​Lions Gate’s Blunder is Disney’s Bounty

Patrick A. Howell  |

#ProfitabilityMatters #EquityEquality #MulticulturismWins

Studios like Lions Gate Entertainment (LGF) are learning the hard way, lessons that were learned long ago were hard earned. Multiculturalism, inclusion and diversity pay handsomely and are rewarded by the marketplace. With the release of the controversial non-diverse God’s of Egypt, 2016’s first major flop, Lions Gate Entertainment’s stock price has nose-dived nearly 30% since 2015.

However, a close look at recent industry reports shows that Lions Gate executives like CEO Jon Feltheimer should have known better. After all, the studio has been here before, with their 2014 release of Exodus: Gods and Kings, also produced for $140M but earning a meager $68M at the box office. So why not correct course and create marketplace winners? Hollywood is not an industry known for high risk tolerance… at least by the major 12 studios and their exemplary leadership.

In their 2014 theatrical market statistics report, the MPAA found that global box office receipts for all films released in the 2013 reached $35.9 billion, up 4.00% from 2013. MPAA Chairman and CEO, former Senator Chris Dodd further reported that the international market had increased by 33% since 2015.

Disney (DIS) - owned Buena Vista studios and Universal Studios (owned by General Electric (GE)) - Hollywood “case studies,” have already shown vision, multiculturalism and inclusion are the pathways to the future. Two of the top grossing films of 2015 were #1) Star Wars: The Force Awakens and #3) The Furious 7, which together domestically grossed nearly $1.3 billion.

These films were “diverse” in front and behind the camera, with not only actors, but multicultural teams of producers, production set designers, art directors, cinematographers, soundtrack technicians, script writers that accurately reflect the demographic of not only America but the world. Globally. these same movies grossed upwards of $3.6B, more than the total production of The Man from U.N.C.L.E, Cinderella (2015), Spotlight, Mad Max Road Fury, Black Mass, Tomorrowland and Exodus: Gods and Kings combined.

But if you take a closer look at smaller films like Straight Outta Compton (LA Castle Studios, Cube Vision, New Line Cinema et. al.) or Creed (again, New Line Cinemas), they were produced with exceptional ingenuity, because their independent production costs are far less, and their yield far higher, maximizing net revenues or IRR (Internal Rate of Return) for their parent companies.

Straight Outta Compton grossed $161M on an estimated budget of $28M – that’s nearly 5X. Creed was made for $35M, and went on to gross nearly $110M- again, 3X its cost. 2014’s Selma? Budgeted at $20M and grossed $52M- 2.6X. Perhaps, in 2016, Nate Turner’s Birth of a Nation will continue to eclipse records. Fox Searchlight already signed a record $17M deal for the film at the Sundance Film Festival. Also, someone seems to have gotten the equation and production DNA right with the forthcoming 2018 Black Panther, which will star Chadwick Boseman with Ryan Coogler at the helm.

Lets get back to the blockbusters - Star Wars? +4.61X. The Furious 7? +1.84X. Let’s also include Disney’s 2015 The Avengers: Age of Ultron, which included the onscreen talents of Samuel L. Jackson, Don Cheadle and Anthony Mackey, as well as their multi-cultural stunt doubles and make up artists. These three movies grossed over $3B globally and are amongst the all time highest grossing films

Preserving a Historical Legacy

Milton Bowen’s Artist in Residence for Twin Rivers Unified School District Artist and Residence Program said in an interview for this article, “Fine art is no different than any other form of art. Just like film, dance, painting, writing, or theater, movie making is the preservation of culture. So when I see a movie s like Exodus: Gods and Kings, the colors simply do not match.”

Reginald Hudlin directed two of the most successful black films in Hollywood history, Boomerang ($131M, produced for $42M) and House Party. In Harvard professor’s Henry Louis Gate’s 2004 “America Beyond the Color Line,” Reginald Hudlin, Executive Director of this year’s Academy Awards said “If a black movie is number one, it is an invisible success, it is a tree that fell in the forest that no one heard. That is what is maddening. In Hollywood, black is only used in the negative…The problem is all the cultural gatekeepers.” Is Lionsgate executive CEO Jon Feltheimer one such gatekeeper?

In 2014, Disney report $7.2B in revenues. It is clear Disney leads with its 2016-2018 releases intends to continue to lead the pack with such multicultural films as The Jungle Book, to be released April 15th, Captain America: Civil War on May 6th, and next year’s Guardians of the Galaxy Vol. 2. Are the so-called big 12 going to leave the innovation to the likes of Kickstarter, Vimeo, GoFundMe, Vision Cube and Indegogo? Which of the 12 major studios will build on the formula from Disney and Buena Vista and be the first? It is no accident that the most profitable studios with the largest shareholder return, NBC Universal, Walt Disney Studios and Warner Brothers Entertainment (Time Warner (TWX)), are also renowned for their diverse programming on the small and silver screens.

Why do some Hollywood studios insist systemically on racism and discrimination when inclusion, diversity and multiculturalism are more profitable? To borrow parlance from a certain reality star turned politician, are Hollywood executives, “money losers”?

Perhaps, there is a silver lining for Lions Gate Entertainment. In “Beyond the Color Line,“, New Regency Production’s Arnold Milshan (net worth over $5.1B), producer of the The Revenant (with Mexican director Alejandro González Iñárritu) said, “I would say 3 out of 10 are profitable; maybe 3 or 4 break even; 3 or 4 lose money. That’s what you need to stay alive and build. And if you have less, you’re dead.”

Maybe Lions Gate Entertainment is just slow, but what does that have to do with Joe Investor? Nothing...absolutely 0.

Yep - It’s that simple in the zero sum game of Hollywood. Results are binary- either something is or it is not - #ProfitabilityMatters

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