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Tickers in this Article: LGF, VIA.B, SNE, NWS
The film production and distribution company Lions Gate Entertainment Corp (LGF) distributed Tyler Perry's family-friendly comedy Madea's Family Reunion, which earned $30 million to close out Black History Month. Movie industry critics and doomsday thinkers believe that the industry is in a state of decline. However, for investors, negative news such as this should always mark a reason for research into investment opportunities.

According to industry figures, attendance at movie theaters has been averaging 1.5 billion visitors for the first half of the decade. Movie theatre revenues for 2005 were just below $9 billion dollars which is the lowest it has been since 2001. Average movie theatre revenues for the past 3 years have been $9.3 billion. Reasons for the drop in revenues have been linked to a rise in the ability for movies to be downloaded over the web, the decreasing window between box-office releases, DVD releases and Video on Demand availability along with a lack of quality movie options.


Lions Gate (LGF), which is currently trading in the $9 range, is coming off of one of its best years after having its thought-provoking post 9/11 Los Angeles-based film Crash nominated for best picture at the upcoming Oscars. With a production budget of $6.5 million, Crash, released in May 2005, has taken in $83 million worldwide. In a similar fashion, Madea's Family Reunion, with a production budget of $6 million, earned $30 million during its opening weekend. Lions Gate's (LGF) fiscal year for 2006 closes at the end of March. According to their 2005 Annual Report, consolidated revenues were up 119% to $842 million while net income also increased 112% to $12 million from the prior year.


One of Lions Gate's (LGF) main revenue drivers was its acquisition of Artisan Entertainment Inc in December 2003. The Artisan acquisition gave Lions Gate (LGF) a diversified motion picture production company along with an extensive distribution network for direct to store DVDs as well as for pay-per-view television programming. While theatrical revenues accounted for 17% of consolidated revenues related to popular releases including Fahrenheit 9/11, Saw and Diary of a Mad Black Woman, video sales contributed 44% based on significant releases for titles including Saw, The Punisher and Barbie in the Princess and the Pauper. According to the Digital Entertainment Group, DVD sales and rentals totaled more than $23 billion dollars in 2005.

Yes, Lions Gate (LGF) is not alone in the fight to produce quality films as major titles such as Mission: Impossible III from Viacom (VIA.B), Sony's (SNE) The Da Vinci Code and News Corp's (NWS) Fox studios X-Men 3 are all due out this May. However, Lions Gate's goal to release between 15 to 18 films per year coupled with their distribution network makes them a company worth watching.

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