Lionsgate pledges faith in online streaming

Jon Feltheimer sees new digital revenue down the road

TORONTO – With Carl Icahn breathing down his neck over falling library valuations, Lionsgate topper Jon Feltheimer on Tuesday underlined his faith in online streaming to drive new digital revenue down the road.

The five-year, $1 billion deal for online rights by Netflix for new releases and library titles from a suddenly profitable Epix pay TV service is just the start, Feltheimer told analysts Tuesday morning.

"It's early in the year, but we're excited about our film and television slates going forward, and the exploitation of all of our content rights and our channels and distribution platforms," the Lionsgate CEO said a day after unveiling a disappointing swing to a first-quarter loss just as Icahn's hostile takeover bid gathers pace (HR, 8/9).

The Netflix deal for Epix titles includes a 90-day window for Paramount, Lions Gate and MGM films to create a new revenue stream, while protecting traditional MSO partners, Feltheimer reported.

Likewise, FEARnet as a linear basic cable network has been coupled with a website and a branded cable video-on-demand service to maximize its digital exploitation.

And while the mini-studio's DVD business is soft, Lionsgate co-COO Steve Beeks said the home entertainment industry is "stabilizing and these new (digital) platforms will be able to provide growth definitely when we go out in the next year or two."

Feltheimer added that varied digital revenue streams, coupled with variable pricing of new windows, "will give us some really accretive revenue, as opposed to replacement revenue."

Lionsgate execs were tight-lipped about their current trench warfare with Icahn, and skirted round the possibility of a run at MGM to boost its library and value creation strategy across multiple digital platforms.

"It (MGM) has a great library, it's got a great brand. It has some significant franchises, and some channels, including a portion of Epix that we think are very valuable," Feltheimer told analysts.

At the same time, Lionsgate vice-chairman Michael Burns stepped in to assure investors, and likely Icahn breathing fire in the wings, that the mini-studio wasn't about to blow its brains out to snag MGM.

MGM, Burns argued, has a "troubled capital structure, with tremendous amount of debt, Our sense is that will, one way or another, be rectified or cleaned up so everyone's comfortable."