DVD, Blu-ray Spur Lionsgate Fiscal Reversal11 Aug, 2008 By: Erik Gruenwedel
Lionsgate's home entertainment revenue, which includes DVD, Blu-ray, video-on-demand (VOD) and electronic sellthrough, increased 47% for the first quarter (ended June 30) to $152.2 million, from $103.8 million during the same period last year.
The Santa Monica, Calif.-based mini-major said top-selling DVD titles included Rambo, The Eye, Witless Protection, 3:10 to Yuma and Bella.
Lionsgate reported net income of $7.1 million on revenue of $298.5 million, compared to a net loss of $53.1 million on revenue of $198.7 million during the same period last year.
In a call with analysts, company president Steve Beeks said the studio's results mirrored the home entertainment industry. He said year-end projections show packaged media will grow at least 1% (catalog up 2%) compared to last year.
“We expect consumer spending in home entertainment across all formats to grow significantly through 2013,” Beeks said.
The executive said Blu-ray generated $260 million in the first six months of 2008, up 330% from the same period last year.
“With 50% of all Blu-disc sales projected to occur in the fourth quarter, we believe BD sales are on track to exceed $1 billion this year,” Beeks said. “The growth of Blu-ray for new releases and library has actually allowed us to increase average wholesale prices in certain areas of our product line, increasing margins going forward.”
He said Lionsgate's library revenue achieved its best-ever quarterly result and could top $300 million by the end of the year.
“We actually saw growth in our deep library titles all at steady margins,” Beeks said. “Given that fiscal Q3 is generally our best quarter for catalog, we project we will beat our earlier projection for full-year library revenue.”
He said the studio had a DVD market share of 7.7%, the highest in its history. Beeks said the May 1 addition of HIT Entertainment titles made Lionsgate the No. 3 family entertainment distributor, with 15% market share. Meanwhile, TV DVD and digital sales of Lionsgate's Weeds: Season 3 exceeded $7 million, outperforming the season two release.
Beeks said industry data on digital, which includes VOD and broadband, indicated $600 million in revenue for the first six months, up 33% from last year. He said he expects expect digital to exceed $1.5 billion for the full year and to top $3.5 billion and represent 15% of the home entertainment pie by 2013.
“We are not seeing evidence that digital cannibalizes any of our packaged-media businesses,” he said. “In some cases it may actually stimulate the appetite for them. And if there is any shift from DVD rental to digital, that is actually the good news. The studio portion of the consumer's dollar is going to continue to grow dramatically.”
Beeks reiterated that studios get 30% to 35% of the consumer's dollar, while in digital, the studio gets 60% to 65% of the consumer's dollar and at significantly higher operating margins.
Lionsgate said it will release a record number of theatrical films in the second half of the year to avoid congestion at the summer box office.