Lionsgate Says Dish's Blockbuster Owes It Money Under Rental Revenue Share Deal

 Millenium Films

NEW YORK – Lionsgate has filed a motion for reconsideration of a bankruptcy judge’s approval of the sale of video rental giant Blockbuster to Dish Network, saying it is owed money for rental titles that it has delivered under a revenue sharing agreement.

Lionsgate basically argued that Blockbuster, now owned by Dish, has been using 25 DVDs and a range of online titles for free. And, according to the motion, “Dish has taken the position…that the sale transferred the videograms free of any revenue sharing obligations to Lionsgate.”

Among the DVD titles are The Expendables, Saw 3D: The Final Chapter and The Last Exorcism. The online rental titles mentioned in the motion partly overlap with the DVD titles, but also include such TV shows as Nurse Jackie and Weeds

“The debtors still have not paid Lionsgate all amounts due for the products delivered to the debtors…and remain in custody or possession of the DVD products, which remain the property of Lionsgate under the terms of the agreements,” the studio’s motion said.

Lionsgate said it last delivered revenue sharing titles to Blockbuster in January before stopping to supply product because the rental firm had said it would stop making payments.

Under the revenue sharing deal, Blockbuster was to pay the studio for titles rented during the 26-week period after their release date. “If any Lionsgate film generated gross box office revenue of $15 million, the debtors were required to destroy a portion of the videograms of that film at the end of the lease term,” the motion also highlighted.

Bankruptcy court judge Burton Lifland had approved the sale of Blockbuster to Dish for about $320 million, and the satellite TV giant closed it on Tuesday.

Lionsgate in its motion said it had objected to the sale, but the objection was not properly considered. It asked that the approval of the Blockbuster sale to Dish be reconsidered and that the court "determine Lionsgate's rights with respect to the videograms for which title had not passed to the debtors as of the closing of the sale of assets to Dish."

Prior to the closing of the Dish deal, Lionsgate communicated with Dish about future business dealings, according to the motion. “In the course of those discussions Dish indicated, for the first time, that it had no liability for post-closing revenue sharing obligations for videograms still within unexpired leasehold periods, to which Lionsgate responded that it still have an ownership interest in the inventory of videograms subject to the revenue-sharing leases and was entitled to payment from Dish,” it said.

Email: Georg.Szalai@thr.com

Twitter: @georgszalai

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