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Lionsgate CEO Talks Future of ‘Hunger Games’ Franchise, Starz Merger

Jon Feltheimer has just come from a breakfast meeting with 50 members of his theatrical distribution team. It’s one of many informal session that the Lionsgate CEO likes to hold with employees at the studio behind “The Hunger Games” and “Mad Men.” No subject is off the table, as the rank and file are invited to ask him about anything ranging from his corporate vision to his personal life.

“This is a collaborative place,” said Feltheimer. “With only 750 people doing mostly the same job that 3,000 are doing at some of the other studios, we have to have full transparency.”

Francis Lawrence, the director of three of the “Hunger Games” films, agrees that the culture at Lionsgate is unique, hailing the studio’s “boutique feel.”

“There’s a family vibe when you’re there,” he said. “There’s not a lot of red tape or rules.”

Lionsgate’s smaller size has been both an asset and a hinderance. It allows them to be more nimble and entrepreneurial, but as a publicly traded company, it’s also left them vulnerable. Its stock can rise or fall based on the fortunes of a single film — a fate that a Disney or Warner Bros., existing as cogs in sprawling media conglomerates, don’t suffer when a movie flops.

The need to get bigger has just spurred Lionsgate to take its riskiest bet. Two weeks ago, the studio closed a $4.4 billion deal for Starz, gambling that partnering with the premium cable player will help stabilize Lionsgate’s revenue streams and potentially provide it with a distribution platform for its movies and shows.

“It gives us more touch points to the consumer,” said Feltheimer in his first interview since the deal closed. “It’’s a larger marketing platform. Frankly, it gives us more places to put content.”

So far, the market has remained cool to the merger, with some Wall Street observers questioning how the acquisition improves Lionsgate’s operations.

“We think this is a deal that happened because management needed a deal to happen given poor recent financial performance and a declining share price,” Doug Creutz, a media industry analyst for Cowen & Co., wrote in a note.

Lionsgate’s stock is essentially flat and some analysts have questioned the amount of debt the studio has taken on as part of the deal. Initially, the company will shoulder a debt ratio of five to five and a half times earnings.

Michael Burns, Lionsgate’s vice-chairman, maintains that both companies will throw off enough cash to service the debt. He believes that investors’ concerns will be assuaged as more financial information is released during the approval process.

Nor does it preclude Lionsgate from making other deals, the studio’s leadership said.

“If we think a transaction is accretive, if we think there’s a smart way to finance it, we would happily do it,” said Burns.

The Starz deal may give Lionsgate greater scale, but it doesn’t rectify creative problems that the studio has in its film business. Over the past year and a half, the company has wrapped up its hugely successful “Hunger Games” franchise. But attempts to replace Katniss Everdeen with new film series have fizzled. Pictures like “Mortdecai,” a critically derided Johnny Depp comedy, and “Gods of Egypt,” a hugely expensive fantasy epic, were produced with an eye towards triggering sequels, only to collapse at the box office. Even worse, once promising series, such as “Divergent,” appear to have run out of steam.

“Like the ancient Greeks say, you suffer your way to wisdom,” said Burns. “We learned some things last year. We probably rushed a few movies.”

Both men said they believe that the upcoming slate, which features the likes of Tyler Perry’s “Boo! A Madea Halloween,” the Ryan Gosling and Emma Stone musical “La La Land,” and the Mark Walhberg drama “Deepwater Horizon” put the film division on more secure footing. They are particularly bullish on a “Power Rangers” reboot.

“We think Power Rangers is one of the world’s greatest brands and we’re going to do well by it,” said Burns.

The television business has been steadier, with Lionsgate fielding hits such as ABC’s “Nashville” and Hulu’s “Casual.” One of its greatest successes, Netflix’s “Orange is the New Black,” experienced a rare stumble last week. The prison comedy was shut out of the major Emmy categories.

“It’s ridiculous,” said Feltheimer. “ This is one of the most important shows across the globe. Somehow the calculus didn’t work this year and it was overlooked, but you can expect us to be back in a big way next year.”

Though Katniss Everdeen’s journey may have ended with “Hunger Games: Mockingjay – Part 2,” Lionsgate is looking for ways to delve deeper into the world of Panem. The company will offer up stage shows and theme park rides, and is exploring other ways to extend both the “Hunger Games” franchise and its “Twilight” series.

“I would say that there’s no big franchise that any studio has that they’re not trying to look at prequels, sequels, spinoffs, some version of that,” said Feltheimer. “We think that there’s a great piece of IP with Hunger Games. It’s a great world.”

Adds Burns, “Great brands like this go on and on.”

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