As ‘Hunger Games’ Ends, John Malone and Lionsgate Grow Closer

Hunger Games Mockingjay Part 2
Courtesy of Lionsgate

They may not have reached the altar yet, but John Malone and Lionsgate are getting serious.

Last week, the billionaire media mogul doubled down on his investment in the Santa Monica studio behind “Hunger Games” to become its second-biggest shareholder. That has Wall Street panting over the prospect that a merger is in the offing.

During an investor-day conference last week for his holding company, Liberty Media, Malone — a coy suitor — refused to rule out deepening his position in the indie film and television studio.

Both Malone and Lionsgate need something out of a potential marriage. Cable companies keep getting bigger. Digital players like Netflix have become global behemoths without equal. And in the process, power has shifted from the companies that produce television and movies to the platforms that distribute them.

Many in Hollywood and on Wall Street believe more consolidation is on the horizon. That was precisely what Rupert Murdoch had in mind when he tried, but ultimately failed, to unite his media empire with Time Warner last year. And it is likely what is driving Malone now.

“We have not seen the consolidation on the content side that we have on the distribution side,” said Tuna Amobi, an analyst with S&P Capital. “Malone talks a lot about consolidation. If you look at his history, he usually comes in with a small stake before expanding his investment.”

Malone’s endorsement comes at a critical time for Lionsgate, which is preparing for the end of “Hunger Games”: The final film in the lucrative series, “Mockingjay, Part 2,” debuts Nov. 20. Despite its best efforts, the studio hasn’t yet found a replacement for the franchise, with new series like “Divergent” a pale shadow of the young adult juggernaut starring Jennifer Lawrence.

“Getting another ‘Hunger Games’ isn’t really something that’s going to happen more than once every five or 10 years,” said Wunderlich Securities media analyst Matthew Harrigan.

Lionsgate has been trying to diversify, with some success. It’s tripled revenues from its TV business over the past five years on the strength of programs like “Orange Is the New Black” and “Mad Men.” Just last week, it made a big bet on the reality show front by plunking down $200 million for a controlling interest in Pilgrim Studios, the maker of “Ghost Hunters” and “Welcome to Sweetie Pie’s.” At the same time, it’s exploring digital businesses, launching a subscription streaming service with Tribeca called Shortlist.

TV certainly seems to be Malone’s major motivation for sniffing around Lionsgate. Theoretically, he could push the shows the company produces onto Starz, the cable channel he controls, or some other entity. Speculation has been rife that he plans to merge Starz and Lionsgate.

Yet he seems to recoil over the volatility of the film industry. When Liberty CEO Greg Maffei was pressed by investors last week about the possibility of a Lionsgate purchase, he noted that the company had lost a fortune on Overture, the indie label it shuttered in 2010, and Malone conceded that none of his previous ventures into the movie business had ended well.

Whether or not it excites Malone, film remains the driving force at Lionsgate and its greatest source of revenue. Consequently, it is imperative that the studio find a way to make up for the loss of Katniss Everdeen et al. To that end, Lionsgate believes at least half of its next 25 wide releases will be follow-ups to successful films or launchpads for new franchises. The studio is making a $140 million bet on the sword-and-sandals epic “Gods of Egypt”; offering up sequels to “Now You See Me” and “John Wick”; rebooting the Power Rangers; and delving into the backstory of Sherwood Forest’s most notorious outlaw in “Robin Hood: Origins.”

Yet, aside from “Hunger Games” and the “Divergent” series, the studio’s film slate has more or less been a dud this year. Soviet-era thriller “Child 44” and stoner comedy “American Ultra” were money losers. The studio’s most recent quarterly earnings report was dragged down by sluggish theatrical revenues.

“You don’t need the new movies to succeed on a scale like the ‘Hunger Games,’ but you do need them to be generally successful,” said David Bank, an analyst with RBC Capital Markets. He notes that several smaller hits could fill the hole left by “Hunger Games.”

Still Lionsgate is more vulnerable than the majors in a number of ways. Unlike the major studios, which are relatively tiny pieces of sprawling media conglomerates, Hollywood’s largest indie doesn’t have theme parks or cable channels to rely on. With the exception of DreamWorks Animation, Lionsgate is the only stand-alone studio that is publicly traded. Its stock price can fluctuate based on the performance of an individual movie or TV show.

Regardless of what happens with Malone, Lionsgate’s management seems reticent to let “Hunger Games” wrap up. The company has a live show tied to the films, and is licensing the characters for theme park rides. In public statements, senior management has been careful to note that “Mockingjay, Part 2” marks the end of the “current” “Hunger Games” story arc. That artful bit of phrasing implies the studio is open to revisiting the world of Panem through spinoffs or other related films. As any fan of the series knows, Katniss didn’t get to find out if the odds were in her favor until the 74th edition of the games.

“Their ace in the hole is always going to be that there were 73 previous Hunger Games,” Bank said. “So you could do 73 prequels.”

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  1. Lionsgate film content relying on a franchise is using a worn template. Studios generally manufacture; they do not create anything but jobs. Malone really wants a TV series, and stockholders want stability of dividends. Filmmaking is about risk. The company needs to be more about reconciliation over consolidation as they consider what Lionsgate’s future will look like.

  2. DouglasSKingsley says:

    Read Now This….my best friend’s mother-in-law makes $66/hr on the internet .. She has been unemployed for 8 months but last month her pay check was $15769 just working on the internet for a few hours. Read more here➜➜➜➜➜➜► Click~Here~To~Read~More

  3. What a weird thought, if my filmmaking career blows up, I could be directing a prequel to The Hunger Games…(only 16 now, so maybe in another 20 years)

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