So, I just read that Lions Gate Entertainment (NYSE: LGF) purchased TVGuide.com and TV Guide Network from Macrovision Solutions Corp. (NASDAQ: MVSN) for over $250 million. Here's the press release. The question I have is: Why would Lions Gate want to do this?
I know I'm going to be called pretty ignorant by some for even thinking to disagree with this move, but nevertheless, I disagree with this move. The reason is simple (to me, at least). If I were a shareholder of the company, I think I'd rather have management focus on creating content as opposed to spending a lot of money to buy up a platform. Sure, these TV Guide properties have a high level of brand equity and are indeed widely distributed. But a quarter of a billion dollars is a lot of money, a sum that could have been allocated toward new movie franchises and content acquisitions.
Does Lions Gate really want the hassle of integrating the TV Guide portfolio into its business? Won't that distract the company from focusing on its desire to build a great library of movies and television shows so that it can become an attractive buyout candidate someday? I mean, let me get specific for a second. Take the Saw franchise. That's getting a little long in the tooth, isn't it? I look at that quarter-billion bucks and see a bunch of seed money for a ton of new concepts. If only a few made it to Saw-level, then I can only imagine that it would help shareholder value.
Now, I know that Lions Gate wants vehicles for distribution at its disposal. But the company already is involved in other channel investments, including, with partners Sony (NYSE: SNE) and Comcast (NASDAQ: CMCSA), the FEARnet platform. I just don't know that this TV Guide thing is the best possible fit.
I don't think this is a disastrously stupid move or anything like that. I just believe that there were better uses for the money. Granted, management is buying at the right time. We are in the middle of a huge recession, and assets are cheap. Again, though, maybe the powers that be at Lions Gate could have found a cheap collection of content to pick up. Just one man's opinion....
Disclosure: I don't own any company mentioned; positions can change at any time.
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Reader Comments (Page 1 of 1)
1-06-2009 @ 12:24PM
Lenny said...
Steven,
This is a diamond in the rough -- it is already heavily distributed on cable and satellite (something a start-up cannot achieve) and does not have many existing long-term program contracts so it can be morphed into an entertainment channel with a dual-revenue stream that over time will grow significantly because its appeal will become enhanced to both advertisers and viewers. Once transformed it also guarantees an outlet for Lionsgate content (both new and library) that does not/may not get sold to basic cable channels currently.
1-07-2009 @ 6:47PM
Andrew Reynolds said...
There are a few reasons why Lionsgate would by the TVguide properties…..The main reason is the brand name of the TVguide for the purposes of online lookup for shows!…when people go there it is to lookup what is on TV….because they don’t know and are looking for what is available to them for entertainment!….So the best way to think about it in terms of something to compare….is why do people goto google…because they know they want to lookup something and that is where they go to do it! So for the purposes of the relationship…..TVguide is the Google of the Television Network!….the place to go for everything that has to with Television programing, what there is..and what time it’s on!……This means that control of TVguide.com means control over what to try and show/advertise to people to watch…when they are looking up what is on!…not from the standpoint of going through every channel….but they can try and show advertisements that can be compelling when people are looking up certain days and time slots!
The other reason they are buying it is for the Data and ways to use that data for discemnation …on what works in what timeslots, compared to what else is on at that time….what age groups watch the programming…and also if they lookged this up first!…..Sure you can say that creating that data is easy…..but in terms of what is possible by acquiring the TVguide technology….there is a vast amount of insight that can and will be gained by them…beause of what they will have now with TVGuide!……Just offhand I can think of several ways on how that data could/will help them to become the market leader in whatever TV spot, they want!….by first getting the relevant data, then using that to either create new shows…tweek the programming they have already, or tweek how to market it!…..and then having the ability to basically have a monopoly in the Television viewers….”what to watch” market!!!
1-28-2009 @ 7:17PM
T. Malgarini said...
Lionsgate needs a new distribution platform since they lost their multi-million dollar Showtime output agreement. As of Jan 09, they have no Pay revenue and their revenue from other platforms, such as Fearnet, doesn't come close. As result, they've announced the launch of a new Pay channel ("Epix") with Viacom and MGM (who also lost their Showtime deals).
Lionsgate recently stated that they aren't using the TV Guide channel as the platform for their new channel. However, I haven't heard that it's been sold in to any cable systems, and it's supposed to launch this fall.