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Lionsgate Confident in Packaged Media

11 Jul, 2006 By: Thomas K. Arnold

LAS VEGAS — Lionsgate executives voiced a resounding vote of confidence in the future of packaged media, citing internal research that projected the DVD business will grow by $1.6 billion over the next four years.

The independent studio held its eighth annual retailer summit here over the weekend, its traditional precursor to the Video Software Dealers Association Convention, which is holding its 25th anniversary event here this week.

Lionsgate director of strategic planning Michael Youn maintained that despite competition from digital downloading packaged media would remain strong in the coming years and even grow due to the proliferation of mobile entertainment.

“People are watching DVDs in their cars, on planes, in the subway,” Youn said.

DVD spending this year is up 10.3% from 2004, he said, with virtually all the growth coming from “midsize, niche films.”

He cited Nielsen VideoScan research that showed films that grossed less than $50 million in theaters generated 25% of box office receipts, but accounted for 47% of all theatrical home video sales.

He cited as examples such Lionsgate titles as Diary of a Mad Black Woman, which grossed $50.4 million in theaters but generated $62.7 million in DVD revenue for a conversion rate of 124%, and the Nicolas Cage starrer Lord of War, which grossed just $24.1 million in theaters but brought the studio $43.9 million in video revenue for a conversion rate of 182%.

Lionsgate's average video-to-box office conversion rate, noted new GM and EVP Ron Schwartz, is 1.16, higher than any other studio.

Over the next four years, next-generation software will keep packaged-media sales steady at between $15 billion and $16 billion. By 2008, Youn said, Lionsgate projects some 20 million U.S. households will have either a Blu-ray Disc player, an HD DVD machine or both.

Adding to the total home entertainment pie will be the growth of video-on-demand and digital download-for-purchase, or “electronic sellthrough,” which Lionsgate projects will grow to more than $4 billion in consumer spending by 2010. By then, 37% of U.S. homes will have the bandwith to download movies, up from 22% today.

Upcoming Lionsgate DVD releases include On Native Soil, the documentary on the 9/11 Commission Report, Aug. 22, a day after its Court TV airing; Akeelah and the Bee, Aug. 29; Hard Candy, about a girl hunting an Internet predator, Sept. 19; a special-edition of Saw II, timed to hit stores in time for the Halloween theatrical debut of Saw III; An American Haunting, a real-life ghost story with Donald Sutherland and Sissy Spacek, Oct. 24; and See No Evil, a horror film starring WWE superstar Kane, Nov. 28.

Lionsgate also is preparing a 15th anniversary edition of Reservoir Dogs for Oct. 24 release and a 20th anniversary edition of Dirty Dancing for DVD release in early 2007.

On the family entertainment front, Lionsgate claims its market share of children's nontheatrical releases doubled in the last 18 months, driven by such top sellers as Ultimate Avengers, the first in a series of animated films based on Marvel comics characters. The direct-to-video release, which came out in February, shipped 850,000 units; a sequel is due Aug. 8.

Lionsgate also formally unveiled its new Latino initiative, headed by Arturo Chavez, previously a key player in Ventura Entertainment's Latino efforts. The studio will focus on Mexican theatrical releases and telenovellas as well as Spanish-language features from Spain and other Latino countries.

Chavez noted that U.S. Latinos are more voracious buyers and renters of DVDs than non-Latinos and as of 2004 their purchasing power amounted to $622.2 billion.

“There are 41 million Latinos in the United States,” he said. “There are more Latinos here than there are Canadians in Canada, and Spaniards in Spain.”

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