Lionsgate To Shareholders: ‘The Hunger Games’ Will Be Worth The Wait
A financial based article on Lionsgate from Bloomberg has Lionsgate assuring shareholders that ‘The Hunger Games’ will be worth the wait as well as ‘The Hunger Games’ would have to make at least US$100 million in order to guarantee sequels to be made.
Jon Feltheimer and Michael Burns crank up the volume as an image flickers to life on a flat- screen TV in their offices at Lions Gate Entertainment Corp. (LGF) in Santa Monica, California.
“Hey, we’ve got something really special here,” says Feltheimer, 60, Lions Gate’s co-chairman and chief executive officer. Burns, 53, the studio’s vice chairman, praises Jennifer Lawrence, the 21-year-old actress who plays the film’s bow- wielding heroine. “She looks like she could start a revolution,” he says.
We would be disappointed if we didn’t make three or four movies,” Feltheimer says.
So would investors, who have seen Lions Gate’s stock drop 45 percent in its four fiscal years ended on March 31. “The Hunger Games” and three potential follow-ups could generate from $220 million to as much as $733 million in earnings before interest, taxes, depreciation and amortization during the next several years, according to forecasts by James Marsh, an equity analyst at Piper Jaffray & Co. in New York, who rated the stock a “buy” as of mid-October.
The high-end forecast would amount to three-quarters of the studio’s market capitalization of $975 million as of Oct.10. “The Hunger Games could be the biggest catalyst for Lions Gate’s profits and share price during the next decade,” Marsh says. “It could be a game changer for them.”
Burns, a lanky man with a boyish face that belies his taste for corporate combat, says the movie offers Lions Gate that most coveted Hollywood prize: a reservoir of revenue that can be tapped for years. “Everyone is looking for stability in this business, so if the first one works, then you should have three more that work, and you create predictability in a very unpredictable business,” Burns says in his rat-a-tat style.
Feltheimer, whose chiseled jaw and deep-set eyes could get him cast in a Western, nods in agreement. He says “The Hunger Games” must hit $100 million in domestic box office sales to justify making sequels. “I’m not too concerned we won’t get to that kind of number,” the studio head says.
He points to an issue of “Entertainment Weekly” magazine on a coffee table. It features two of the film’s hunky young stars, Josh Hutcherson and Liam Hemsworth, on the cover. “There’s just too much heat for this property around the world,” he says.
Burns squirms at his partner’s confidence. “Can I just knock on wood through this entire interview?” he says, rapping the side of his chair.
…Alli Shearmur, Lions Gate’s president of movie production, had zeroed in on a hot property making the rounds in Hollywood: “The Hunger Games” (Scholastic Press, 2008). She gave copies to Feltheimer; Burns; her boss, Joe Drake, president of Lions Gate’s motion picture group; and other studio executives. They were immediately smitten by the story of how the resourceful Katniss Everdeen fights for her survival in the lethal games of the title. News Corp. (NWSA)’s Twentieth Century Fox and other major studios were also circling the book.
When Drake and Shearmur pitched author Collins and independent producer Nina Jacobson for the rights in late 2008, they vowed to make a character-driven story that would resonate with young readers.
“We weren’t going to let the violence be gratuitous or the selling point of the franchise,” says Shearmur, who oversaw the Bourne series starring Matt Damon while she was an executive at Universal Pictures Ltd. in 2002. “This is an emotional story about a young girl who sacrifices everything and sets off a revolution she never intended.”
In greenlighting Lions Gate’s priciest picture ever, Feltheimer hedged the financial risk by selling the international distribution rights, except for the U.K., to other studios. Piper Jaffray’s Marsh estimates that Lions Gate collected $50 million in upfront cash from the deals in exchange for permitting its partners to pocket box office sales in foreign markets.
After receiving tax incentives from North Carolina, where the film was shot this summer, Lions Gate has about $30 million at risk in the production, Feltheimer says. The studio will probably spend another $40 million in marketing and advertising “The Hunger Games,” he says.
After several box-office bombs from Lions Gate, its shareholders are now counting on it to deliver a blockbuster. “Patience is running out,” Caris’s Miller says. Feltheimer and Burns find their studio’s fortunes riding on the shoulders of a 16-year-old girl fighting for her life.
Bloomberg has also updated with a video of the interview. Unfortunately, we couldn’t embed it here so you have to head over to Bloomsberg to watch the video.
It’s not surprising that Lionsgate are betting on ‘The Hunger Games’ to do well considering their recent releases hasn’t been doing well. In fact, The Wrap reported Lionsgate had reported US$24.6M in losses in this 2nd quarter of the year.