Lionsgate expects more revenue gains

Steve Beeks says digital not cannibalizing media business

TORONTO -- Buoyed by the growing Blu-ray and digital markets, Lionsgate executives said Monday that they expect current double-digit home entertainment revenue gains to continue.

"We have seen no evidence that digital cannibalizes any of our packaged media businesses. In fact, in some cases, it might stimulate the appetite for this," Lionsgate president Steve Beeks said during a Monday conference call with analysts.

Beeks added that motion picture library revenue could hit $300 million by the end of fiscal 2009, with virtually all of that coming organically, rather than through acquisitions.

On Friday, Lionsgate unveiled a first-quarter profit of $7.1 million on revenue up 50% to $298.4 million, with much of that gain coming from DVD titles including "Rambo," "The Eye" and "Witless Protection."

Lionsgate was able to swing to a first-quarter profit from a prior-year loss thanks to lower P&A costs derived from avoiding the summer release schedule. But a record number of pictures scheduled for the second half of fiscal 2009 means that a predicted $300 million in P&A spend will be roughly in line with 2008 levels. Upcoming titles include "Punisher 2" and Tyler Perry's "Madea Goes to Jail."

Lionsgate also is subject to the ebbs and flows of slate financing deals with partners like Pride Pictures, which reduce its marketing and distribution expenses but force it to record those expenses as they occur.

"With the ebbs and flows of the Pride picture fund, coupled with a heavily back-loaded year affecting both free cash flow and EBITIDA, we are not anticipating free cash flow to grow this fiscal year," Lionsgate vice chairman Michael Burns told analysts.

Lionsgate also projected close to break-even EBITIDA in 2009 and $50 million in 2010, and set a free cash flow target of $100 million for 2009.

The studio also forecast $550 million at the North American theatrical boxoffice in fiscal 2009, up from $450 million in 2008.