Thursday, 5 March 2009

Hollywood Babble On & On #243: A Lions Share of Lionsgate

A tip of my sombrero to the indefatigable Nikki Finke for her coverage of the piece by piece take-over of mini-major/mega-indie Lionsgate by ultra-investor Carl Icahn and his former Chief Investment Officer Mark Rachesky. The pair now own enough stock to either take the company private, which means they buy out the other shareholders until they're the only ones left, or the use their clout to force a sale to one of the big media conglomerates.

Let's look at the pros and cons of the different options.

1. Lionsgate has a 6,000 title library, there are a lot of jokers in that deck, but also more than a few gems.

2. The company's distribution capacity makes it appealing to independent producers. This appeal could become even stronger, if the company reforms make it the place to go for a square deal that won't put the screws to you.

3. In the long term running a profitable "new independent" company filling the markets the majors ignore, can be more rewarding, especially financially, than gunning for a quick sale to a conglomerate eager to become more bloated.

1. Running a film company, even a major, is very risky. Too many bombs in too short a time can sink a smaller company. You need deep pockets and nerves of steel to survive.

2. It might take years before the initial investment that funded the takeover gets made back, and in these uncertain economic times, that could a real problem.

1. Quick money can be made by selling off Lionsgate to one of the majors either as whole package, making into New Line Redux, or in bits and pieces all over town.

2. The trade of Lionsgate to a major for stock, could give the investors an important position in a larger media conglomerate, from which to keep the crusade for shareholder rights going.

1. While the money maybe quick from a sale, the company is currently undervalued, something that won't improve much, not only because of the current economic climate, but also because people are just plain wary of getting involved with investing in Hollywood. The lack of capital or debt financing could hamper any sale to a major.

2. Trading the company for stock in a major runs the very real risk of getting into the sinking, stinking quagmire of major media. Remember, the majors all have corporate cultures that make old Soviet bureaucracies look lean and efficient, and it's very hard to get anything accomplished, even when you're a major shareholder. And in the current market, those shares could easily lose their value very quickly.

So in a way, I hope they keep the company going as a viable film producer and distributor, because I think Hollywood needs that more than just another corporate division.

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