Well, I have to admit, I thought Disney's (NYSE: DIS) High School Musical 3: Senior Year was going to drop quite a bit in rank this past weekend at domestic theaters even as early estimates from Boxofficemojo had indicated, putting Lions Gate Entertainment's (NYSE: LGF) Saw V in first place with $3.1 million for that day, while Senior Year dropped all the way down at spot number five with about $1.7 million. I was somewhat blown away by the expected decline. It was going to be Jigsaw's day, of course, but even so I didn't think Halloween would have that much of an effect on Disney's musical juggernaut.

But then, once the weekend estimates were actually in, the story changed. Senior Year was back on top! I guess moviegoers took a break from singing in the aisles to pay Jigsaw some respect on the dark holiday (maybe Lions Gate should put out a Saw musical in the future).

After that, it was back to the stories that populate the corridors of East High. Senior Year took in around $15 million, while the Saw sequel came in third with a haul of $10.1 million. Kevin Smith's Zack and Miri Make a Porno, distributed by the Weinstein Co. and featuring comedy superstar Seth Rogen, was second with $10.7 million. General Electric's (NYSE: GE) Universal captured the fourth slot with Changeling, earning $9.4 million. The Haunting of Molly Hartley, from Freestyle Releasing, was fifth, grossing $6 million.

We all expected Disney's (NYSE: DIS) High School Musical 3: Senior Year to be the number-one picture at domestic theaters over the weekend, but I have to admit, I thought it might do a little better than the $42 million it's grossed so far (according to estimates at Boxofficemojo). That's still a very decent figure for a movie that began its life on the small screen. And one has to wonder if Disney now believes that a fourth Musical movie might actually be ready to compete in the summer box-office season. If the budget were low enough to justify the risk, I might be for it.

We also had a good idea of what would come in second. Lions Gate Entertainment's (NYSE: LGF) Halloween tradition, a Saw sequel, took up that respectable position. Saw V grossed approximately $30 million. Lions Gate was quick to issue a press release over the weekend pointing out the film's success as well as the financial impact of the Saw franchise as a whole. The numbers are compelling (worldwide theatrical and home-video revenues of the entire series have passed $1 billion) for the low-budget properties.

But, as I noted in an earlier post, the opening-weekend grosses for the Saw flicks have plateaued. Even though we are told by Lions Gate that the Saw franchise has taken in over $1 billion in revenues, exactly what is the profit margin on those revenues? And what is the assumed growth rate of the franchise over time versus the assumed growth rate of the budgets/marketing expenditures? If you look at the following chart, you'll note that cumulative domestic grosses for Saw II through Saw IV have been in decline. Total worldwide grosses for Saw IV declined compared to Saw III.

Lions Gate Entertainment (NYSE: LGF) reported Q3 earnings after the bell on Monday. Revenue growth was pretty cool, roaring up by double digits to just under $291 million. Unfortunately, the studio could only wring about $2 million from all that top-line take in terms of bottom-line income -- that translated to two measly pennies per share of diluted earnings. In the previous year's quarter, Lions Gate achieved $0.17 per diluted share. Talk about a drop! Earnings.com reported that analysts were hoping for $0.07 per share.

Lions Gate is big on mentioning its free cash flow position, a measure that oftentimes cuts through the vagaries of GAAP income and indicates how well a company is doing at generating the green stuff. Unfortunately, shareholders will be disappointed at this metric as well -- according to the company's calculations in the earnings release, free cash flow dropped like a rock into the abyss, declining 87% to $6.4 million. Increases in total expenses hit the earnings growth, while changes in working capital affected the cash flow.

Keep in mind that Lions Gate operates in the up-and-down world of movies; not every quarter is going to be a good one. The key thing to remember about Lions Gate is that it is for investors looking to get a more direct exposure to the movie industry than is possible with bigger media conglomerates such as Disney (NYSE: DIS), Time Warner (NYSE: TWX), News Corp. (NYSE: NWS), and Viacom (NYSE: VIA). As such, these kinds of quarters are inevitable, and a longer-term mindset is requisite. Not only that, but a big thesis behind Lions Gate is the possibility that it will eventually be acquired because of its valuable library -- Lions Gate is responsible for the Saw horror films featuring that sadistic trap-setting crackpot Jigsaw, the popular Tyler Perry features, and the bloody Hostel flicks. That isn't far-fetched at all. For now, however, the stock has been trading in a tight range, and it has been oftentimes categorized as dead money.

Disclosure: I own shares in Disney.