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| About Lionsgate |
| Lionsgate is the leading independent filmed entertainment studio with a strong
and diversified presence in motion pictures, television programming, home entertainment,
family entertainment, video-on-demand and digital distribution of content. Under
the leadership of Chief Executive Officer Jon Feltheimer and Vice Chairman Michael
Burns, Lionsgate has successfully executed a business plan that has included
the successful acquisition and integration of Artisan Entertainment, Trimark
Holdings Ltd., Redbus Film Distributors, Debmar-Mercury and Mandate Pictures
as well as strategic investments in Break.com, Roadside Attractions and several
other filmed entertainment companies. Over the past eight years, Lionsgate has grown its annual revenues from $184 million in fiscal 2000 to approximately $1.2 billion anticipated in fiscal 2008, has increased its market capitalization from approximately $80 million to nearly $1.5 billion, has grown its domestic theatrical box office market share from 0.4% to nearly 4% and grown DVD market share from 2% to nearly 7%. Television revenues have increased from $8 million in fiscal 2000 to $119 million in fiscal 2007, with further growth to approximately $200 million expected this year, a compound annual growth rate of more than 50%. Feltheimer and Burns, who engineered Lionsgate's recapitalization in December 1999, joined the Company as CEO and Vice Chairman, respectively, in March 2000. With senior management signed to new long-term agreements, Lionsgate is positioned to continue successfully executing its business plan of continued organic growth of the Company's core motion picture, television and packaged media businesses while beginning the process of leveraging its content into new digital media platforms that represent an important element of Lionsgate's future. Throughout its evolution, Lionsgate has built one of the most prolific and prestigious libraries in the filmed entertainment business through a combination of organic growth and accretive acquisitions. With nearly 12,000 titles, including such evergreen hits as Dirty Dancing, Reservoir Dogs, Terminator 2, Basic Instinct, Total Recall, The Blair Witch Project, the Saw franchise, Crash, Monster's Ball, the smash television series Weeds and the Tyler Perry catalogue, the Lionsgate library generates more than $250 million annually in recurring revenue and approximately $90 million a year in positive free cash flow, covering the Company's corporate overhead and serving as a foundation for the disciplined growth of its core businesses. The stability and reliability of library cash flow differentiates Lionsgate from its independent competitors and provides the Company with the foundation for continuing to grow its motion picture pipeline without taking the larger budget risks common throughout the industry. |
| Motion Pictures á |
| Lionsgate has achieved unusual stability in all metrics of its motion picture
business, continues to grow and diversify its portfolio and has established a
reputation for distinctive, original and daring films that epitomize the Lionsgate
brand. Coming off three consecutive years averaging approximately $300 million
or more at the North American box office, the Company has assembled its largest,
most diverse and talent-laden theatrical slate for fiscal 2008, with a strong
pipeline of star-driven wide releases reflecting Lionsgate's continued growth
and momentum. Propelled by recent hits such as Rambo, Saw 4, 3:10 To Yuma, Tyler Perry's Why Did I Get Married?, Good Luck, Chuck and War, the Company expects to generate at least $400 million at the North American box office this year, growth of more than 50% from last year. Lionsgate won the Best Picture Academy Award ® for Crash in 2005 and is a perennial contender for major awards, earning 31 Oscar ® nominations in the past nine years, more than any other independent studio. Lionsgate has achieved theatrical market share of 3.8% over the past 12 months, number one among independents and more than the theatrical market share of most other independents combined. During the months of September and October 2007, a string of hits propelled Lionsgate to number one at the domestic box office among all studios with a market share of approximately 18%. Lionsgate focuses on market segments where it can efficiently achieve a sustainable competitive advantage. These include action films (3:10 To Yuma, War, Crank, Rambo and the upcoming Forbidden Kingdom), teen comedies (Good Luck, Chuck, Employee of The Month and the upcoming My Best Friend's Girl) horror films appealing to a similar young demographic (the Saw franchise and The Eye) and prestige specialty films (Oscar ® winners Crash and Monster's Ball, 3:10 To Yuma and Away From Her, for which Julie Christie has won the SAG Award for Best Actress In A Drama as well as a