Culver City, California – The success of The Hunger Games, the merger with Summit which brought them Twilight, and the booming TV division have Lionsgate on track to grow significantly in the next three years, the studios vice chairman Michael Burns said at the Produced By Conference on Saturday, but their basic risk-averse philosophy is not going to change.
Burns said they mitigate the risk on movies by using incentives to bring down production costs, with foreign pre-sales and careful marketing. Even The Hunger Games put only less than $50 million at risk for the studio before it became a huge blockbuster. That way if it didn’t perform as hoped, “it wasn’t going to bankrupt us,” said Burns.
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He said the acquisition of Summit not only was done without huge risk or by diluting the company’s stock but also came with the built in promise of two more Twilight movies. Burns said when they saw the results from The Twilight Saga: Breaking Dawn - Part 1, which grossed some $700 million worldwide, they knew it would be a profitable deal to do.
That philosophy goes back to the very beginning of the company nearly 14 years ago, explained Burns, who started his career in finance and on Wall Street. When he and Jon Feltherimer put together the company they raised about $35 million. The strategy was clear from the start.
“Our strategy was to control as much content as possible,” said Burns, citing advice he got to not worry about “new platforms. That’s a fools game.”
Instead, they set out to acquire libraries with “evergreen classics,” which led them to buy Trimark, Artisan, Mandate and most recently Summit.
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Burns said he was recently able to tell stock market analysts Lionsgate expects significant growth in the next three years, with the amount earned after taxes, depreciation and other expenses passing $900 million a year.
The movie that turned the corner for Lionsgate, said Burns, was Monster’s Ball, which won an Oscar for actress Halle Berry.
Burns laughed when he recalled that it was described as a movie that was depressing and about an inter-racial romance. But it didn’t cost much and performed well. “That movie made us a lot of money,” said Burns.
They acquired Crash after it was already made but it never performed at the box office as well as they hoped, even though it won a best picture Oscar. Burns attributed that to the difficulty of marketing the movie, which was complex and not easily explained.
Burns said when they acquire a script or movie, they want something that can be described easily in a short time, because that is what they will have to do in ads and theatrical trailers.
The movies are getting more expensive, but Lionsgate still tries to keep the risk profile low, mainly through pre-sales. When asked if Lionsgate would use its new affluence to go into direct distribution outside the U.S. and the U.K. where it currently operates, he said absolutely not. “We would rather be in business with a bunch of international distributors that have a long history of making money,” said Burns. “That’s a smarter play for us.”
And, he added, it means someone else is usually putting up the print and advertising cost in those foreign territories, which also keeps their risk down.
Burns also talked about their success in TV. He said they have a TV division with about 15 people and it has about 15 series on the air, so it is very efficient. On the day before their show Mad Men has its season finale, Burns said they intend to continue to focus on cable TV series.
