United states securities and exchange commission



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Media Networks Revenue
Media Networks revenue for the fiscal years ended March 31, 2011 and 2010 are nil and $19.3 million, respectively. The acquisition of TV Guide Network occurred on February 28, 2009. The results of operations of TV Guide Network are included in the Company's consolidated results from February 28, 2009 through May 27, 2009. A portion of the entity was sold on May 28, 2009. Subsequent to the sale of TV Guide Network, and pursuant to the new accounting guidance for accounting for variable interest entities effective April 1, 2010, which the Company has retrospectively applied, the Company's interest in TV Guide Network is being accounted for under the equity method of accounting.

Direct Operating Expenses

The following table sets forth direct operating expenses by segment for the fiscal years ended March 31, 2011 and 2010 :



 

























































































 

Year Ended

 

Year Ended

 

 

 

March 31, 2011

 

March 31, 2010

 

Motion

Pictures

 

Television

Production

 

Total____Motion__Pictures'>Total

 

Motion

Pictures

 

Television

Production

 

Media

Networks

 

Total

 

(Amounts in millions)

Direct operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

Amortization of films and television programs

$

354.4




 

$

175.0




 

$

529.4




 

$

302.0




 

$

202.4




 

$

7.3




 

$

511.7




Participation and residual expense

170.3




 

95.0




 

265.3




 

188.8




 

75.9




 

0.2




 

264.9




Other expenses

1.2




 

(0.2

)

 

1.0




 

0.8




 

0.7




 

(0.1

)

 

1.4




 

$

525.9




 

$

269.8




 

$

795.7




 

$

491.6




 

$

279.0




 

$

7.4




 

$

778.0




Direct operating expenses as a percentage of segment revenues

42.8

%

 

76.4

%

 

50.3

%

 

43.9

%

 

79.5

%

 

38.3

%

 

52.2

%

Direct operating expenses of the motion pictures segment of $525.9 million for fiscal 2011 were 42.8% of motion pictures revenue, compared to $491.6 million , or 43.9% of motion pictures revenue for fiscal 2010. The decrease in direct operating expense of the motion pictures segment as a percent of revenue in fiscal 2011 is primarily due to the change in the mix of product generating revenue in fiscal 2011, as compared to fiscal 2010. Investment in film write-downs of the motion picture segment during fiscal 2011 totaled approximately $6.6 million compared to $12.5 million for fiscal 2010. In fiscal 2011, there was one write-down that individually exceeded $1.0 million. In fiscal 2010, there were two write-downs that individually exceeded $1.0 million, which totaled $7.4 million in the aggregate.

Direct operating expenses of the television production segment of $269.8 million for fiscal 2011 were 76.4% of television revenue, compared to $279.0 million , or 79.5% , of television revenue for fiscal 2010. The decrease in direct operating expenses as a percent of television revenue is primarily due to the change in the mix of titles generating revenue compared to fiscal 2010, including the success of the Mad Men and Weeds series franchises relative to total television revenue. In fiscal 2011, $11.6 million of charges for costs incurred in excess of contracted revenues for episodic television series or write-downs of television film costs were included in the amortization of television programs, compared to $12.6 million in fiscal 2010. The fiscal 2011 write-downs included write-downs on three titles over $1.0 million, which aggregated $7.9 million, of which $5.3 million related to one television series. The fiscal 2010 write-downs included write-downs on four titles over $1.0 million, which aggregated $10.5 million, of which $4.9 million related to one television series.


Direct operating expenses of the Media Networks segment of $7.4 million for fiscal 2010 consists primarily of programming expenses associated with the production of such programs as Idol Tonight and Hollywood 411 from April 1, 2009 to May 27, 2009.