Best Actress Oscar ® nomination). Lionsgate has achieved a highly visible leadership position in the horror genre, which it has leveraged into the successful launch of FEARNet.com, its branded horror channel with partners Comcast and Sony, which has already established itself as a leading VOD and Internet horror site in its first year. Lionsgate's niche strategy enables the Company to keep P&A costs low through targeted marketing campaigns and fosters the creation of successful franchises which generate a higher degree of stability and predictability for the Company's annual release slate. Two of Lionsgate's most successful franchises include Saw, the most popular horror franchise in history, whose first four installments have already grossed more than half a billion dollars in worldwide box office and sold more than 15 million DVD's (with Saw 5 scheduled for Halloween 2008 release) and the Tyler Perry franchise, whose first four films have grossed approximately $200 million combined in North American box office and shipped more than 22 million DVD's (in conjunction with other DVD's from the Tyler Perry catalog). The next Tyler Perry feature film, Meet The Browns, is slated for March 2008
release and, through the recent acquisition of the Debmar-Mercury independent
syndication company, Lionsgate has extended its Tyler Perry franchise into
television to encompass syndication fees from his first-run comedy, House
of Payne, which has already sold a virtually unprecedented order of 100 episodes
to TBS and Fox station groups and began airing to strong ratings in June
2007. Lionsgate has established a distinctive creative signature in recent years with diverse hits such as Crash, Monster's Ball, 3:10 To Yuma, Good Luck, Chuck, the Saw franchise, Fahrenheit 9/11, Hostel, The Punisher ™, Crank and the Tyler Perry franchise. It has created a unique and disciplined financial model that keeps costs low, minimizes risks and maximizes upside potential. And it has remained committed to the same business model of cost-effective niche targeting, a balanced portfolio approach, a focus on generating singles and doubles rather than swinging for the fences and measured and prudent growth that CEO Feltheimer and Vice Chairman Burns established in 2000. |
| Television á |
| Lionsgate's television business has grown from $8 million in fiscal 2000 to nearly
$120 million in revenue in fiscal 2007, and the division continues its disciplined
and profitable expansion. Lionsgate has generated a strong and diverse slate
of prime time series for fiscal 2008, executing the Company's strategy of targeting
large niches in which it can achieve a sustainable competitive advantage by supplying
the proliferating spectrum of cable networks with original, distinctive programming
bearing the Lionsgate brand. Lionsgate's acclaimed comedy Weeds and critical sensation Mad Men lead the roster. Weeds, starring Golden Globe ® winner Mary Louise Parker, has already completed its smash third season on Showtime and the series is on track to become the Company's first big hit in syndication. Weeds has been successfully sold in more than 125 territories worldwide. Following closely in the footsteps of Weeds, the critically-acclaimed Mad Men, the first scripted drama on AMC, won two Golden Globes ®, a DGA award and two SAG nominations and has been picked up for a second season by AMC as its ratings continue to grow. Other mainstays of the Lionsgate television line-up include Wildfire, currently shooting its fourth season for ABC Family in New Mexico, and The Dead Zone, which shot its sixth broadcast season in Montreal, Canada, for USA Network, as part of a larger initiative to bring more filmed entertainment production to Quebec province. The Dead Zone, starring Anthony Michael Hall, has already been sold into syndication. Lionsgate has generated a powerful slate of original new programming for the current season, including the horror anthology series Fear Itself, which will air on NBC and Lionsgate's FEARNet.com branded channel and Crash, a series for Starz based on Lionsgate's Academy Award ® winning feature film. Lionsgate uses a cost-effective television business model which minimizes risk, targeting the niche of emerging cable networks with unique, original programming and selling series only when it can achieve a combination of network license fees, international television sales, state and local production subsidies and other incentives and DVD sales to fully cover production costs from the first season of airing onward. The Company is a leader in identifying cost-effective locations that welcome filmed entertainment production and has forged strong partnerships with the states of New Mexico (where Wildfire is shooting its fourth season), Pennsylvania, Massachusetts, Connecticut and the Canadian provinces of Quebec and Alberta for current and future television production. Lionsgate Television