For Lions Gate, 'The Expendables' Are Shaping Up to Be Indispensable
With so many blockbusters in theaters and on the way, you might not know that Millennium Films and Lions Gate Entertainment are back with another entry in The Expendables franchise.
I know, I know. The Expendables? Seriously? Yes, seriously.
While these films haven't meant as much to Lions Gate as The Hunger Games or even Divergent, they have done well. Expecting any less from The Expendables 3 when it reaches theaters on Aug. 15 would be a mistake. But don't take my word for it; have a look at the numbers:
Est. profit before distribution (50% of worldwide gross minus production costs)
Lions Gate share (50%)
Est. marketing and distribution
DVD and Blu-ray sales
To be fair, these aren't perfect figures since financing arrangements can vary from movie to movie. Here, I estimated that Lions Gate would get a 50% cut of profits after producers Nu Image and Millennium Films covered their costs. Lions Gate would then pay marketing and distribution costs and collect the bulk of revenue from DVD, Blu-ray, and download sales. With each film, the company appears to have done well without taking on burdensome production costs.
What The Expendables means to Lions Gate
Not that production is necessarily a bad business. If anything, the first two installments of The Hunger Games franchise proved definitively that the right property could do wonders for Lions Gate stock. Distribution deals merely reduce the overall risk in Lions Gate's portfolio while offering some upside.
How much upside can we expect with The Expendables 3? That's tougher to say. Adding Harrison Ford, Mel Gibson, Kelsey Grammer, and Wesley Snipes, among others, to the ensemble cast probably pushed production costs over the $100 million mark. Clearing a higher hurdle won't be easy, especially with the much-touted Guardians of the Galaxy screening two weeks earlier.
Regardless, history says we can expect $300 million or more at the box office and at least $40 million in DVD and Blu-ray sales. Mix in download sales and licensing deals with the likes of Netflix, which is airing The Expendables 2 right now, and I think you've the makings of another solid profit producer, and a good reason to give Lions Gate stock a second look.
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The article For Lions Gate, 'The Expendables' Are Shaping Up to Be Indispensable originally appeared on Fool.com.Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team and the Motley Fool Supernova Odyssey I mission. He owned shares of Netflix at the time of publication. Check out Tim's web home and portfolio holdings or connect with him on Google+, Tumblr, or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.The Motley Fool recommends Lions Gate Entertainment and Netflix. The Motley Fool owns shares of Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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