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Carl Icahn's battle of wills with the management of Lionsgate Pictures caused LA Times blogger Patrick Goldstein to ask a question: "Is Lionsgate well run?"
For those too lazy to click the links, I'll give you a little background..jpg)
In the past decade Lionsgate went from being a small scale distributor from Vancouver Canada, to an indie powerhouse. It hit it big with low budget horror franchises, to Tyler Perry movies, to Oscar bait like Crash and Precious.
But all has not been golden. The company tried to "grow" and compete with the major studios, and took a bit of a pasting with some big budget turkeys like The Spirit and the fizzling, via overkill (pun intended) of their flagship Saw horror franchise. The stock went from a high of $12, to a low of $4.85, and is now lingering around the $6 mark. Enter corporate raider and shareholder activist Carl Icahn. He thinks the management is not doing its job in the field of providing value to their shareholders, and thinks that his 19% should let him get a spot on the board, and the right to buy up the rest of the company at $6 a share.
Now the Lionsgate management, backed by its two biggest shareholders, say that the price is "insulting." However the analysis wing of JP Morgan Chase, who is the company's main banker, says that it's actually a pretty fair price, from the state of the company, and the market.
The management have a lot to be afraid of if Icahn gets his way. Currently there are 4 people at the top of the Lionsgate heap, Chairman/Chief Executive Officer Jon Feltheimer and Vice Chairman Michael Burns, co-chief operating officer Steve Beeks, and Joe Drake as president of Lions Gate's motion picture group. All four are making pretty big money, and perks, while a $600 million debt hangs over its head, its stock languishes, as well as most of their films, aside from a few acquisitions from independent producers, and millions of dollars get spent fighting Icahn instead of making and releasing movies.
So what can Lionsgate do?
Well, I think it's time to look back at one of my past pieces and adapt it and update it for this situation:
1. DON'T DO WHAT THE MAJORS ARE DOING, DO WHAT THEY ARE NOT DOING.
Right now the major studios are all about mega budget fantasy adventures shot in ultra-expensive 3D, mostly because they can charge more for a ticket. This leaves the smaller scale 2D market wide open. Non epic action films, comedies, and that old stand-by horror can be all yours, if you want it.
2. DON'T WASTE MONEY ON MAKING YOUR FILMS.
Keep your budgets tight. These are lean times, and a company like Lionsgate doesn't have the depth of money and resources that the big boys do. So blowing $100 million on a movie is a severe no-no.
3. EMBRACE THE AUDIENCE.
Audiences are flocking to the story-light/effects heavy blockbusters right now because they just aren't happy with a lot of the stories that Hollywood is putting out. Find the stories that the average ticket-buyer wants to see, then give them what they want.
4. AVOID THE BLOCKBUSTER MONEY TRAP.
Chasing big record breaking box office returns is tempting, but that chase is loaded with all sorts of pitfalls. The bigger the production budget, the bigger the marketing budget, and the bigger the risk. For every studio release that breaks records, there are ten that don't, but had to in order to make money. Which is why you need to follow steps 1, 2, and 3.
5. EMBRACE NEW TECHNOLOGY BUT DON'T LET IT HYPNOTIZE YOU.
Digital video technology can save a company millions in production costs. Digital theaters can save millions in distribution costs. 3D productions and conversions COST millions of dollars above and beyond the regular costs. Add the theater owners constant jacking of the prices, audience dissatisfaction with the 3D effect in some of the "converted" movies, and the whole tulip mania air around the whole thing, and it can sink a company rather than float it.
Look for opportunities to save money, not stunts that only increase the risk.
6. FORGET ABOUT THE STAR SYSTEM.
Big stars are on the way out. The proof, Sam Worthington. He's in two of the biggest movies of the year, yet most viewers don't seem to remember him after the show.
No actor is worth a $20 million payday, and 40% of the dollar 1 box-office. No one. Pay them well, and pay them their fair share, but don't go freaking nuts about it.
7. FORGET ABOUT WINNING HOLLYWOOD.
The critics and media personalities that used to guide public tastes are going the way of the dinosaur. Forget them.
8. MAKE PARTNERS & TREAT THEM AS PARTNERS, NOT SUCKERS.
There are a lot of independent producers out there who have the ability to make films, but not the ability to release them on themselves. They don't want to be dependent on the Weinstein Co. as the only one willing to do acquisitions anymore, because they're not in the business of releasing movies anymore.
So find some good indie companies, ones that are efficient, creative, and well organized, and make some partnership deals with them. Then treat them as partners, and not suckers you can jerk around. Treat them right, and soon you will be the first choice of independents.
9. MAKE DECISIONS WITH YOUR BRAIN, NOT YOUR EGO.
Always base decisions on how it will help your company, not whether it will get you an invite to one of the more star studded parties. If you run a successful company, they'll be clamoring for your attention, so forget them.
10. SEEKING AWARDS CAN ONLY LEAD TO SUFFERING.
Films like Crash and Precious are all well and good, especially when they make money and win praise. However, constantly chasing awards aren't going to help your company, because in this day and age, awards don't always mean money in your company's pocket.
I hope that advice helps.
