Up In Flames

Lionsgate lobbied to be the belle of buyout ball last year in Hollywood, but Prince Charming never arrived.

Shares of Lionsgate have plunged 42% since peaking last summer. The last quarter of 2018 saw revenue fall by 20% (to $932M) and net income by 90% (to $23M). 

In January 2018, Lionsgate was the subject of a supposed bidding war. It was reported that Amazon, CBS, Comcast, Verizon, and Viacom all made offers. However, given Lionsgate’s eagerness to be acquired, it’s unlikely these offers were more than a fishing expedition to discover its true market value. 

Of all the suitors, Lionsgate was most interested in merging with CBS and Viacom, but those companies were under the chaotic stewardship of the Redstone clan deeply embroiled in executive infighting, court competence tests of the patriarch, paramour payouts, sexual harassment claims against CBS’s CEO, and general mismanagement by the family-run business. 

In a failed deal that sums up everything that is wrong with Hollywood, the Hasbro toy company was the closest Lionsgate came to being acquired. The two companies had previously collaborated on the 2017 film My Little Pony.

If Lionsgate was truly interested in selling itself, it should have started years earlier when they were still riding high from The Hunger Games. The greatest example of this strategy came when China’s Wanda bought Legendary Pictures at the peak of its value. 

AT&T’s acquisition of Time Warner could prove equally as rich. HBO is coming off the biggest show in history, Game of Thrones, without too much in reserve. Combined with plummeting viewership for its news outlets, AT&T might have buyer’s remorse as it contemplates its $180 billion mountain of debt.

Lionsgate greatly strengthened its value with the Starz buyout in December 2016 for $4.4 billion, but even this was not enough to land a buyer.

All these failed buyout attempts have resulted in demoralized executives and managers at Lionsgate. The company has operated on autopilot for the last two years in anticipation that it would no longer be an independent company. 

Rising Star Wanes

Lionsgate appeared destined to become a major studio after a spectacular run that started with Twilight and continued through The Hunger Games. Likewise the newly formed television department involved itself with hits like Mad Men, Orange is the New Black, and Nashville.

However, after these climatic megahits, Lionsgate experienced massive declines in its franchise films, including Divergent and Now You See Me. The sequels only grossed about half of their previous films.

Films that Lionsgate hoped would spawn franchises, such as Gods of Egypt and The Last Witch Hunter, bombed, and the third installment of the Divergent series ended plans to release the finale in theaters. A scaled-down version was released DTV.

Box Office Rise and Fall

a) In millions; b) *Receipts for US and Canada; c) 2019 data though April 21

However, the John Wick films are a rare bright spot in Lionsgate’s film slate. The first installment grossed $42 million domestically, but the second film more than doubled the first by racking up $92 million in domestic gross receipts. The third film in the series hits theaters on May 17th. It’s very likely it will gross over $100 million in the United States and Canada.

After the inevitable collapse of the dystopian fiction formula aimed at young adults, Lionsgate continues to double down, seemingly destined to keep making the same mistakes. 

The company is currently scrambling to film reshoots on Chaos Walking, the first of many planned adaptations of the science fiction series aimed at young adults. The film has already cost the studio $100 million, but after executives screened a cut of the film they refused to release it in March.

Over the last year, several top film executives have left Lionsgate and new productions have screeched to a near halt. In the interim, Lionsgate is shifting focus from production to acquiring films for distribution. However, very few films are being made with sizable enough budgets to support a nationwide release by Lionsgate. 

FilmTake Away

The culture at Lionsgate is wounded, likely beyond repair in the near future. The Starz merger provided a much-needed boost, especially to the bottomline, but without a radical shift in how the company is managed, it will no longer compete with the major studios as it did in the company’s heyday.