10-K 1 lgf201533110-k.htm FORM 10-K LGF 2015.3.31 10-K
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
ý
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 2015
or
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission File No.: 1-14880
LIONS GATE ENTERTAINMENT CORP.
(Exact name of registrant as specified in its charter)
British Columbia, Canada
 
N/A
(State or Other Jurisdiction of
Incorporation or Organization)
 
(I.R.S. Employer
 Identification No.)
 
 
 
250 Howe Street, 20th Floor
Vancouver, British Columbia V6C 3R8
 
2700 Colorado Avenue, Suite 200
Santa Monica, California 90404
(877) 848-3866
 
(310) 449-9200
(Address of Principal Executive Offices, Zip Code)
Registrant’s telephone number, including area code:
(877) 848-3866
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
 
Name of Each Exchange on Which Registered
Common Shares, without par value
 
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
___________________________________________________________
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes þ No o
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934. Yes o No þ
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or Section 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer þ
 
Accelerated filer o
 
Non accelerated filer o
 
Smaller reporting company o
 
 
 
 
(Do not check if a smaller reporting company)
 
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ
The aggregate market value of the voting stock held by non-affiliates of the registrant as of September 30, 2014 (the last business day of the registrant’s most recently completed second fiscal quarter) was approximately $2,729,000,687, based on the closing sale price as reported on the New York Stock Exchange.
As of May 11, 2015, 147,668,566 shares of the registrant’s no par value common shares were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
     Portions of the registrant’s definitive proxy statement to be filed with the Securities and Exchange Commission pursuant to Regulation 14A and relating to the registrant’s 2015 annual meeting of shareholders are incorporated by reference into Part III.



 
 
 
 
Page
 
 
 
 
 
 
 
 
 
 


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FORWARD-LOOKING STATEMENTS

This report includes statements that are, or may deemed to be, “forward looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These forward-looking statements can be identified by the use of forward-looking terminology, including the terms “believes,” “estimates,” “potential,” “anticipates,” “expects,” “intends,” “plans,” “projects,” “forecasts,” “may,” “will,” “could,” “would” or “should” or, in each case, their negative or other variations or comparable terminology. These forward-looking statements include all matters that are not historical facts. They appear in a number of places throughout this report and include statements regarding our intentions, beliefs or current expectations concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth, strategies and the industry in which we operate.
By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We believe that these risks and uncertainties include, but are not limited to, those discussed under Part I, Item 1A. “Risk Factors”. These factors should not be construed as exhaustive and should be read with the other cautionary statements and information in the report.
We caution you that forward-looking statements made in this report or anywhere else are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate may differ materially and adversely from those made in or suggested by the forward looking statements contained in this report as a result of various important factors, including, but not limited to, the substantial investment of capital required to produce and market films and television series, increased costs for producing and marketing feature films and television series, budget overruns, limitations imposed by our credit facilities and notes, unpredictability of the commercial success of our motion pictures and television programming, risks related to our acquisition and integration of acquired businesses, the effects of dispositions of businesses or assets, including individual films or libraries, the cost of defending our intellectual property, difficulties in integrating acquired businesses, technological changes and other trends affecting the entertainment industry, and the other risks and uncertainties discussed under Part I, Item 1.A. “Risk Factors”. In addition, even if our results of operations, financial condition and liquidity, and the development of the industry in which we operate are consistent with the forward looking statements contained in this report, those results or developments may not be indicative of results or developments in subsequent periods.
Any forward-looking statements, which we make in this report, speak only as of the date of such statement, and we undertake no obligation to update such statements. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless expressed as such, and should only be viewed as historical data.
Unless otherwise indicated, all references to the “Company,” “Lionsgate,” “we,” “us,” and “our” include reference to our subsidiaries as well.


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PART I
ITEM 1. BUSINESS.
Overview

Lions Gate Entertainment Corp. (“Lionsgate,” the “Company,” “we,” “us” or “our”) is a premier next generation global content leader with a strong and diversified presence in motion picture production and distribution, television programming and syndication, home entertainment, digital distribution, channel platforms and international distribution and sales. We operate primarily through two reporting segments: Motion Pictures and Television Production.

