Lionsgate's profit set to fall

Studio anticipates more marketing costs

By BEN FRITZ

Lionsgate expects to see big business from its new private equity partnership, even though it will push the indie studio into the red.

CEO Jon Feltheimer told Wall Streeters in a conference call Thursday that the company expects to swing from a $27.5 million profit in the fiscal year that ended March 31 to a $50 million loss in the current fiscal year as it significantly ups marketing for new features. That's because while half the cost will be borne by its new $400 million co-financing fund, Lionsgate has to report all the spending.

Studio plans to nearly double its theatrical marketing this year from $150 million to $290 million, along with an added $60 million for homevideo. However, with more, bigger budgeted pics such as "War," "Good Luck Chuck," and "3:10 to Yuma," vice chairman Michael Burns predicted the studio could see domestic box office grow from approximately $250 million to more than $400 million.

In the past fiscal year, revenue grew 3% to $976 million. Feltheimer said the current fiscal year should see growth of 10% to 15%, bringing the company to well over $1 billion in revenues. While net loss will grow due to the accounting rules, free cash flow is expected to be more than $100 million. It was $114.2 million in the past fiscal year.

Home entertainment revenue was flat in fiscal 2007 at $528 million, though the indie studio's library saw growth of more than 20% to $256 million, making up for declines in new releases.

Theatrical revenue fell 26% to $107.9 million on disappointing results for a number of pics, including "Pride," on which the studio lost $6 million. "Tyler Perry's Daddy Little Girls" also grossed significantly less than the helmer's previous two pics.

TV revenue was down 11% to $132.9 million as it delivered fewer episodes.

For the quarter ending March 31, revenue was up 6% to $331.6 million and net income fell 36% to $25 million.

Lionsgate stock closed up 1% Thursday at $11.85.