Lionsgate CEO Jon Feltheimer Says Avoiding “Crazy Risk” Will Help Film Studio Weather Stormy Box Office After Starz Split

Dade Hayes
·3 min read
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Lionsgate CEO Jon Feltheimer expressed an optimistic view of the movie business – at least the way it is approached by his cost-conscious executive team.

During a conference call with Wall Street analysts to discuss the forthcoming split of the company’s film and TV operations from Starz, Feltheimer said the key is to avoid “crazy risk” that can cause financial pain in a volatile marketplace. One analyst asked how Lionsgate would manage through a period of sustained theatrical revenue decline, with ticket sales continuing to lag well behind pre-Covid levels.

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“You can’t talk about the film business as a box office business, OK?” Feltheimer said, adding that the analyst’s “premise is a little bit off” concerning theatrical moviegoing, which is expected to slump in 2024 due to multiple factors. “I’m not really concerned about it. I’m bullish on it,” the CEO said.

“Box office is the driver of the business,” the exec acknowledged, “but while I can’t speak for all studios, I think if you asked folks overall how they think about the business right now, I’m hearing really when people start putting together all of the revenue streams, I think it’s a pretty positive business.”

The wide releases put out by Lionsgate, whose stable includes John Wick, Hunger Games, Saw and other franchises, are handled “a little differently” than major studios, Feltheimer noted. “I like our profile. We probably take a little away from the super-upside, but the way we pre-license our movies to, frankly, a much larger group of international buyers means we go into the domestic release with a far lower gap or deficit” to recoup. “In the world we’re in right now, it’s a great model.”

On the tier below wide releases, a category including everything from direct-to-streaming fare, day-and-date or low-budget titles, Feltheimer said Lionsgate has had a 94% financial success rate. The individual rate of return on those films is 30% to 40%, he estimated.

“That’s a business that is getting stronger and stronger, with 30 to 40 movies a year,” he said, calling it a “great foundation” and a “bedrock” for the studio.

With a sizable library of films, including recent releases it can sell to third-party streamers increasingly on the hunt for licensed fare, Lionsgate can realize incremental revenue and not be as hit-dependent, Feltehimer maintaiend. In his ideal world, he conceded, the library would account for the bulk of motion picture revenue (without the volatility of production spending or release timing affecting results as much). As it gets set to separate from Starz, the studio will continue to avoid the mega-budgets of major studios accustomed to shelling out $250 million to $300 million on their largest tentpoles.

Feltheimer’s comments came during a call to discuss the Lionsgate Studios announcement a few days before Christmas. Plans call for creating a new publicly traded studio entity via a SPAC deal with Screaming Eagle along with an investment from private sources. The company’s management team delivered scripted remarks for about 25 minutes and then fielded questions from a handful of analysts. They also presented a “road show” deck that runs to 30 pages, including financials and fine print.

After the transaction, which is expected to close in the spring, the parent Lionsgate company will own 87% of Lionsgate Studios and 100% of Starz. The full separation of the entities is expected to be completed during calendar 2024.

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