Digital Entertainment

Lions Gate Swallows TV Guide


Digital Entertainment January 6, 2009, 12:01AM EST

Lions Gate Swallows TV Guide

CEO Feltheimer aims to promote Lions Gate hits Weeds and Mad Men on the channel and eventually distribute content directly to consumers

The hardest-charging media mogul in Hollywood these days may not be named Rupert, Jeff, or Bob. Instead, it may well be a 57-year-old TV veteran named Jon Feltheimer who runs a company that until recently was mostly known for making African American movie comedies starring Tyler Perry and distributing such low-brow fare as the horror series Saw. For the last eight years, Feltheimer has run tiny (by Hollywood standards) Lions Gate Entertainment (LGF), a $1.4 billion-a-year movie and TV company that may have designs on the big boys.

On Jan. 5, Feltheimer swung a $225 million deal to buy the TV and online remnants of the iconic TV Guide from high-tech company Macrovision (MVSN), snapping up the TV Guide Network cable channel and TV Guide Online site. Only two weeks ago those assets were purchased by money manager About One Equity Partners and Allen Shapiro, the onetime CEO of TV production company Dick Clark Productions. Macrovision won't say why that deal fell apart, but ad sales have been falling fast at cable networks, says Derek Baine, an analyst at cable firm SNL Kagan. He figures TV Guide Channel gets a paltry 2¢ each month for every subscriber—a huge drop from the 20¢ or more other channels get.

In case you've never heard of the TV Guide Network, it's carried on cable or satellite in 83 million homes—mostly for its glossy commercials for upcoming shows. Even on its best days, says TV Guide Network President Ryan O'Hara, it gets only about 1% of cable viewers, who hang around for only six minutes a pop. But Feltheimer, a onetime Sony TV executive, says he aims to take a page from counterparts at Disney (DIS) and Fox (NWS) and use his new cable channel to show off Lions Gate movies, TV shows (the studio produces Showtime's Weeds and Golden Globe-nominated Mad Men), and a library of some 12,000 films and TV shows, including Will & Grace, Saturday Night Live, and the Rambo series. "If you look at Bravo or any of the channels, it only takes one or two hit shows and suddenly you can start to promote all your other shows on the channel," he says. "This is great real estate for our ambitions to distribute our content directly to consumers."

Building a Major Player However he plans to make good on those ambitions, the executive known as "Felt" to his friends clearly intends to make Lions Gate a major player in the next generation of electronic distribution. The Lions Gate CEO says he and TV Guide's O'Hara will need to work with cable and satellite operators to change the network's format of mostly trailers for upcoming shows, but O'Hara says they have that ability in many of their current contracts. Moreover, with cable companies clamping down on the number of spaces they're allotting for new channels (they're saving their digital space for things like video on demand and phone service), even a lightly watched channel like TV Guide could be a winner.

Even before he plunked down the $225 million for TV Guide, Feltheimer was beefing up on ways to get his content to the outside world. Along with Sony (SNE) and cable giant Comcast (CMCSA), Lions Gate already owns a 33% stake in horror channel FearNet to put horror flicks online and on TV screens. Lions Gate also owns 42% of male-centric site Break.com and last year agreed with MGM and Viacom's (VIA) Paramount Pictures to launch a new movie channel to take on the likes of HBO and Showtime. The channel, about one-third owned by Lions Gate, is expected to launch later this year, though it has yet to announce its first agreement with a cable, satellite, or video-offering telephone company.

That's a lot of potential firepower for a company that lost $41 million in its first six months of the fiscal year through Sept. 30 and last year lost $73.9 million on almost $1.4 billion in revenue. Still, this is a company that of late seems to have found a way to make hit shows like Weeds and Mad Men, and if it can create hefty distribution outlets, it can guard against the inevitable hits and misses of Hollywood. As one of the last remaining independent studios, Lions Gate could become a media company that could just as easily be acquired as become an acquirer. Indeed, there are recurring rumors in Hollywood that Feltheimer, who used to work for MGM Chairman Harry Sloan when both were at New World Entertainment in the late 1980s, might eventually seek a merger of the two companies.

At the same time, the often impatient investor Carl Icahn, who has tried to force mergers at other companies, recently doubled his stake in Lions Gate, to 9.2%, a potentially ominous sign. Then again, Icahn is a dealmaker who likes a company that makes aggressive moves to grow. If it shows nothing else, the TV Guide deal shows that Feltheimer surely wants to grow.

Grover is Los Angeles bureau chief for BusinessWeek.


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