is also home to the Company's feature-length documentary unit, which was created to identify and develop theatrical-length single-subject documentary projects suitable for television, theatrical and home entertainment distribution that reinforce the cutting edge Lionsgate brand. The unit’s first three documentary releases included Werner Herzog’s critically acclaimed Sundance award-winning Grizzly Man, the award-winning Leonard Cohen I'm Your Man, produced in conjunction with Showtime, and The U.S. v. John Lennon, a Lionsgate/VH-1 Films production. Upcoming documentaries include Street Dogs of South Central, produced in conjunction with Animal Planet and slated for early 2008 release, the untitled High School Musical project produced with Showtime as a partner, and Facing Ali, a documentary about sports icon Muhammed Ali, produced with network partner Spike TV and executive produced by Ali himself. Lionsgate Television also served as the genesis of the Dirty Dancing reality television series and the Dirty Dancing stage play phenomenon which has already sold out audiences months in advance in Japan, Australia, Germany, London, England and, most recently, Toronto, on its way to the U.S. stage. With the recent acquisition of Debmar-Mercury, the leading independent television syndication company in the industry, Lionsgate's television business is positioned to continue growing its revenues and margins. A month after its acquisition, Debmar-Mercury made an unprecedented sale of 100 episodes of Tyler Perry's original comedy series House of Payne to TBS and a Fox station group, expected to generate substantial high-margin revenues in upcoming fiscal years. Debmar-Mercury subsequently acquired the classic game show Family Feud from The Tribune Company for syndication later in fiscal 2008 and continues to syndicate Comedy Central's smash hit South Park along with film packages from Revolution Studios and Lionsgate. Additional properties in Debmar-Mercury's extensive syndication portfolio include the recently-announced American Chopper and Deadliest Catch from Discovery Channel, VH-1's The Surreal Life and the acquisition of worldwide rights to Trivial Pursuit: America Plays, to be distributed both domestically and internationally through Debmar's newly-created international arm. The wholly-owned syndication subsidiary now positions Lionsgate to self-distribute its own television series, including this year's syndication of The Dead Zone and the anticipated future syndication of Lionsgate's hot comedy Weeds, further increasing profit margins. |
| Home Entertainment á |
| Propelled by hit theatrical titles and a prestigious library, Lionsgate's home
entertainment business strengthened its position as an industry leader in fiscal
2007, generating $528 million in revenue, shipping nearly 100 million discs and
building its competitive edge in the horror, urban, children's non-theatrical,
fitness and TV-to-DVD categories. Reflecting the diversity of its DVD slate,
Lionsgate achieved DVD market share of approximately 25% for its theatrical horror
titles in fiscal 2007, market share of approximately 8% for its children's non-theatrical
releases, nearly 10% for TV-to-DVD releases and approximately 8.5% market share
for fitness DVD's. Lionsgate's home entertainment growth momentum has continued in fiscal 2008, and the Company has captured overall market share of nearly 7% for fiscal 2008 to date. Fuelled by the recent success of theatrical titles on DVD including 3:10 To Yuma, War, Good Luck, Chuck and Saw IV, the Company had its most successful month ever in January 2008, shipping approximately 14 million DVD units, capturing market share of 11% for the month and placing four of the top eight releases on the North American DVD charts, one of the best performances by an independent studio in history. This success has continued the Company's proficiency at achieving the highest theatrical box office-to-DVD revenue conversion rate in the industry, underscored earlier in fiscal 2008 with such chart-topping DVD's as The Condemned, Delta Farce and Pride. In the past two years, Lionsgate has achieved a series of number one DVD debuts that have underscored the diversity of its video portfolio -- Saw III, Crank, Saw II and Lord of War, which have all debuted at number one on the DVD charts, The Biggest Loser (#1 fitness DVD for five weeks), Ultimate Avengers (#1 children's non-theatrical DVD), Ultimate Avengers 2 (#1 children's non-theatrical DVD), See No Evil (#1 horror), The Descent (#1 horror), Tyler Perry's Madea's Family Reunion (#1 urban DVD for three weeks), Akeelah And The Bee (#1 urban DVD), Waiting (#1 comedy) and La Mujer de Mi Hermano (#1 Spanish-language DVD). Through its leadership in key niches such as the horror genre, strength in critical box office ranges and marketing and distribution skills honed through years of efficient management of an extensive