Lions Gate turns to Relativity Media to fill movie pipeline

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Lions Gate Entertainment, which recently announced it would finance fewer movies to reduce production and marketing costs, has made a multi-year distribution deal to release up to five films a year from Relativity Media. The arrangement will enable Lions Gate to fill out its annual release schedule without having to spend much more money.

Relativity, a production and film financing company headed by Ryan Kavanaugh, will shoulder all production costs of the movies and share the marketing expenses with Lions Gate. Relativity will pay Lions Gate a double-digit distribution fee to release the films inthe U.S. The arrangement differs significantly from the co-financing deal that Relativity has with Universal Pictures to fund 75% of that studio’s annual movie slate through 2015.

For Relativity, the deal with Lions Gate assures the production company a locked-in distributor for movies rather than having to seek one on a picture-by-picture basis.

Under pressure to slash costs after suffering a $93.4-million net loss in its last quarter, Lions Gate said it planned to cut about $100 million out of its annual production budget and more than $100 million out of its marketing expenses. The Santa Monica-based studio also is facing a possible proxy fight from investor Carl Icahn, who has been unhappy with Lions Gate management and its decision to buy the TV Guide channel and website.

Over the last two years, Lions Gate and Relativity partnered on a trio of movies -- the western ‘3:10 to Yuma,’ the crime thriller ‘The Bank Job’ and action adventure film ‘The Forbidden Kingdom’ with Jet Li and Jackie Chan.

With backing from the New York-based hedge fund Elliott Associates, Relativity has been stepping up its plans to produce eight to 10 movies a year. The company recently acquired the horror-thriller label Rogue Pictures from Universal Pictures for a reported $150 million.

The first Relativity title to be released under the new deal is ‘Brothers,’ about the rivalry and redemption of two brothers in love with the same woman, starring Tobey Maguire, Jake Gyllenhaal and Natalie Portman and directed by Jim Sheridan. The film will come out this fall, followed by the supernatural thriller ‘Season of the Witch,’ starring Nicolas Cage and Ron Perlman, and the action-comedy ‘The Spy Next Door,’ with Jackie Chan. Both of those pictures are currently in post-production and are expected to be released before the end of Lions Gate’s fiscal year in March 2010.

After two down quarters of under-performing movies, Lions Gate came back with three hits in its latest earning period, ‘Tyler Perry’s Madea Goes to Jail,’ ‘The Haunting in Connecticut’ and ‘My Bloody Valentine 3D.’ However, the studio’s current release ‘Crank 2: High Voltage’ is lacking box office fire power.

-- Claudia Eller