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Lions Gate Entertainment Corp. (USA) (LGF), Netflix, Inc. (NFLX): An Entertainment Company with an Effective Strategy

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Lions Gate Entertainment Corp. (USA) (NYSE:LGF) has implemented an effective strategy of catering content to underserved markets, including Youth, Urban, Hispanic, and Horror. Whether you’re a fan of Lions Gate Entertainment Corp. (USA) (NYSE:LGF) or not, you can’t argue with the company’s recent successes, including “The Hunger Games” and “Orange Is the New Black.” And the fan base is impressive, which is evidenced by the company’s more than 270 million fans on Facebook. While Lions Gate Entertainment Corp. (USA) (NYSE:LGF)’s momentum is strong at the moment, remaining highly relevant in the motion picture and distribution business can be challenging.

Lions Gate Entertainment Corp. (USA) (NYSE:LGF)Going to the movies vs. watching a movie at home

Lions Gate Entertainment Corp. (USA) (NYSE:LGF) operates in two segments: Motion Pictures and Television Production. If you have been to the movies lately, then you have likely fallen victim to sky-high prices. With the consumer not as strong as it has been over the past several years due to lower wages, a payroll tax increase, and higher gas prices, demand for movie theater tickets has waned. Plus, many consumers own large HD televisions, which are conveniently located in their living rooms. While the experience still isn’t the same as the silver screen, there’s now less incentive to go to the movies.

All of the above is why Lions Gate Entertainment Corp. (USA) (NYSE:LGF) has suffered from weakness at the theater. But don’t go jumping ship just yet. If you look at Motion Picture revenue for the first quarter on a year-over-year basis, you will see an 8% increase to $438.6 million, thanks to strong Home Entertainment and International operations.

Home Entertainment revenue jumped 16% to $145.5 million. This pertains to motion pictures and television, and the improved revenue is thanks to a diversified portfolio of titles, including “Warm Bodies,” “Texas Chainsaw 3D,” “The Twilight Saga – Breaking Dawn Part 2,” “Sinister,” “The Perks of Being a Wallflower,” and “The Expendables 2.”

International Motion Picture revenue increased 63% to $79.1 million, and with Lions Gate Entertainment Corp. (USA) (NYSE:LGF) focusing more on largely populated markets like Latin America, China, and India, this trend is likely to continue.

Television Production revenue more than doubled thanks to the licensing out of popular television series.

Overall, revenue for the quarter increased 21% to $471.8 million.

Content breakdown

Lionsgate offers highly diversified content, which allows it to target many different markets.

  • TVGN: Focuses on celebrity lifestyles and entertainment news. Found in 80 million homes.
  • EPIX: More HD movies than any other service. Found in 10 million homes.
  • Fearnet: 300 horror titles per year. has 30 million subscribers.
  • BeFit: Ad-supported fitness channel on 540,000+ subscribers.
  • Break Media: Content for men. is the largest comedy site online.
  • KIX: Pay T.V. action entertainment channel in Asia

A risky move that paid off

Lionsgate might be best known for “The Hunger Games” at the moment, but what many people don’t know is that Lionsgate bought the rights to the book when it only had 150,000 copies in print. The book later went on to sell 50 million copies, and it grossed more than $408 million at the box office.

This is more important than the average reader might realize. When it comes to content, franchises are the keys to big success. With “The Hunger Games” franchise in its arsenal, Lionsgate is likely to see more big numbers in the future, especially considering the second book installment, “Catching Fire” has sold well (429,873,093 copies.) “Catching Fire” the movie is set to be released on Nov. 22, 2013.

“The Hunger Games” has been so popular that it drove others to want to get in on the act, including Netflix, Inc. (NASDAQ:NFLX). Lionsgate and Netflix, Inc. (NASDAQ:NFLX) signed a Pay-T.V. agreement in which Netflix, Inc. (NASDAQ:NFLX) will have the rights to show any of “The Hunger Games” installments.

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