Distribution and Marketing Expenses

The following table sets forth distribution and marketing expenses by segment for the fiscal years ended March 31, 2011 and 2010 :



 
72


Table of Contents


























































































 

Year Ended

 

Year Ended

 

March 31, 2011

 

March 31, 2010

 

Television__Production'>Motion

Pictures

 

Television

Production

 

Total

 

Motion

Pictures

 

Television

Production

 

Media

Networks

 

Total

 

(Amounts in millions)

Distribution and marketing expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

Theatrical

$

267.1




 

$






 

$

267.1




 

$

237.6




 

$

0.2




 

$






 

$

237.8




Home Entertainment

191.2




 

12.6




 

203.8




 

195.7




 

18.7




 






 

214.4




Television

1.6




 

14.8




 

16.4




 

0.9




 

8.5




 






 

9.4




International

5.3




 

5.3




 

10.6




 

4.7




 

3.7




 






 

8.4




Lionsgate UK

45.1




 

2.5




 

47.6




 

31.1




 

1.1




 






 

32.2




Media Networks






 






 






 






 






 

2.0




 

2.0




Other

1.5




 

0.2




 

1.7




 

1.7




 

0.3




 






 

2.0




 

$

511.8




 

$

35.4




 

$

547.2




 

$

471.7




 

$

32.5




 

$

2.0




 

$

506.2



The majority of distribution and marketing expenses relate to the motion pictures segment. Theatrical P&A in the motion pictures segment in fiscal 2011 of $267.1 million increased $29.5 million , compared to $237.6 million in fiscal 2010. The increase is primarily driven by a higher average P&A expense for titles contributing greater than 5% of distribution and marketing expenses in fiscal 2011 as compared to fiscal 2010, as well as a higher number of theatrical releases in fiscal 2011 as compared to fiscal 2010. Domestic theatrical P&A from the motion pictures segment in fiscal 2011 included P&A incurred on the release of Alpha and Omega, Buried, For Colored Girls, Kick-Ass , Killers , The Expendables, Saw 3-D, The Last Exorcism, The Next Three Days, and Why Did I Get Married Too?, which individually represented between 2% and 16% of total theatrical P&A and, in the aggregate, accounted for 93% of the total theatrical P&A. Approximately $58.7 million of P&A was incurred on titles that generated less than 5% of theatrical revenue in fiscal 2011, of which $7.6 million was P&A incurred in advance for films to be released in fiscal 2012. Domestic theatrical P&A from the motion pictures segment in fiscal 2010 included P&A incurred on the release of Brothers, Daybreakers, From Paris With Love, Gamer, I Can Do Bad All By Myself, Saw VI, Precious, and Spy Next Door , which individually represented between 5% and 13% of total theatrical P&A and, in the aggregate, accounted for approximately 79% of the total theatrical P&A. Approximately $48.0 million of P&A was incurred on titles that did not contribute significant revenue in fiscal 2010, of which $31.9 million was P&A related to titles released in fiscal 2011 such as Kick-Ass, Killers, The Expendables, and Why Did I Get Married Too?.

Home entertainment distribution and marketing costs on motion pictures and television product in fiscal 2011 of $203.8 million decreased $10.6 million , or 4.9% , compared to $214.4 million in fiscal 2010. Home entertainment distribution and marketing costs as a percentage of home entertainment revenues was 29.5% and 32.5% in fiscal 2011 and fiscal 2010, respectively. The decrease in home entertainment distribution and marketing costs as a percentage of home entertainment revenues was primarily due to an increase in home entertainment revenue from electronic media in fiscal 2011 as compared to fiscal 2010. In addition, the decrease was also in part due to an increase in revenue associated with new releases in fiscal 2011, such as The Expendables , which generated higher revenues in relation to marketing expense, as compared to fiscal 2010.

Lionsgate UK distribution and marketing expenses in the motion pictures segment in fiscal 2011 of $45.1 million increased from $31.1 million in fiscal 2010, primarily due to a higher number of theatrical releases in fiscal 2011 as compared to fiscal 2010.


Media Networks includes transmission and marketing and promotion expenses from April 1, 2009 to May 27, 2009.




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