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Lionsgate prepares to stake claim in Hollywood and take on rival studios

By Joe O'Leary
On April 17, 2012

  • By purchasing the rights for the first two ‘Hunger Games’ books and tranferring them to the big screen, Lionsgate proved that it was a company on the rise. Now that it has merged with Summit it will prove to be an even more significant force in the industry. (Above left) Elizabeth Banks and (above right) Jennifer Lawrence emerged as mega-stars after Lionsgate cast them for ‘The Hunger Games.’. Photo courtesy of Rottentomatoes.com

On Jan. 13, Lionsgate Entertainment purchased Summit Entertainment for $412.5 million. At first glance, this might not seem too important; companies acquire other companies all the time. But this merger could lead to a huge change in the film industry.

 Lionsgate owns the rights to "The Hunger Games" trilogy, whose first film has already grossed more than half-a-billion dollars worldwide, while Summit has produced the wildly successful "Twilight" franchise, whose four films have made more than $2.5 billion since 2008. With at least two "Hunger Games" sequels to come, not to mention the finale of the "Twilight" series coming in November, Hollywood may finally have a seventh major studio.

Normally, there are six major film studios who produce the lion's share of movies released yearly; Buena Vista (Disney), Paramount, 20th Century Fox, Universal, Sony and Warner Bros. While there are dozens of smaller competitors in the mix, including Relativity and the Weinstein Company, these six have much larger bankrolls to work with through both corporate ownership and blockbuster successes. When a "Harry Potter" or "Transformers" sequel makes a billion dollars worldwide, it helps fund smaller films; studios without reliable blockbuster franchises have fewer opportunities for success, and failures can hurt their bottom line or even put them out of business.

Before this merger, both Lionsgate and Summit were experiencing that exact problem, especially because they're relatively new studios. Lionsgate's first success, "American Psycho," was released in 2000; Summit only started releasing films in 2007. Believe it or not, before "Hunger Games," Lionsgate's biggest success was Michael Moore's 2004 documentary "Fahrenheit 9/11." For every successful film the company's had, they've had pricey missteps, such as last year's "Conan the Barbarian" (which grossed only half of its $90 million budget) that prevented them from strengthening market share. Summit, too, has struggled outside of its vampire hits; while the "Twilight" films have paid for minor successes like "50/50" and "Source Code," they've also helped cover the losses from painful flops like "Drive Angry 3D" and "The Three Musketeers."

Everything changes with this acquisition. The combined profits of the two young-adult novel adaptations will result in billions of dollars Lionsgate can then turn around into bigger, more appealing films; gone are the days where Tyler Perry films carry the company into the black year after year. And if the company can stack financial successes, there's no reason why they can't become the next major player in Hollywood.

Many of the other big six are caught in a limbo of sorts, making this the perfect time for Lionsgate to pounce. Disney's looking at a $200-million-dollar loss on their mega-budget flop "John Carter," while Warner Bros.' major franchises are ending; "Harry Potter" is no more, and "The Dark Knight Rises" will be Christopher Nolan's final Batman film. While the company has "The Hobbit" to look forward to, recent attempts at creating new franchises like the $200 million "Green Lantern" have floundered.

Universal may be in trouble if new franchise hopefuls "Battleship" and "Snow White and the Huntsman" underperform, while Sony's quasi-reboots of the formerly popular "Men In Black" and "Spiderman" series are not sure bets. Fox is banking on two new films, "Prometheus" and "Abraham Lincoln: Vampire Hunter," and may be in trouble if one or both underperform; other than their Dreamworks animated pictures, Paramount has no sure hits on the way either. In this unsure film marketplace, Lionsgate's bold purchase may change the world of the multiplex as we know it.

 


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