Why "Hunger Games" Matters So Much to Lions Gate

Lions Gate's (NYSE: LGF  ) latest movie in its Hunger Games series, Catching Fire, has been doing very well in the box office. The film has already collected $300 million in box office sales domestically and about $600 million globally, on track to outperform the first Hunger Games movie on almost every metric. Despite the movie's success, investors are disappointed. Apparently they had higher expectations for the movie.

With the company's stock down about 10%, it suggests Lions Gate's overall corporate results are highly dependent on the movie. Is this really the case? It is. Unlike Walt Disney (NYSE: DIS  ) , which has a very small reliance on its motion pictures segment (10.4% of fiscal 2013 operating income), motion pictures play a central role in the company's results.

In the video below, Fool contributor Daniel Sparks weighs in with the details on why Lions Gate's business is so dependent on the Hunger Games franchise.

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  • Report this Comment On December 07, 2013, at 10:43 AM, djstunt101 wrote:

    You describe your investing philosophy as: Buy great businesses with the intention of holding for a very, very long time.

    Agree. But does your analysis of LGF reconcile with your objective? If you look at LGF's business as a whole, creating, producing, delivering all forms of content, during a period in which the mantra "content is king" seems to carry some weight as companies like Netflix and Amazon are racing to deliver original content along with the widest degree of choices, maybe LGF is in the right business at the precisely correct moment in time.

    While one can assign the importance of CF to the quarter to quarter results, LGF's longer term situation is what any potential investor should focus on, right?

    Your video does simply point out that one should know where and how a company makes its money and why one single movie can effect different companies different ways…..but I think investors should also consider the various areas LGF is moving into and the potential "return of capital" plans the CEO just recently hinted at on CNBC….don't you?


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