Motion Pictures

Our Motion Pictures segment includes revenues derived from the following:

Theatrical. Theatrical revenues are derived from the domestic theatrical release of motion pictures licensed to theatrical exhibitors on a picture-by-picture basis (directly distributed by us in the United States and through a sub-distributor in Canada).

Home Entertainment. Home entertainment revenues are derived from the sale and rental of our film productions and acquired or licensed films and certain television programs (including theatrical and direct-to-video releases) to retail stores and through digital media platforms. We distribute a library of approximately 16,000 motion picture titles and television episodes and programs. Home entertainment revenue consists of packaged media revenue and digital media revenue.

Television. Television revenues are primarily derived from the licensing of our theatrical productions and acquired films to the domestic cable, satellite and free and pay television markets.

International. International revenues are derived from the licensing of our productions, acquired films, our catalog product and libraries of acquired titles from our international subsidiaries and revenues from our distribution to international distributors, on a territory-by-territory basis. International revenues also include revenues from the direct distribution of our productions, acquired films and our catalog product and libraries of acquired titles in the United Kingdom.

Motion Pictures-Other. Other revenues are derived from, among others, our interactive ventures and games division, our global franchise management and strategic partnerships division, the sales and licensing of music from the theatrical exhibition of our films and the television broadcasts of our productions, and from the licensing of our films and television programs to ancillary markets.

Television Production

Our Television Production segment includes revenues derived from the following:

Domestic Television. Domestic television revenues are derived from the licensing and syndication to domestic markets of one-hour and half-hour series, television movies, mini-series and non-fiction programming.

International. International revenues are derived from the licensing and syndication to international markets of one-hour and half-hour series, television movies, mini-series and non-fiction programming.

Home Entertainment. Home entertainment revenues are derived from the sale or rental of television production movies or series to retail stores and through digital media platforms. We distribute a library of approximately 16,000 motion picture titles and television episodes and programs. Home entertainment revenue consists of packaged media revenue and digital media revenue.


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Television Production-Other. Other revenues are derived from, among others, product integration in our television episodes and programs, the sales and licensing of music from the television broadcasts of our productions, and from the licensing of our television programs to ancillary markets.

Segment Revenue

For the year ended March 31, 2015, contributions to the Company’s consolidated revenues from its reporting segments included Motion Pictures 75.9% and Television Production 24.1%. Within the Motion Pictures segment, revenues were generated from the following: Theatrical 19.5%, Home Entertainment 36.4%, Television 14.8%, International 27.2% and Motion Pictures-Other 2.1%. Within the Television Production segment, revenues were generated from the following: Domestic Television 71.7%, International 19.4%, Home Entertainment 7.7% and Television Production-Other 1.2%.

Business Strategy

We continue to grow and diversify our portfolio of film, television and digital content to capitalize on demand from emerging and traditional platforms throughout the world marketplace. We maintain a disciplined approach to acquisition, production and distribution of film and television product, by balancing our financial risks against the probability of commercial success for each project. We pursue the same disciplined approach to investments in, and acquisition of, libraries and other assets complementary to our business. We believe that our strategic focus on content and creation of innovative content distribution strategies will enhance our competitive position in the industry, ensure optimal use of our capital, build a diversified foundation for future growth and generate significant long-term value for our shareholders.

Motion Pictures - Theatrical
Production

Theatrical production consists of “greenlighting” and financing motion pictures, as well as the development of screenplays, filming activities and the post-filming editing/post-production process. We take a disciplined approach to film production with the goal of producing content that we can distribute to theatrical and ancillary markets, which include home entertainment, pay and free television, on-demand services and digital media platforms, both domestically and internationally.

Our production team attempts to produce films with disciplined budgets that have commercial potential. After review of hundreds of scripts and original intellectual property, we actively develop a small number of such scripts and work with agencies and producers to recruit talent that appeals to the film's target audiences. We believe the commercial and/or critical success of our films should enhance our reputation and continue to give us access to top talent, scripts and projects.

