Lionsgate

Lionsgate continues to grow into a vertically integrated global content platform of increasing diversity, reach and scale. The Company’s portfolio of assets includes one of the largest independent television businesses in the world, a 17,000-title film and television library, a world-class film business and an expanding global distribution footprint.

says their investor website.   What is Lionsgate?  How do we value an entertainment company?

I’m interested in Lionsgate, because they have a majority ownership of 3 Arts

The management company where I am represented.  In a way, I work for them?

Here’s a brief history of Lionsgate – which is not very old – from this recent LA Times article by Ryan Faughnder, entitled

Founded in 1997 in Vancouver, Canada, the company became known early on for edgy indie and horror films such as “American Psycho” and “Saw.” Lionsgate grew its firepower and boosted its stock price through acquisitions, catapulting itself into the big leagues with its 2012 purchase of “Twilight Saga” studio Summit Entertainment and the release of the first “Hunger Games.” The four-movie apocalyptic “Hunger Games” series grossed $2.97 billion. It impressed investors with its tactic of offsetting the risk of producing movies by pre-selling foreign distribution rights and bringing in co-financiers.

Then they had some busts:

“Gods of Egypt,” a $140-million mythological epic released in 2016, flopped after it was slammed by critics and accused of whitewashing its cast. A reboot of billionaire Haim Saban’s “Power Rangers” franchise disappointed after Feltheimer said on an earnings call that the company could produce multiple films based on the kids series.The studio’s decision to turn the third book in the “Divergent” series into two movies backfired when “Allegiant” flopped. A planned fourth installment was never produced.

That LA Times article is entitled Lionsgate, the studio behind ‘Hunger Games’ movies, struggles in shifting Hollywood currents.  

The Wall Street Journal had a whack, too, a few days later:

Management Tension, Mounting Competition Sink Lions Gate’s Stock

As rivals grow larger, studio struggles to find box-office hits and synergies with pay-TV network

Lions Gate’s movie business has lost ground since ‘The Hunger Games’ series ended in 2015. PHOTO: LIONS GATE/EVERETT COLLECTION

Apparently they are, at the moment, attempting to salvage a huge and expensive turd:

Lions Gate faces a major challenge called “Chaos Walking.” The first of several planned adaptations of a series of young-adult science fiction novels cost around $100 million to produce but turned out so poorly it was deemed unreleasable by executives who watched initial cuts last year, according to current and former employees.

A scalding take:

I’m not sure how much Wall Street has built the disaster here into the stock’s price.

Sir John Templeton taught us to look for points of maximum pessimism.  Is Lionsgate an opportunity? How should we value an entertainment company, which is liable to have big swings and misses?

First, what does Lionsgate own?

Over the course of its life, Lionsgate scooped up a bunch of film companies, in the process acquiring a library.  They swallowed up:

  • International Media Group

don’t know what their big movies were

  • Sterling Home Entertainment
  • Trimark Holdings

Their biggest franchise might be Leprechaun

  • Modern Times Group
  • Roadside Attractions

They produced, among others, Supersize Me, Manchester By The Sea, Mystery Team, Winter’s Bone, Mud

  • Mandate Pictures

Juno, This Is The End

  • Summit Entertainment

Hurt Locker, Red, Hellboy, John Wick, American Pie, Ender’s Game

  • Artisan Entertainment

Blair Witch Project, Ninth Gate, House of the Dead, Step Into Liquid

From that library I have to imagine Lionsgate will continue to make some kind of money.  Some of these films are things people will want to see and resee or rediscover, and it’s a good business to keep selling something that’s already made.  All told, according to their 2018 investor letter, Lionsgate has something like 17,000 films in its library.

I was surprised by this fact:

In fiscal 2018, we shipped approximately 65 million DVD/Blu-ray finished units.

