as Netflix and Amazon Prime.

“As we predicted a few years ago, digital pennies have become millions of digital dollars,” Feltheimer said, adding that he couldn’t comment on reports Lionsgate was working with the creator of “Weeds” to create an original series for Netflix.

“This is certainly the kind of premium content we are looking to generate for the expanding array of digital distribution platforms shaping the global market place,” Feltheimer said.

Television program revenue was $68.7 million, up 27% from last year. Domestic series licensing from Lionsgate’s production, distribution and syndication business increased 24% to $49.9 million due to deliveries of series "Are We There Yet?," "Tyler Perry's House of Payne," "The Wendy Williams Show" and Seasons 6 (in syndication) and 7 of "Weeds."

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