Lionsgate scales back slate, cuts targets
Studio hit by boxoffice disappointments, recessionTORONTO -- Look for a leaner 2010 theatrical slate at Lionsgate, lower boxoffice and revenue targets and lower film production P&A expenditures as the indie studio reacts to boxoffice disappointments and a brutal recession.
Lionsgate executives told analysts Tuesday to expect fiscal 2009 revenue of about $1.4 billion, against an earlier target of $1.5 billion to $1.6 billion, and that 2010 home entertainment revenue will decline by 12%.
And poor theatrical results, especially during the most recent second and third quarters, led Lionsgate to forecast $400 million in U.S. boxoffice for fiscal 2009, and only a 5% margin, well down from an earlier projection of $550 million in U.S. boxoffice this year and margins at about 15%.
Executives at Toronto-based studio also said they will release about a dozen movies in fiscal 2010, against 15-16 releases in the current year. It will spend about $200 million less on production and marketing costs for its film slate next year, and make safer bets in its choice of film genres and audiences.
"Breaking even or taking losses, even small ones, on so many films this year is totally unacceptable. ... We must do better, and we will," Lionsgate CEO Jon Feltheimer said after Lionsgate on Monday posted a third-quarter loss of $93.4 million, against net income of $7.3 million in 2008.
Lionsgate revenue in the third quarter was up 8.4% to $324 million, but operating expenses rose 45% to $417.9 million, from a year-earlier $288.3 million.
The leap in film distribution/marketing expenses was caused in part by key partner Pride Pictures no longer sharing theatrical P&A costs on the last three pictures of fiscal 2009. That loss will negatively impact Lionsgate's free cash flow by $65 million in the current year.
Further lowering expectations for the rest of fiscal 2009, the indie studio indicated it will record $47 million in reserves and charges in the fourth quarter, including a $20 million writedown on a DVD deal with HIT Entertainment.
Also on the DVD front, Lionsgate lowered its library revenue projection from TV, international and domestic home entertainment to $273 million, from an earlier $300 million target.
Feltheimer told analysts that Lionsgate remained on the acquisitions trail, not least after recently picking up the TV Guide Network for $255 million in cash.
But he added a more immediate focus was containing costs and restricting overhead to businesses "capable of more immediate profitability and revenue generation."
Shares in Lionsgate were off $0.83 or 16% to $4.50 on the New York Stock Exchange as investors continued to react to Monday's poor results showing.