home entertainment and library catalogue, Lionsgate continues to be an industry leader in live action box office-to-DVD conversion rates. The Company typically "overindexes" its major theatrical titles on DVD, usually achieving video revenues that are even higher than box office grosses for its top theatrical titles. Lionsgate continues to be a leader in the TV-to-DVD category, compiling an impressive track record of selling such third-party product as Will & Grace, Moonlighting and Alf as well as selling more than 750,000 boxed sets of its own smash television comedy series Weeds (which also achieved approximately one million downloads on Apple iTunes). In February 2007, the Company also acquired the prestigious Little House on The Prairie franchise, the #2 TV-to-DVD title in home entertainment ihistory. The Company also continued its leadership at the cutting edge of new digital technologies. By March 2007, Lionsgate had captured 11% market share and seven of the industry's top 41 titles for the new BluRay high-definition format, placing it in the forefront of industry growth as consumers increasingly turn to high definition technology for enhanced quality. In addition, Lionsgate has completed or is negotiating digital delivery deals for its content with more than two dozen companies, including completed agreements with such industry leaders as Apple, Amazon, Microsoft Xbox, Netflix, Walmart, Best Buy, CinemaNow and Movielink. As the Company maintains the vibrancy of its traditional packaged media business as a stable foundation for growth, it plans to capitalize on the billions of dollars in anticipated consumer spending on new digital formats over the next few years as an important source of high-margin incremental revenue. Lionsgate's family entertainment arm has achieved industry leadership (a #4 ranking among all studios in children's non-theatrical DVD market share) through the success of its popular branded DVD franchises, including a long-term agreement with Marvel for at least eight direct-to-video titles that has already generated the hit releases Ultimate Avengers, Ultimate Avengers 2, Invisible Iron Man and Dr. Strange. Lionsgate has also acquired the Bratz franchise in a long-term home entertainment agreement, with the first release under the deal, Bratz Fashion Pixiez, scoring number one on the children's non-theatrical charts in February 2007. Other major upcoming family entertainment theatrical releases include Foodfight! and Alpha & Omega, from the cocreator of Shrek, in addition to the scheduled 2008 launch of the new television series Speed Racer on Nickelodeon. |
| Mandate Pictures á |
| Lionsgate acquired Mandate Pictures, a leading independent motion picture production
and distribution company, in August 2007. Within a few months of the acquisition,
Mandate had already released the sleeper hit Juno, starring Ellen Page, Michael
Cera, Jennifer Garner and Jason Batemen, which has earned four Academy Award ® nominations
(including Best Picture) and grossed more than $100 million at the domestic box
office. Mandate Pictures basically operates three core businesses. Its motion picture arm has generated such hits as Harold and Kumar, Marc Forster’s Stranger than Fiction and Juno. Mandate also operates the Ghost House Pictures joint venture with legendary filmmaker Sam Raimi (the Spider Man franchise, The Evil Dead) and partner Ron Tapert, which has established itself as one of the most successful brand names in the horror genre. Ghost House Pictures has released a string of number one box office hits, including The Grudge franchise, Boogeyman, The Messengers and 30 Days of Night. Mandate’s third arm is its highly profitable international distribution business. The company distributes major feature films in the world marketplace, creating an important independent profit center for Lionsgate. Mandate recently achieved record international sales at the American Film Market for its slate of films. The Mandate International brand is so prestigious that, shortly after the acquisition, Lionsgate and Mandate unified their international theatrical sales teams under the Mandate International banner. Upcoming feature film releases include the comedy sequel Harold and Kumar 2, featuring the directorial debut of the original film’s writers, John Hurwitz and Hayden Schlossberg, and the crime thriller, Horsemen, starring Dennis Quaid and Ziyi Zhang. |
| Music á |
| Lionsgate Music is an innovative, entrepreneurial and diversified company complementing
Lionsgate's filmed entertainment content leadership with a growing role in all
facets of music publishing, talent relationships with a broad spectrum of musical
icons and cutting edge young stars, and the licensing, ownership and incorporation
