The multiyear Netflix deal to stream movies from Epix will immediately make the nascent premium TV service profitable, executives from Lionsgate, an Epix partner, said Tuesday.
During a quarterly earnings conference call — in which Lionsgate execs made no mention of their fight with activist shareholder Carl Icahn — vice chairman Michael Burns declined to disclose the terms of the deal with Epix, but he said published reports that say Netflix will pay about $1 billion for access to programming for five years are “in the ball park.”
Viacom-operated Epix is a partnership between Lionsgate, MGM and Viacom’s Paramount. The studios will provide movies to Netflix 90 days after their premium pay TV and on-demand windows.
“The deal allows us to preserve our traditional relationship with the MSOs,” said Lionsgate CEO Jon Feltheimer, “while allowing us to create new revenue streams.”
The offerings to Netflix, which will include new releases and library titles, will not be branded as Epix movies, Lionsgate executives said.
Netflix and Epix confirmed the deal Tuesday but did not offer any details on financial terms.
Netflix will begin streaming Epix movies on Sept. 1 with titles bowing 90 days after their premium pay TV and subscription on demand debuts. Historically, Epix said, the rights to distribute films are pre-sold to pay TV for as long as nine years after their theatrical release.
During Tuesday’s earnings call, Lionsgate steered clear of what has made headlines for the studio for months: Icahn’s battle to take control of Lionsgate because he feels the studio is being mismanaged. Feltheimer said executives would not discuss the controversy. Icahn did not return calls seeking comment.
It is clear that management’s defense against Icahn has not come cheaply to Lionsgate. The company reported that it spent $7.3 million in its fiscal first quarter on costs associated with its defense and another $23.3 million in compensation costs that represent the accelerated vesting of options triggered by change of control provisions. Executives on Tuesday did not elaborate on these costs.
Even though first quarter earnings were less than stellar, Feltheimer said Lionsgate was on track to post higher revenues for the full year, suggesting a stronger back half with high hopes for this Friday’s opening of “The Expendables,” starring Sylvester Stallone and other big names.
On Monday, after the markets closed, Lionsgate reported revenues for the quarter ending June 30 of $327 million, a drop of 14%, and a net loss of $64 million, compared with profits of $36 million in the period a year ago. “Our first quarter was affected by marketing costs for our three wide releases, timing of television deliveries and the underperformance of our theatrical release ‘Killers,’ ” Feltheimer said in a statement.
The three wide releases Feltheimer referred to were Tyler Perry’s “Why Did I Get Married Too?,” “Kick-Ass” and “Killers.” “Killers” took in $78.4 million worldwide, while “Kick-Ass” has cumed $94.7 million thus far. The latest Perry pic, which has not been distributed overseas, earned $60.1 million domestically. Lionsgate said its marketing costs rose by $71 million in the quarter.