Lower operating costs help studio decrease decline

Lionsgate revenue declined 11% during a slow quarter for its film and TV business, but CEO Jon Feltheimer emphasized that TV and digital media are the indie studio’s biggest growth opportunities going forward.

Meanwhile, significantly lower operating costs helped Lionsgate reduce its net loss to $3.6 million from $21.8 million a year ago.

Lionsgate had only two releases in the quarter ended June 30 — “Akeelah and the Bee” and “See No Evil” — neither of which generated significant business, along with holdovers “Larry the Cable Guy” and “La Mujer de mi hermano.” As a result, theatrical revenue dropped 17% to $22.3 million.

Feltheimer noted, however, that Lionsgate has a record high $240 million in future film revenue not yet recorded from contracts.

TV revenue dropped 9% to $14.8 million, which the company attributed to the timing of television deliveries later in the year, as new series and seasons premiere. In the next year, Lionsgate will have a record 11 primetime skeins.

Feltheimer told analysts on a conference call that TV will be a prime growth driver for Lionsgate in the coming years.

“When we started in this business six years ago, our TV revenues were $8.3 million,” he said. “Last year they were $133 million, and we’re on track for more growth this year — all in a business with low overhead and positive free cash flow.”

In addition, Lionsgate recently acquired syndicator Debmar-Mercury, which distributes the indie’s USA series “The Dead Zone” and Tyler Perry-produced sitcom “House of Payne.”

Returns last quarter were better overseas, as the studio’s international revenue grew 55% to $15.5 million thanks to solid returns for “Saw 2″ and “Hard Candy,” as well as the addition of Blighty distrib Redbus, which it acquired last fall and renamed Lionsgate U.K.

In homevideo, Lionsgate last quarter bucked the downward trend that has plagued the industry and saw it warn investors that it would miss guidance late last year. Homevid revenues rose $18% to $114.8 million thanks to strong sales for “Madea’s Family Reunion” and several direct-to-DVD titles from Tyler Perry, as well as “Crash” and “Lord of War.”

Library titles on DVD did particularly well, growing 71% to $53 million.

Feltheimer also emphasized the importance to Lionsgate of online distribution opportunities. In addition to existing deals to sell films and TV shows through CinemaNow, Movielink and iTunes, he said Lionsgate has upcoming announcements with two “major industry players,” most likely Amazon.com and either a major retailer movie online or iTunes’ upcoming movie store.

Lionsgate stock closed down slightly at $9.16 before earnings were announced.

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