Carl Icahn's battle of wills with the management of Lionsgate Pictures caused LA Times blogger Patrick Goldstein to ask a question: "Is Lionsgate well run?"
For those too lazy to click the links, I'll give you a little background.
.jpg)
In the past decade Lionsgate went from being a small scale distributor from Vancouver Canada, to an indie powerhouse. It hit it big with low budget horror franchises, to Tyler Perry movies, to Oscar bait like Crash and Precious.
But all has not been golden. The company tried to "grow" and compete with the major studios, and took a bit of a pasting with some big budget turkeys like The Spirit and the fizzling, via overkill (pun intended) of their flagship Saw horror franchise. The stock went from a high of $12, to a low of $4.85, and is now lingering around the $6 mark. Enter corporate raider and shareholder activist Carl Icahn. He thinks the management is not doing its job in the field of providing value to their shareholders, and thinks that his 19% should let him get a spot on the board, and the right to buy up the rest of the company at $6 a share.
Now the Lionsgate management, backed by its two biggest shareholders, say that the price is "insulting." However the analysis wing of JP Morgan Chase, who is the company's main banker, says that it's actually a pretty fair price, from the state of the company, and the market.
The management have a lot to be afraid of if Icahn gets his way. Currently there are 4 people at the top of the Lionsgate heap, Chairman/Chief Executive Officer Jon Feltheimer and Vice Chairman Michael Burns, co-chief operating officer Steve Beeks, and Joe Drake as president of Lions Gate's motion picture group. All four are making pretty big money, and perks, while a $600 million debt hangs over its head, its stock languishes, as well as most of their films, aside from a few acquisitions from independent producers, and millions of dollars get spent fighting Icahn instead of making and releasing movies.
So what can Lionsgate do?
Well, I think it's time to look back at one of my past pieces and adapt it and update it for this situation:
1. DON'T DO WHAT THE MAJORS ARE DOING, DO WHAT THEY ARE NOT DOING.
Right now the major studios are all about mega budget fantasy adventures shot in ultra-expensive 3D, mostly because they can charge more for a ticket. This leaves the smaller scale 2D market wide open. Non epic action films, comedies, and that old stand-by horror can be all yours, if you want it.
2. DON'T WASTE MONEY ON MAKING YOUR FILMS.
Keep your budgets tight. These are lean times, and a company like Lionsgate doesn't have the depth of money and resources that the big boys do. So blowing $100 million on a movie is a severe no-no.
3. EMBRACE THE AUDIENCE.
Audiences are flocking to the story-light/effects heavy blockbusters right now because they just aren't happy with a lot of the stories that Hollywood is putting out. Find the stories that the average ticket-buyer wants to see, then give them what they want.
4. AVOID THE BLOCKBUSTER MONEY TRAP.
Chasing big record breaking box office returns is tempting, but that chase is loaded with all sorts of pitfalls. The bigger the production budget, the bigger the marketing budget, and the bigger the risk. For every studio release that breaks records, there are ten that don't, but had to in order to make money. Which is why you need to follow steps 1, 2, and 3.
5. EMBRACE NEW TECHNOLOGY BUT DON'T LET IT HYPNOTIZE YOU.
Digital video technology can save a company millions in production costs. Digital theaters can save millions in distribution costs. 3D productions and conversions COST millions of dollars above and beyond the regular costs. Add the theater owners constant jacking of the prices, audience dissatisfaction with the 3D effect in some of the "converted" movies, and the whole tulip mania air around the whole thing, and it can sink a company rather than float it.
Look for opportunities to save money, not stunts that only increase the risk.
6. FORGET ABOUT THE STAR SYSTEM.
Big stars are on the way out. The proof, Sam Worthington. He's in two of the biggest movies of the year, yet most viewers don't seem to remember him after the show.
No actor is worth a $20 million payday, and 40% of the dollar 1 box-office. No one. Pay them well, and pay them their fair share, but don't go freaking nuts about it.
7. FORGET ABOUT WINNING HOLLYWOOD.
The critics and media personalities that used to guide public tastes are going the way of the dinosaur. Forget them.
8. MAKE PARTNERS & TREAT THEM AS PARTNERS, NOT SUCKERS.
There are a lot of independent producers out there who have the ability to make films, but not the ability to release them on themselves. They don't want to be dependent on the Weinstein Co. as the only one willing to do acquisitions anymore, because they're not in the business of releasing movies anymore.
So find some good indie companies, ones that are efficient, creative, and well organized, and make some partnership deals with them. Then treat them as partners, and not suckers you can jerk around. Treat them right, and soon you will be the first choice of independents.
9. MAKE DECISIONS WITH YOUR BRAIN, NOT YOUR EGO.
Always base decisions on how it will help your company, not whether it will get you an invite to one of the more star studded parties. If you run a successful company, they'll be clamoring for your attention, so forget them.
10. SEEKING AWARDS CAN ONLY LEAD TO SUFFERING.
Films like Crash and Precious are all well and good, especially when they make money and win praise. However, constantly chasing awards aren't going to help your company, because in this day and age, awards don't always mean money in your company's pocket.
I hope that advice helps.
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