Entertainment

Lionsgate Bows Out of the Summer Blockbuster Arms Race


Dolph Lundgren (left) and Jason Statham in a scene from The Expendables 3

Photograph by Phil Bray/Lionsgate

Dolph Lundgren (left) and Jason Statham in a scene from The Expendables 3

Lionsgate (LGF) may be the only shop in Hollywood looking forward to a lazy, relaxing summer.

While its competitors work themselves into a marketing frenzy over massively expensive movies, Lionsgate is rolling out a third Expendables movie with a cast of has-been action stars, along with a fifth iteration of its Step Up dance franchise. Expectations are restrained, at least among those who don’t keep up with Dolph Lundgren. But so, too, are the costs and risks involved.

The studio’s summer strategy is both counterintuitive and savvy. Blockbuster movies can be a marketing arms race, and Lionsgate doesn’t have nearly the advertising arsenal of big rivals such as Warner Bros. (TWX) and 20th Century Fox (FOXA). That’s one of the reasons it slated Divergent, its next multi-installment franchise, for the less crowded calendar of late March.

And the films Lionsgate is screening this summer won’t even need to perform like blockbusters to make some money at the box office. The Expendables 3 cost an estimated $90 million—no doubt because the cast, including Wesley Snipes, Antonio Banderas, and Kelsey Grammer, don’t hold as much power at the negotiating table as they did 20 years ago. Bruce Willis won’t be in the picture because he was asking for too much money, according to the Guardian.

Step Up All In is likely to be even cheaper. The original—starring a younger, more affordable Channing Tatum—cost just $12 million. Tatum, of course, won’t appear in the latest sequel; he’s busy this summer anchoring 22 Jump Street for Sony Pictures Entertainment (SNE).

It’s all gravy for Lionsgate with its forthcoming Hunger Games movies on the calendar for the next two Novembers. That franchise is sure to carry the company financially for the near future. The only way to screw it up would be to squander the spoils on unproven projects and bloated August ad campaigns.

Not surprisingly, Lionsgate is being more conservative about which films it bankrolls, not just when it opens them. Last year the company had only 13 widely released films, down from 19 in 2012. Instead of buying more movies, the studio is investing in a Hunger Games video game and considering a theme park attraction. And it’s green-lighted a fourth Divergent film and a Power Rangers project.

“We don’t model that everything is going to work, but obviously we’ve got a very robust business right now,” Lionsgate Chief Executive Officer Jon Feltheimer said during a conference call on Friday. “Most of the things that we have do not require a large deficit going in.”

Meanwhile, Lionsgate is making a pile by cranking out hit TV shows such as Orange Is the New Black, Nashville, and Mad Men. Its television revenue surged 18 percent last year to $447 million. The company sells the premieres of those shows to outlets like AMC (AMCX), but it owns the ongoing rights and can convert those into quick cash through deals with streaming services. “That didn’t even exist five years ago,” Feltheimer said.

So step up and buy some movie tickets this summer—or don’t. Lionsgate doesn’t necessarily need you this season, as long as you still turn on your TV and turn out for movies again in the fall.

Kyle-stock-190
Stock is an associate editor for Businessweek.com. Twitter: @kylestock

The Good Business Issue
LIMITED-TIME OFFER SUBSCRIBE NOW

Companies Mentioned

  • LGF
    (Lions Gate Entertainment Corp)
    • $32.47 USD
    • 0.11
    • 0.34%
  • TWX
    (Time Warner Inc)
    • $86.71 USD
    • 1.13
    • 1.3%
Market data is delayed at least 15 minutes.
 
blog comments powered by Disqus