Lionsgate’s Home Entertainment Pivots Hard to Digital as Physical Sales Collapse

Lionsgate posted a net loss of roughly $112 million in its latest quarter, as overall revenue dipped due to a lighter film slate. But the real story is in its home entertainment arm, where a dramatic pivot to digital is paying off, successfully writing the playbook for how to monetize content after its theatrical run.

• Digital dwarves physical: The company's home entertainment sales grew over 6% to nearly $135 million, a figure that masks a massive internal change. The growth was fueled by nearly $125 million in digital sales, which dwarfed the just over $10 million brought in by the collapsing packaged media business. The success was largely credited to the home release of "Ballerina: From the World of John Wick."

• Fewer films, fewer dollars: The home entertainment growth was a bright spot, as the studio's total earnings fell to around $475 million. The studio attributed the drop to releasing only two wide-release films during the quarter, a stark comparison to the five films it released in the same period last year.

• The billion-dollar library: Even with fewer new hits, the company's catalog remains a cash cow. Lionsgate successfully monetized its vast content library, with its twelve-month library earnings hitting a record $1.0 billion, a 13% increase from the prior year.

Despite the mixed results, CEO Jon Feltheimer stated the company's film slate is "primed to deliver strong growth" over the next 18 months. The studio put a fine point on that optimism by dropping the first trailer for its highly anticipated Michael Jackson biopic on the same day, signaling a big bet on its future content.

Lionsgate is also making moves to bolster its content library, acquiring the rights to "The Expendables" and "Rambo" franchises while attracting big-money investors like Steven Cohen. Meanwhile, its television division is finding success in a tough market, scoring renewals for three different shows across three different platforms.