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Hollywood Volatility
Michael McLellan

Relativity Media and Lions Gate Illustrate Film Industry Volatility

by Michael McLellan | Dun & Bradstreet Editor

August 26, 2015 | No Comments »

Hollywood VolatilityThe movie business has not suffered as badly as the music and television industries in the digital age. However, Hollywood studios are not printing money the way they once were. The high-stakes financing that goes into feature film production remains a very risky business. A legitimate hit movie or a box office bomb can make or break a company’s future.

Relativity Bankruptcy

Bankrupt movie studio Relativity Media is one recent casualty of the unpredictable industry and an example of how quickly things can go south for media producers. Never mind selling tickets to its movies at the box office — the company is fighting to keep operating before it can sell itself this fall. Relativity Media hopes to stay in business long enough to put itself up for auction in October. The sale will include the once-trendy digitally focused entertainment company’s film and television production units.

Relativity Media’s fashion division, M3/Relativity, has already shuttered. After undergoing a series of layoffs in anticipation of its Chapter 11 filing, Relativity Media employs just 85 people.

With debts estimated between $500 million and $1 billion, executives from the company have been reaching out to investors to encourage them to bid on Relativity Media’s remaining assets. The company’s assets are estimated to be worth between $100 million and $500 million.

Relativity has pushed back film releases and told some vendors they will not be repaid. The releases of Masterminds, Before I Wake, The Bronze, and Kidnap were all pushed back.

Lions Gate Brings In Billions

On the other side of the film industry coin is Lions Gate Entertainment. Lions Gate is currently the Los Angeles area’s most profitable public company. Lions Gate reported about $2.4 billion in revenue for fiscal 2015 (motion pictures accounted for more than 75%).

The studio’s blockbuster films such as The Hunger Games and Divergent have done very well at the box office all over the world. Blockbuster movies manage to bring in multiple revenue streams even in the modern fragmented media-delivery marketplace.

The Hunger Games release marked a shift in strategy for Lions Gate, which historically has spent relatively little on marketing campaigns and new releases. The company extended The Hunger Games franchise into a mobile game in partnership with leading social and mobile game developer Kabam.

Success on television has also propped up Lions Gate’s revenue. Television accounted for about 25% of the company’s revenue in fiscal 2015. In the television market, Lions Gate produces nearly 80 hours of programming a year, which includes a variety of one-hour dramas, miniseries, and made-for-TV movies. Recent TV hits include the hour-long drama Mad Men, airing on AMC, and the Showtime series Weeds.

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Michael McLellan covers the business of restaurants, marketing, media, technology, and more for Dun & Bradstreet and Hoover’s. He is a graduate of the University of Texas at Austin’s Radio-Television-Film program. Follow him on Twitter.


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