Lionsgate profits from television

Q1 TV production revenue soars 112% to $87.2 mil

TORONTO -- As Lionsgate roared back with a strong first quarter, the studio said Tuesday that it has uncovered hidden value in the movie studio's expansion into TV production.

"The value of our TV business alone currently exceeds the equity value of our entire company," Lionsgate CEO Jon Feltheimer told analysts after the mini-major late Monday posted earnings of $36.3 million to June 30, against a profit of $3.5 million in 2009, on first-quarter revenue up 30% to $387.7 million.

During the latest quarter, Lionsgate saw TV production revenue soar 112% to $87.2 million on the strength of cable shows such as Showtime's "Weeds" and "Tyler Perry's House of Payne" from Debmar Mercury, the award-winning AMC drama "Mad Men" and rookie series like Showtime's "Nurse Jackie."

Feltheimer said overall TV business revenue in the first quarter from its diversified parts was around $115 million, including new revenue from TV Guide Network and the Ish Entertainment joint venture, as the studio built a small-screen division that was "unique, profitable and diversified."

The major profits from TV production are still to be realized because of ongoing marketing costs, Liongate cautioned. The studio forecast packaged media and digital sales of "Weeds" to eventually exceed $100 million. When pressed by analysts, however, executives conceded the earnings so far from the Showtime series were marginal, and will come well down the road.

At the same time, Feltheimer valued Debmar Mercury at about $150 million, and the newly acquired TV Guide Network and TV assets at $400 million, up from the $255 million purchase price.

Between Lionsgate's TV production business led by Kevin Beggs and Debmar Mercury, the studio has eight first-run series in production with seven networks, and another five first-run syndication series in production on three networks.

The studio is also syndicating another 15 series for third parties.

"Our strategy of fitting together the pieces of a highly diversified business is working," Feltheimer told analysts.