A few more details were revealed last week about the new premium service that Lionsgate, Viacom's Paramount Pictures and Metro-Goldwyn-Mayer Studios are launching next year.
Lionsgate, the TV and movie studio, disclosed that so far it's invested nearly $9 million in the startup pay TV network and on-demand service, and has “a mandatory commitment” to spend at least $31.4 million on the joint venture.
In addition, Lionsgate co-chairman and CEO Jon Feltheimer told analysts last week that the start-up will launch October next year by airing all 17 James Bond movies.
“We have locked up some very interesting content,” Feltheimer said during Lionsgate's fiscal first-quarter conference call. “For example, for the first time ever on pay television we're going to launch the channel with all 17 films from the James Bond library.”
The joint venture is in talks with cable operators about getting carriage for the pay TV network and on-demand service, which was announced in April and remains unnamed, according to Feltheimer.
“We're having distribution conversations at the highest level of all of the MSOs. … Given the content that we've got, we are highly confident that we'll have significant distribution at premium license fees by next fall,” he said, adding, “We've got 15 or 16 months to come up with the perfect name, and we're still playing around with it.”
The three studios — Lionsgate, Paramount and MGM — decided to partner and create their own pay TV network as a platform for their theatricals and TV titles after failing to reach new output deals with Showtime Networks.
In its 10-Q filing, Lionsgate reported that as of June 30 it had invested $8.6 million in the new premium service, which represents 28.57% or the company's proportionate share of investment in the joint venture. Lionsgate “has a mandatory commitment of $31.4 million increasing to $42.9 million if certain performance targets are achieved,” according to the 10-Q.
Viacom officials said in May that their company doesn't expect to invest more than $100 million in the new pay-TV service “over the life of the venture.”
Feltheimer also talked about another joint venture that Lionsgate is a partner in, the horror Web site and video-on-demand service Fearnet, which he said just did a distribution deal with Time Warner Cable. With that pact, Fearnet VOD is in 29 million homes. The Fearnet joint venture includes Comcast and Sony Pictures Entertainment along with Lionsgate, which so far has invested $10.1 million in it.
Lionsgate “made capital contributions to Fearnet of $5 million in October 2006, $2.6 million in July 2007, and $2.5 million in April 2008,” according to the 10-Q. “As of June 30, 2008, the company has a remaining commitment for additional capital contributions totaling $3.2 million, which are expected to be fully funded over the next two-year period.”
Lionsgate, which produces hit TV shows such as AMC's Mad Men and Showtime's Weeds, pointed out that Weed has been picked up for fifth and sixth seasons, “positioning the Emmy-nominated series for future syndication.” And Mad Men recently garnered 16 Emmy nominations, a record for a basic-cable drama series, Lionsgate noted.
During the call, Feltheimer cited Lionsgate's recent agreement to allow some of its content to be posted on YouTube, making it the first movie studio to strike such a deal with the user-generated video portal. Lionsgate officials told analysts that although YouTube takes a upfront small fee for administration, its basically a 50-50 revenue-sharing agreement between the studio and the Web site.
In the first quarter Lionsgate posted revenue of $298.5 million, a 50% increase from the prior-year quarter; net income of $7.1 million, versus a net loss of $53.1 million in the year-ago first quarter; and EBITDA of positive $13.2 million. EBITDA is defined as earnings before interest, income tax provision, depreciation and equity interests.
Lionsgate management said that the 50% revenue growth was driven by double-digit revenue increases in all its core businesses, including motion pictures, television programming, home entertainment, library, international and digital.
Television-production revenue in the quarter was $41.1 million, up 45% from $28.4 million in the prior-year first quarter as Weeds season four(Showtime), Mad Men season two(AMC), Fear Itself (NBC), Debmar-Mercury's Tyler Perry's House of Payne (TBS) and Family Feud, as well as the Weeds season threeDVD, all made strong contributions.
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