The Lionsgate investor page highlights some of their big ones:

MOTION PICTURE GROUP

Lionsgate’s Motion Picture Group encompasses eight film labels and more than 40 feature film releases a year, including 15-20 wide releases from the Lionsgate and Summit Entertainment mainstream commercial labels. Lionsgate’s film slate has grossed nearly $10 billion at the global box office over the past five years, and films from Lionsgate and its predecessor companies have earned 122 Academy Award® nominations and 30 Oscar® wins.

As well as some of their TV productions and co-productions:

TELEVISION GROUP

The Lionsgate’s Television Group has carved out a unique position as a leading supplier of premium scripted content to streaming platforms, cable channels and broadcast networks alike. One of the largest independent television businesses in the world with nearly 90 series on 40 different networks, Lionsgate’s premium quality programming includes the ground-breaking Orange is the New Black, fan favorite Nashville, the hit dramedy Casual, the critically-acclaimed Dear White People and the breakout success Greenleaf. The Company continues to build on its legacy of award-winning premium series that include the iconic multiple Emmy Award-winning Mad Men, one of the best reviewed series of all time, Weeds and Nurse Jackie.

The Company’s development and production slate includes a number of high-profile premium properties including The Rook (Starz), a Lionsgate/Liberty Global coproduction executive produced by Twilight creator Stephenie Meyer with acclaimed producer Stephen Garrett serving as showrunner, The Kingkiller Chronicle (Showtime)Step Up: High Water (YouTube Red)Get Christie Love! (ABC) and American Lion (HBO).

As they note:

many of the titles in our library are not presently distributed and generate substantially no revenue. Additionally, our rights to the titles in our library vary; in some cases, we have only the right to distribute titles in certain media and territories for a limited term.

Coming down the pike are some high-risk, potential high-reward titles.  From the LA Times:

Lionsgate could rebound this year with the release of movies including “Long Shot” and a third “John Wick” movie, analysts said. But otherwise, the schedule includes few obvious hits. Upcoming films include “Angel Has Fallen,” the third installment in the “Olympus Has Fallen” series, “Rambo V: Last Blood” and a Roland Emmerich remake of “Midway.”

How much do people want to see an expensive movie about the Battle of Midway, I wonder?

All told:

the Company’s consolidated revenues from its reporting segments included Motion Pictures 44.1%, Television Production 19.5% and Media Networks 37.1%

The big engine at Lionsgate in Media Networks is Starz, the premium network.

Home to Outlander, Power, Ash vs Evil Dead, a bunch of costume-y looking shows.  Starz produces a lot of the profits:

Starz has performed well financially, with revenue increasing 4% to $366.8 million and profits up nearly 10% to $134.1 million in the fiscal third quarter ended Dec. 31. It added just over one million subscribers in 2018.

There was a writeup of Lionsgate in a recent issue of Graham and Doddsville, “an investment newsletter from the students at Columbia Business School.”  You can read it free, here.  Amit Bushan, Bruce Kim, and Stephanie Moroney won 1st place at the CSIMA Stock Pick Challenge with their case.

Above-consensus subs projection results in a 12% above-consensus NTM adj. EBITDA. Given the FCF stability of the subscriptionbased business, we are applying a premium over movie studios (~10x). Note that 12x multiple is 12% lower than Starz’s recent average (13.7x).  Catalysts: 1) higherthan-consensus OTT subs growth in the next few quarters; 2) increased visibility on the impact of the international expansion; 3) M&A.

Not sure I agree with this assessment.  But there are a couple points I think are interesting about Lionsgate.

  • Starz is easy to add on to your Amazon Prime.  In addition to being its own channel, it’s like an add-on to your Amazon.  To me as a customer, that makes it very accessible.
  • 3 Arts is cool, and represents a lot of top tier talent.  It’s kind of hard to find a list of their clients if you don’t have IMDb pro, but here’s the top ranked by “Star Meter”
7
60
78
256
357
379
604
721
786
820
1,025
1,043
1,047
1,081
1,128
1,270
1,311
1,319
1,347
1,353
1,464
1,481
1,483
1,550
1,620
1,682
1,816
1,823
1,881
1,882
1,903
1,961
1,966
2,136
2,157

 

What impact that will really have on 3 Arts’ bottom line, I’m not sure.  But they do have access and potential synergies with some pretty explosive entertainers and creators.