of distinctive music in the Company's feature films and television programming. Recipients of an Academy Award ® nomination for Bird York’s “In The Deep,” penned for Lionsgate Best Picture Academy Award® -winning Crash, the Company's music business includes such notable recent successes as Marco Beltrami’s award-winning score for the hit Western 3:10 to Yuma, The Flaming Lips' end titles for the hit comedy Good Luck, Chuck, and Dr. Dre’s end titles for the action film War. Lionsgate's music initiatives have also played a key role in the recent critical acclaim generated by the Company’s television programming. The Golden Globe®-winning hit comedy Weeds includes innovative main title covers by Linkin Park, Randy Newman and others, and songs from a diverse and eclectic roster of artists including Bob Dylan, Miles Davis and the Andrews Sisters have been incorporated in Lionsgate's latest hit, the Golden Globe®-winning television drama Mad Men. The Company has approximately doubled the asset value of its music publishing operations in the past two years and is currently exploring the acquisition of leading music catalogs as part of its continued growth. |
| Digital Media á |
| Lionsgate is currently transitioning its vast library and other content into
a digital environment which offers a broad spectrum of new buyers and revenue
streams for its product. Digital revenues accounted for less than 1% of Lionsgate’s
home entertainment revenues last year. By 2010, that number is expected to increase
to 10 to 15% or more. The Company has forged pioneering digital delivery deals for television, library and rental product with Apple iTunes as well as such other digital platforms as Amazon, Microsoft, Blockbuster, Netflix, Movielink, Vudu and CinemaNow, in which it owns a 20% minority interest. In July 2007, Lionsgate acquired a 42% equity interest in Break.com, a leading viral marketing company that creates new opportunities for showcasing the Company’s feature films and television programming, gives it access to a pool of Internet-oriented, cutting edge young talent and opens up the possibility of creating Webisodes and other fresh content designed specifically for online audiences. Lionsgate has also completed a highly successful first year for its branded
horror channel, FEARNet.com with partners Sony and Comcast. FEARNet.com has
emerged as the leading online horror site and one of Comcast’s top
VOD channels, reaching over 16 million households nationwide. The Company
will debut its new television horror anthology series, Fear Itself, on Fearnet.com
almost concurrently with its scheduled airing on NBC. The channel has been
so successful that Lionsgate is exploring opportunities for replicating its
success with other branded online networks. |
| Library á |
| The jewel in the Lionsgate crown is its library of approximately 12,000 motion
picture titles and television episodes, one of the largest and most prestigious
in the entertainment industry. The library generates approximately $250 million
in recurring revenue and $90 million in free cash flow annually, serving as the
foundation for the growth of the Company’s core businesses and a source
of stable and predictable revenue that buffers the cyclicality of the entertainment
business. Lionsgate's strategy of acquiring and consolidating available libraries for the right price has been a key ingredient in the Company’s evolution into the dominant content player in the independent space. Lionsgate continually grows its library constantly through a combination of organic replenishment, adding approximately 200 feature films, direct-to-video titles and television episodes each year, and accretive strategic acquisitions. Beginning with the original Lionsgate platform of approximately 800 titles, the Company has acquired or licensed the libraries of Trimark Pictures (October 2000), Artisan Entertainment (September 2003), Modern Times Group (MTG) (July 2005), Redbus Film Distributors (October 2005), StudioCanal (2006), Mandate Pictures (August 2007) and the film classics of Latin media giant Televisa (September 2007), among others. Most of these titles are either owned in perpetuity or for long-term leases averaging five to 20 years or more. The library is replete with evergreen titles, including Dirty Dancing, which continues to sell more than 50,000 units a month, Terminator 2: Judgment Day, Total Recall, Basic Instinct, Reservoir Dogs, Monster's Ball, The Blair Witch Project, Crash and Rambo. The Company monetizes its library through a constant process of repackaging and reissuing, with more than 2,000 titles in general circulation at any given time. During the past few years, Lionsgate has begun leveraging its library content into an expanding array of digital media platforms, including digital downloads for Apple iTunes, Amazon, Microsoft, and others as the Company’s transition to the digital marketplace of the future creates new and incremental revenue streams. |
| COPYRIGHT 2008 | LIONSGATE | NYSE:LGF |
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