Lions Gate Enters the Maze

Not long ago, I wrote about the consummation of a multipicture deal between Lions Gate Entertainment (NYSE:LGF) and Twisted Pictures, a corporate combination that, previous to that deal, gifted cinema culture with the gory -- and certainly twisted -- movie SAW.

Now comes word of the first project to be spawned off that agreement. According to a press release issued by the company, horror fans can look forward to something called Catacombs. Looks like the main character of the piece will become lost in a maze located beneath the city of Paris, a labyrinth that is unbelievably huge at more than 200 miles in length. And, as you can imagine, terror is sure to be lurking around every turn.

If SAW is any indication, it is quite possible that Lions Gate will have another high-margin hit on its hands. The press release states that SAW grossed close to $100 million in theaters across the globe; it also has sold 4 million units so far in the U.S. and Canada since its release to the home video market on the day after Valentine's Day (what an interesting holiday to debut around, huh?). All this from a $1.2 million production budget. Even taking into theoretical consideration the marketing/distributional expenses involved (I say theoretical because the company did not break such costs down), you can bet that a lot of green is headed Lions Gate's way. It also proves yet again that you don't always need an obscene amount of cash to generate a hit -- pay attention, Hollywood.

I don't know whether this project signals the beginning of a relationship on the order of Disney (NYSE:DIS) and Pixar (NASDAQ:PIXR), but I like the premise of the film on paper and can see why this was green-lighted. It should have great appeal to the youth not only because of the presence of rock star Pink in the cast but also just by the mere fact that it is a horror film. Viewers of the WB and MTV love this kind of product and will come out in droves on the opening weekend if the marketing is correctly executed.

W.D. Crotty took a look at Lions Gate's recent earnings report and gave a great analysis on the company's current prospects. He found that while cash flow has improved, the valuation might be somewhat questionable at this point. And I'll state something I said before regarding Lions Gate: This is an interesting company and stock, but it is probably appropriate for the more speculative section of one's portfolio.

Want to get caught up in a maze of recent articles on Lions Gate Entertainment? Go right ahead:

• Lions Gate Roaring Along
• Lions Gate Wants Candy
• Opening the Lions' Floodgates
• Lions Gate Gets Twisted

Have an opinion about Lions Gate Entertainment? Roar it out loud on the discussion board.

Fool contributor Steven Mallas owns shares of Disney.