Lions Gate Entertainment Corp. LGF, a producer and distributor of motion pictures for theatrical and straight-to-video releases, has entered into an exclusive long-term deal with Discovery Communications, Inc. DISCA to distribute Discovery programming across packaged media platforms in the U.S.
This deal extends the strategic tie-up between the two companies, announced last month (Nov 10), under which Discovery purchased a 3.4% stake in Lionsgate.
Per the latest deal, Lionsgate will distribute DVDs and Blu-rays of the Discovery series and specials through Discovery Channel, TLC, Animal Planet and Investigation Discovery. The first release is of “Racing Extinction” on Feb 23, 2016, which premiered on Dec 2 on Discovery Channel in more than 220 markets.
The agreement seems to hold benefits for both companies. Lionsgate feels that the deal will create strategic opportunities to grow its content initiatives and position it to generate significant shareholder value. On the other hand, Discovery feels that the deal will help it to utilize Lionsgate’s marketing prowess and distribution expertise for releases across its vast portfolio.
Lionsgate has been trying to diversify its product portfolio and is hence pursuing various agreements. Earlier this year, Lionsgate teamed up with comic book publisher Double Take (2T) for the big screen version of the graphic novel Z-Men.
Prior to this, the company entered into an agreement with China’s leading online video platform iQIYI to stream its own and third-party feature films. Under the deal, Lionsgate will not only provide video on demand but will also provide transactional video on demand to iQIYI.
The company recently made some positive moves, which include expanding its Television segment and online presence. Although the company’s performance in the last quarter was disappointing, Lionsgate’s attempt to diversify its business is a good sign for investors.
Additionally, the company had extended its domestic distribution deal with Miramax and entered into an agreement with Millennium Films and Hong Kong-based mobile game developer and publisher Fifth Journey to launch The Expendables themed mobile game. Lionsgate also collaborated with Tribeca Enterprises to introduce a subscription-based video-on-demand service to cater to a fast growing online viewership. Moreover, the company entered into the game arena by making a major investment in Telltale Games, one of the leading game developers and publishers.
We are encouraged by Lionsgate’s diversification strategy but as of now one can only wait and see whether these deals drive up its top line.
Zacks Rank
Lionsgate currently carries a Zacks Rank #5 (Strong Sell). A couple of better-ranked stocks from the same industry are Twenty-First Century Fox, Inc. FOX and RR Media Ltd. RRM. Both stocks carry a Zacks Rank #2 (Buy).
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