Lions Gate Entertainment (NYSE: LGF), the little studio that makes big waves in Hollywood with franchise hits such as Saw and Hostel, distributed its annual earnings numbers on Friday after market close. For fiscal 2008, revenues leaped like a lion (you knew that was coming, don't kid yourself) to $1.36 billion, which represented top-line appreciation of 39%. So far, an excellent start. But, it's the bottom line where things start to get ugly. Lions Gate reported a net loss of $0.62 per diluted share; in 2007, the studio booked net income of $0.25 per share. That can't be pleasing to shareholders. According to Marketwatch, Lions Gate did not meet expectations, as some on Wall Street believed the loss would be closer to $0.50 per share (the company did beat on the top line, though). Things were rosier for the fourth quarter, as revenues jumped over 50% and net income climbed 19% to $0.22 per share. Unfortunately, expectations were again too high, as analysts were hoping for $0.37 per share.

The cash flow is a little more pleasing. Operational cash flow increased just shy of 50% to $89.2 million. And the company adjusted this stat even further to come up with a free-cash-flow figure of nearly $137 million (the company adds back the effect of borrowings for production obligations). The huge problem here is a familiar story: rising costs for marketing and distribution. This isn't unique to Lions Gate; competitors such as Disney (NYSE: DIS), Time Warner (NYSE: TWX), Viacom (NYSE: VIA), and Sony (NYSE: SNE) all face this same issue. Management reported that costs for Lions Gate in this regard rose well over 100%.

Lions Gate is a tough one for me. Here's the thing: I love the movie business, and Lions Gate is definitely a more direct play on the business than what you get through a Disney or a Time Warner due to the scales involved. Lions Gate has some great franchises under its belt, and it tends to go for niche, edgy content. Plus, the cash flow is pretty cool.

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.

Last year I previewed the big-budget summer movies, giving you a look at ten interesting films that were on the docket for the summer of 2006. This year I'm back with an even longer list (bloated like these films' budgets) of 15 movies you may want to escape to -- or possibly run screaming from.

Of these fifteen movies, Spiderman 3 and ten others are sequels, which in itself indicates something about the state of the industry (And I didn't even include Rush Hour 3 in this list, because, honestly, who wants to see that?). Two of the remaining four movies, Transformers and The Simpsons, are based on animated television shows, leaving only two original ideas in the whole lot -- Knocked Up and Ratatouille. Please, don't shoot the messenger.

Anyway, here is the list, chronologically, of the movies that Hollywood's brain-trust believes you will shell out your cash to see in the air-conditioned darkness of your local movie-house, along with my opinion of how they'll fare. The first on the list, Spider-Man 3, is already out in Asia, but will not be released here until May. All release dates below are for the U.S.

5/04 - Spider-Man 3, Sony Corp's (NYSE: SNE) Sony Pictures
Being the first blockbuster of the summer almost guarantees a successful open, and the popularity of the franchise seals that guarantee. One problem, however, is that "success" measured by any normal means won't be enough, as this movie had an estimated budget of $258M.

5/11 - 28 Weeks Later, News Corp's (NYSE: NWS) 20th Century Fox
The highlight of the horror/zombie genre for the summer, this follows the surprise success of Danny Boyle's 28 Days Later, which reinvented the zombie film with faster zombies and smarter characters.

5/18 - Shrek the Third, Viacom's (NYSE: VIA) Paramount Pictures
One of the only cartoon franchises that has held its own against Pixar (Ice Age being the other), the draw of this fairytale romp is that while kids love the story, there are enough winks at the adult audience to make parents happy to take them.

5/25 - Pirates of the Caribbean: At World's End, Walt Disney (NYSE: DIS)
Money in the bank for Disney, and since it was shot simultaneous with the second Pirates installment, it wasn't even as expensive to make as this summer's other budget hog, Spider-Man 3.

Lions Gate Entertainment Corp (NYSE: LGF), which has been a bright light in the otherwise dim movie industry recently, has found success making low budget movies aimed at the 20-30 year-old audience. Here is a list of some of their more notable recent releases, sorted by their estimated budgets. None of the movies has a rating milder than PG-13.

• Hostel ($4.5M est. budget / $47.3M gross)
• Diary of a Mad Black Woman ($5.5M est. budget / $50.3M gross)
• Crash ($6.5M est. budget / $54.5M gross, won Best Picture Oscar)
• Crank ($12M est. budget / $27.8M gross)
• Employee of the Month ($12M est. budget / $28.4M gross)
• Saw III ($12M est. budget / $80.1M gross)
• Hotel Rwanda ($17.5M est. budget / $23.4M gross, nominated for 3 Oscars)
• Lord of War ($42M est. budget / $24.1M gross)

(All above figures taken from IMDB.com)

From the above list, you can see Lions Gate's winning formula. All their successes have budgets under $20 million dollars, and most fit into three categories: Movies that push the limits of violence and gore (Hostel, Crank, Saw); low-brow adult-themed comedies (Diary of a Mad Black Woman, Employee of the Month); and edgy dramatic works that gain critical appreciation (Crash, Hotel Rwanda).

Now, here is the problem -- neither the movie the just released, Happily N'Ever After, nor the movie that is making noise today with its addition of Paula Abdul to its cast, Bratz, fits this formula.