Net Income 473,600 14,800 50,200 181,800

As always around here, we like to look at a picture of the company’s CEO:

Here is John Feltheimer.  He gets paid a lot of money.

Is this company worth $2.8 billion dollars?

I’ll be interested to hear their fourth quarter earnings report on May 23.

Thank you for joining us on a continued journey to learn about business and entertainment.

 


What? Are You Jealous?

The painting evokes a sense of Pacific paradise in which sexual relations are playful and harmless. According to Professor Peter Toohey, “this jealousy is not the product of a threat to an exclusive sexual relationship or jilted love affair – it is the result of one of the sisters having enjoyed more sex than the other the night before”.

So says Professor Toohey.  Gauguin.org counters:

Despite the title, there seems to be no rivalry between the two women, who are not talking. Rather, the question might be directed at those who would see the painting in the future and might envy Gauguin and his models their tropical dolce far niente.

We’ve discussed the incredible titles of Gauguin paintings before.

Over at Paul-Gauguin.net, you can view his works according to some ranking of popularity.

Last place:

Breton Village Under Snow.

First:

Here in LA, at LACMA, we have:

And a few others, none of them currently on view:

How about a wood carving?:

“Be in love and you will be happy.”

Gauguin’s ankle was injured in a fight in 1894.  This is sometimes referred to as “a drunken brawl,” or “a brawl with sailors,” but in this book

we’re told that

on an outing to Concarneau, he and Anna and a couple of friends got into a squabble with some children

(we’ve all been there, you’re at the beach and you get in a fight with some children).

Local sailors came to the youngsters’ assistance, and in the ensuing brawl, Gauguin broke his ankle.

Anna by the way was not Gauguin’s wife and mother of his kids, but his mistress, seen here:

who would dance with a little monkey for society gentlemen

Gauguin: what a piece of work!

Self Portrait with Halo and Snake

 


Barbarian Days

sometimes reading “the news” I am reminded of this part from Barbarian Days:

In the cemeteries in Tonga, late in the day, there always seemed to be old women tending the graves of their parents – combing the coral-sand mounds into proper coffin-top shape, sweeping away leaves, hand-washing faded wreaths of plastic flowers, rearranging the haunting patterns of tropical peppercorns, orange and green on bleached white sand.

A shiver of secondhand sorrow ran through me.  And an ache of something else.  It wasn’t exactly homesickness.  It felt like I had sailed off the edge of the known world.  That was actually fine with me.  The world was mapped in so many different ways.  For worldly Americans, the whole globe was covered by the foreign bureaus of the better newspapers – the New York Times, the Washington Post, the Wall Street Journal – and, at that time, the big newsweeklies.  Every place on earth was part of somebody’s beat.  Bryan understood that map before I did, having gone to Yale.  But when I’d found an old copy of Newsweek on Captain Brett Hilder’s bridge, and tried to read a George Will column, I’d burst out laughing.  His Beltway airs and provincialism were impenetrable.  The truth was, we were wandering now through a world that would never be a part of any correspondent’s beat (let alone George Will’s purview).  It was full of news, but all of it was oblique, mysterious, important only if you listened and watched and felt its weight.

As the Jamaican cab driver said, the news is a Babylon thing.

 


Tupaiai’s Map

After he landed in Tahiti in 1769*, Captain James Cook met an island man, Tupaia, who drew him a map of islands of the South Pacific.

That Cook respected and trusted Tupaia is evidenced by the fact that for an entire month, he let Tupaia navigate his precious ship through the archipelago of the Society Islands, and on southward across open waters to Rurutu in the Austral Group. Tupaia turned out to be an invaluable linguistic and cultural translator for the crew, especially so in Aotearoa/New Zealand, where Cook landed next. Only when the Endeavour reached Australia did Tupaia’s powers to communicate fail; he eventually fell ill and tragically died in Batavia, today’s Jakarta in Indonesia.

