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Lions Gate Not in <I>Fahrenheit</I> Home Video Running, Says CEO

29 Jun, 2004 By: Erik Gruenwedel

Despite heralding its theatrical distribution deal of Michael Moore's controversial film Fahrenheit 9/11 as a “big positive for us” with a “nice solid double-” digit projected margin, Jon Feltheimer, CEO of Lions Gate Entertainment, indicated that the Santa Monica, Calif.-based studio would not obtain the home video rights to last week's No. 1 box office film.

“We certainly have been aggressive in trying to get [the video rights], but I believe it is going to a major studio,” said Feltheimer in a fiscal year 2004 call today with investors.

At the final phase of its integration of Artisan Entertainment, Lions Gate reported an annual net loss of $94.2 million, or $1.35 per diluted share, on revenue of almost $385 million for the year ended March 31, compared to net income of $1.1 million, or a 6-cent loss per diluted share, during the same period last year.

Feltheimer said he has made it “really clear to [Miramax founders] Harvey and Bob” Weinstein that Lions Gate can do an “as good if not better” job distributing home video of Fahrenheit than any major studio.

Lions Gate rushed Fahrenheit prints and advertising out to select markets in less than four weeks.

“The prints practically went out wet,” Feltheimer said.“I think part of what [the Weinsteins and Moore] are trying to create here in terms of coalition, in terms of [public] perception, is that [the film] will end up going to a studio,” he said.

Some analysts believe that that studio could be Disney through its Buena Vista Home Entertainment unit — despite the fact that CEO Michael Eisner reportedly nixed distributing the film theatrically in the first place.

“I don't know how completely they severed that tie,” said Dennis McAlpine, analyst with McAlpine Associates. “My guess is that there is already a deal in place somewhere. It may well be that Disney or Miramax had a right of first refusal on the film if they wanted to do it.”

McAlpine doubts the film would go to a different studio.

“If you are going to do that, why not leave it with Lions Gate? They are not a minor distributor anymore. It probably comes down to what Moore wants,” he said.

Lions Gate intends to market Fahrenheit in addition to Stage Beauty and the as-yet unreleased Beyond the Sea and Fierce People for the Academy Awards, according to company officials.

“I would dare say that Fahrenheit 9/11 could conceivably not be nominated in the documentary category,” said Feltheimer, who added the company would receive a standard distribution fee when the film moves to Showtime cable and pay-per-view.

Company officials described the theatrical distribution deal for Fahrenheit as a fairly typical studio-to-studio deal, which means it receives a distribution fee up-front with out-of-pocket costs, including prints and advertising, accrued later.

“This picture is a bit of an anomaly because I can't remember a picture where you basically recouped your P&A [prints and advertising] in the first weekend,” said Feltheimer, who added that Fahrenheit grossed an additional $4.3 million Monday.

“It's the gift that keeps on giving,” he said.

Home video accounted for $223.4 million, with $121 million generated in the fourth quarter alone based on early retail response to The Punisher, Girl with a Pearl Earring, The Cooler and Dirty Dancing: Havana Nights.

“They are the kind of genres that tend to do well in the ancillary markets,” said Steve Beeks, president of Lions Gate.

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