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Pain. Screaming. Bloodshed. Tortured flesh; harrowed souls. That's what has been partly behind the success of Lions Gate Entertainment
Hey, Mom might as well buy some shares, considering her kids have probably caught a movie or two distributed by Lions Gate at the multiplex. Or on DVD. Or pay-per-view. That's one of the great things about the studio -- its content gets around on all the major ancillary platforms, allowing it to build a significant brand presence.
And Lions Gate loves to leverage that brand equity in an effort to target the younger-skewing movie fans who watch MTV, World Wrestling Entertainment matches, and the CW. That's where the money is. The Saw franchise, for instance, has given birth to an unimaginably grotesque mind known as Jigsaw. Mom might remember cinematic psychos such as Norman Bates, Leatherface, Michael Meyers, Freddy Krueger, and every camp counselor's worst nightmare, Jason Voorhees. Well, Jigsaw is the new legend out there, and along with that shadowy organization that turns pain into profit in Hostel, Lions Gate knows how to touch nerves and bring in the date crowd at the same time. Believe me, Mom, it can offer bigger fish like Disney
The studio has been successful at bringing in the cash. In February, I found the Lion's earnings and cash-flow statements to be supreme. Operating income and net income shot up like a rocket. Operational cash flow more than doubled, and free cash flow was much higher as well.
This is the movie business, of course, so Mom won't always see quarters like that. In fact, back in November, things were a lot different -- a nasty net loss was reported, and cash flow for the six-month period was on the decline.
That doesn't mean, though, that Lions Gate is to be avoided. It just means that you have to be prepared for a bumpy ride. For instance, Lions Gate struck out with Akeelah and the Bee. But, it struck gold with Tyler Perry. The studio will hopefully have more hits than misses as it builds a valuable film library. That library, Mom should know, can be counted on to contribute to earnings for years, especially as new mediums and platforms are developed. The new Blu-ray and HD-DVD discs offer Lions Gate opportunities to cash in on its content, as does broadband distribution.
Oh, and for Moms who might like to walk on the wild side every now and then, there is an interesting speculative side to the Lions Gate story based on the movie library. At more than 10,000 titles, there are a lot of gems in the Lion's vaults. Besides the ones already mentioned, the studio has access to Total Recall (gotta love Kuato), The Blair Witch Project, American Psycho, and Rambo (I loved the first one). Mom surely knows that some entity out there, whether it be a major media concern or a private equity fund, is probably salivating at the prospects of that catalog. She could one day wake up and find the company is about to be taken over at a premium. This is, again, pure speculation, but you never know.
Lions Gate may not be as well-known as larger competitors such as Viacom
Have Mom check out some more Takes on the Lion:
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Fool contributor Steven Mallas owns shares of Disney. As of this writing, he was ranked 7,580 out of 28,358rated investors in the Motley Fool CAPS system. Don't know what CAPS is? Check it out. The Fool has a disclosure policy.