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Lionsgate: DVD Spurred Profitable FY 2007

1 Jun, 2007 By: Erik Gruenwedel

A robust 11,000-title DVD catalog generated revenue of $256 million, up 21% from last year, and helped Lionsgate post fiscal-2007 (ended March 31) income of $27.5 million compared to income of $6.1 million during the same period last year.

For the fourth quarter, net income fell to $25 million on revenue of $331.6 million, compared to income of $38.9 million and revenue of $312.3 million last year.

The Santa Monica, Calif.-based mini-major cited poor box office results from Pride and Slow Burn for the decline.

Lionsgate said DVD sales of Saw III, Crank, Employee of the Month, Madea's Family Reunion, Madea Goes to Jail, Oscar winner Crash, The Descent, Akeelah and the Bee, See No Evil and An American Haunting helped home entertainment sales exceed box office revenue.

Home entertainment generated nearly $528.3 million in North American revenue, compared to $527.2 million last year, despite a depressed 2006 box office, Lionsgate CEO Jon Feltheimer said in an analyst call.

In January, Lionsgate recorded its best month ever in DVD unit sales. The fourth quarter was the second best period in packaged-media sales in the company's history.

The studio said it would have an 11% market share for Blu-ray Disc releases by end of 2007 with 50 releases, which exceeds Lionsgate's home entertainment market share by 5%.

“The performance of home entertainment and our library was particularly significant,” said Feltheimer.

Video-on-demand and pay-per-view revenue increased 50% to nearly $24 million in FY 2007, led by Crank and Employee of the Month ($3 million), which both tallied nearly 10% of their domestic box office revenue electronically.

Lionsgate president Steve Beeks said the results showed that digital distribution can be accretive going forward instead of cannibalizing DVD sales.

“We are entering an environment where any consumer with broadband can have instaneous access to our content,” said Beeks.

He said data last week from Apple's iTunes Music Store underscored the fact that six of Lionsgate's top 10 revenue films available for download are not for sale in Wal-Mart.

“Virtual shelf space in the digital environment is unlimited,” Beeks said.

Lionsgate has generated approximately 1.4 million downloads with its digital partners in FY 2007, according to Beeks. He said the Showtime series “Weeds” generated 1 million episodic downloads on iTunes in the past 90 days.

He said recent addition Van Wilder was iTunes' No. 1 download during its first week.

“That's not bad for a 5-year-old film that generated just less than $20 million at the box office,” Beeks said.

He said Lionsgate's distribution deal with Microsoft's Xbox Live generated 150,000 VOD downloads from just 15 titles since starting in February.

Television revenue, which included several motion picture releases, increased 50% to $109.3 million compared to $72.9 million last year.

Separately, Lionsgate said it had acquired an English DVD distributor (Elevation Sales) with France's Studio Canal to better facilitate its home entertainment business in the United Kingdom.

Beeks said the studio plans to establish a similar home entertainment distribution arm in Australia later this year.

For the year, Lionsgate reported revenue of $976.7 million, compared to $945.4 million last year.

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