Only copies remain, and they’re hard to comprehend:

For almost 250 years, Tupaia’s Map posed a riddle to historians, anthropologists and geographers of the Pacific alike. Until more recently, only a rather small number of islands on the map could be reliably identified. The British on Cook’s ship knew little Tahitian, and their linguistic talent was limited. They wrote down what they heard Tupaia say when he named the islands he drew, in an often very corrupted English transcription. What is more, many of the Tahitian island names are no longer in use in the region. But the more foundational problem is that even those islands which could be identified are hardly where one would expect them according to the logic of a Western map. By the standards of maps in Mercator projection as Cook used and drew them, the islands seem to be all over the place: Islands thousands of kilometers apart appear right next to each other, islands which should be to the south of Tahiti appear in the northern quadrants, small islands can have very large outlines, etc.

To cut a much longer story short: In Tupaia’s cartographic system, avatea marks a bearing to the north. It references the direction of the sun in its highest position at noontime (which south of the tropic of Capricorn, and most of the year south of the equator, points due north). Tupaia thus overrode the cardinal logic the Europeans set up for him: For the islands he subsequently drew, north would no longer be ‘up,’ east ‘right,’ south ‘down,’ west ‘left.’ North would from now on be in the center of the chart. What he thus also overrode is the logic of a singular, central perspective.

In Tupaia’s logic, there is no singular orientation abstracted from the traveller. True to his wayfinding tradition, the center of observation is always the va‘a (canoe). Rather than imaging an aloof bird-eye perspective, Tupaia must have invited his European collaborators to situate themselves in the chart, on a va‘a at any of the islands he subsequently drew.

One can’t help but be reminded of Super Mario Bros. 3, World 4:

* thanks to the many emphatic readers who noted my error (Cook’s voyage reached Tahiti in 1769, not 1767 as originally stated)


Showbiz

a non-industry friend asked me to summarize the current dispute between the WGA and the ATA.  I did my best:

Anyway.  We welcome comment!


Breakfast inequality

saw this on Bloomberg, but I don’t think it really tracks.  Maybe just the specific combination of regular milk, one egg, two slices of toast, and one fruit, an ideal of breakfast we can probably say evolved in Europe, is just easier to get in North America and Europe than it is in sub-Saharan Africa?

As Bloomberg notes:

Bloomberg picked the four food items based on widely available commodities that allow for price comparisons globally. What people across the world actually eat for their first meal of the day varies from egg-and-potato tacos in Mexico City to fried pork buns in Shanghai to cooked fava beans in Cairo.

Damn all those sound good.

In my own experience trying to get breakfast in Latin America or Asia, you might not be able to get milk, an egg, two slices of toast, and one fruit, but you can easily and inexpensively get say pupusas or a tasty medu vada or something.

Still, the point they are going for, worth considering:

The 30 cities with the least affordable breakfasts were largely concentrated in South America, Eastern Europe, Southeast Asia and Africa. Many of these regions suffer from food insecurity, or limited access to affordable and nutritious food, which can lead to additional problems such as disease and even death.

In Accra and Lagos, the two cities with the least affordable food prices, the standard breakfast would take more than 2 hours of work to purchase. The index would show an even more staggering disparity if Caracas were included. However, due to hyperinflation and the complex currency situation, that nation’s capital was excluded from this year’s list.

 


Top Of The Rock

Purging some books from my collection.

This one no longer sparks joy.  Perhaps because the cover itself is too busy, and also summons up a specific 90s period that now feels almost grotesque?

I got a lot out of this book.  What an era – when the most popular TV show really was the funniest.  On Frasier:

What a great, brilliant innovation.  It really gave Frasier a different, quieter feel than some of the other shows of the era.

How about this story about Clooney on the first day of E.R.: