Lions Gate Entertainment (NYSE: LGF), whose bigger colleagues include Disney (NYSE: DIS), General Electric's (NYSE: GE) Universal, Time Warner (NYSE: TWX), Viacom (NYSE: VIA), and Sony (NYSE: SNE), publicized its Q2 earnings after the bell on Monday. There was good news and bad news.

The good news was that the company narrowed its loss compared to last year's results. Lions Gate booked a net loss of $0.41 per share this year versus a net loss of $0.49 per share in the year-ago period. The bad news, however, is that the results did not meet expectations. I mean, they really didn't meet expectations, as the call was for a loss of $0.15 per share. That's just how the movie business goes sometimes.

However, let's look at the cash flow, because we can find some comfort there. Operational cash flow for the quarter was positive this year instead of being negative, and free cash flow, which is the ultimate goal of any business, increased over three times to nearly $74 million.

And I'll steer you to another positive statistic -- filmed entertainment backlog increased to what management is calling a record $456.5 million. I know, I also tend to dismiss terms like "record" when I see them in a press release, but at least in this case it refers to revenues that will ultimately be recognized down the line.

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.

Unless you are completely out of touch with pop culture, you probably know that Disney's (NYSE: DIS) High School Musical 3: Senior Year is coming to theaters today. However, there's another film that's coming out as well, one that's darker, and quite a bit bloodier to boot: Lions Gate Entertainment's (NYSE: LGF) Saw V.

This is actually going to be one of the most exciting weekends ever for box-office observers. Exactly how high will Musical gross over the weekend? That's the big question. I've read guesses that center around the $30 million mark. I've seen one pundit predict $40 million. Well, let's consider the following. Saw IV was released last year around this time. It grossed about $31 million in its debut weekend according to data at Boxofficemojo.com. Saw II and Saw III grossed a similar amount in their respective opening weekends. Given the fact that the Musical franchise has captured a lot of zeitgeist equity the last couple years, and given that it isn't limited by an R-rating, I'd have to assume that we're looking at between $40 million and $50 million for the opening weekend. I say it will be toward the upper end of that range.

Now, where does this leave Saw V? Actually, this weekend is even more interesting than it appears at first glance. Lions Gate's stock has been declining along with the market, but it certainly also has critics in terms of the quality of its earnings and cash-flow growth, as well as the fact that it spooks some people because it has direct exposure to the very risky movie business. The studio, without a doubt, needs Saw V to hit it out of the park. It desperately needs to be number one. For one thing, the opening grosses for the franchise have, as I sort of alluded to earlier, plateaued. To me, that means that Lions Gate is increasing its risk with every new sequel. For another thing, investors who are losing money on Lions Gate want to know that management is capable of determining the life cycle of a franchise; they want to have faith that the powers that be recognize when sequels should stop, or when they should bypass theatrical exhibition and see release on other media. If Saw V doesn't live up to its gore-rich reputation, then Wall Street might lose faith in Lions Gate. From my perspective, I have to wonder if people aren't getting sick of the movies. I love the concept, and the character of Jigsaw, as portrayed by Tobin Bell, is a brilliant psychotic icon of industrious ingenuity, rampant contradiction, and cruel philosophical wit. That being said, here's the bottom line: the first movie was undeniably great, the rest were...eh, letdowns. The novelty, for me at least, was contained within the frames of the first flick only.