The decision whether to “greenlight” (or proceed with production of) a film is a diligent process that involves many of our key executives. Generally, our theatrical production division presents projects to a committee comprised of the heads of our production, theatrical distribution, home entertainment, marketing, international distribution, legal and finance departments. In this process, scripts are evaluated for both artistic merit and commercial viability. The committee considers, among other things, the script, the talent that may be attached or pursued, the production division's initial budget and story elements that could make the project more successful. Next, the heads of domestic and international distribution prepare estimates of projected revenues and the costs of marketing and distributing the film. Our finance and legal professionals then review the projections and financing options, and the committee decides whether the picture is worth pursuing by balancing the risk of a production against its potential for financial success or failure. In general, the final “greenlight” decision is made by our senior management team, headed by our Chief Executive Officer, our Vice Chair and the Co-Chairs of our Motion Picture Group.

We typically attempt to mitigate the financial risk associated with film production by negotiating co-production agreements (which provide for joint efforts and cost-sharing between us and one or more third-party production companies) and pre-selling international distribution rights on a selective basis, including through international output agreements (which refers to licensing the rights to distribute a film in one or more media generally for a limited term, in one or more specific territories

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prior to completion of the film). We also often attempt to minimize our production exposure by structuring agreements with talent that provide for them to participate in the financial success of the motion picture in exchange for reducing guaranteed amounts to be paid, regardless of the film's success (referred to as “up-front payments”). Additionally, from time to time, we have entered into other co-financing, development and production-type arrangements with third parties. For instance, we recently entered into an agreement with Hunan TV & Broadcast Intermediary Co. Ltd., one of China's leading media and entertainment companies, and its wholly-owned TIK Films subsidiaries to co-finance qualifying Lionsgate feature films for three years.

In addition, many states and foreign countries have implemented incentive programs designed to attract film production as a means of economic development. Government incentives typically take the form of sales tax refunds, transferable tax credits, refundable tax credits, low interest loans, direct subsidies or cash rebates, which are generally calculated based on the amount of money spent in the particular jurisdiction in connection with the production. Each jurisdiction determines the regulations that must be complied with, as well as the conditions that must be satisfied, in order for a production to qualify for the incentive. We use certain Canadian and United Kingdom tax credits, international tax structures and subsidy programs, domestic state tax incentives and/or programs (in such states as Georgia, Louisiana, North Carolina, New Mexico, New York and Pennsylvania) and other structures that may help reduce our financial risk.

Our approach to acquiring films for theatrical release is similar to our approach to film production. We generally seek to limit our financial exposure while adding films of quality and commercial viability to our release schedule and our library. The decision to acquire a motion picture for theatrical release entails a process involving our key executives from the releasing, home entertainment, acquisitions and marketing departments, as well as corporate executive management. The team meets to discuss a film's expected critical reaction, marketability and potential for commercial success, as well as the cost to acquire the picture, and the estimated theatrical distribution and marketing expenses (typically called “P&A” or “prints and advertising”) required to maximize the targeted audience and ancillary market potential after its theatrical release.
 
Distribution

In general, the economic life of a motion picture consists of its exploitation in theaters and in ancillary markets such as home entertainment, pay-per-view (“PPV”), video-on-demand (“VOD”), electronic-sell-through (“EST”), subscription video-on-demand (“SVOD”), advertiser-supported video-on-demand (“AVOD”), digital rentals, pay television, broadcast television, foreign and other markets. Successful motion pictures may continue to play in theaters for more than three months following their initial release. Concurrent with their release in the U.S., motion pictures are generally released in Canada and may also be released in one or more other foreign markets. After the initial theatrical release, distributors seek to maximize revenues by releasing movies in sequential release date windows, which are generally exclusive against other non-theatrical distribution channels:
Typical Film Release Windows*
 
Months After
Release Period
Initial Release
Theatrical
Premium VOD
3-4 months
Home entertainment (DVD/Blu-ray/EST), VOD, PPV
3-6 months
Pay television, SVOD
7-15 months**
Network television (free and basic), AVOD
27-30 months
Licensing and merchandising
Concurrent
International releasing
Concurrent
* These patterns may not be applicable to every film, and may change based on release patterns, new technologies and product flow.
** First pay television window.

Theatrical distribution refers to the marketing and commercial or retail exploitation of motion pictures. We distribute motion pictures directly to U.S. movie theaters. Generally, distributors and exhibitors (theater owners) will enter into agreements whereby the exhibitor retains a portion of the “gross box office receipts,” which are the admissions paid at the box office. The balance (i.e., gross film rentals) is remitted to the distributor.


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In most territories, international theatrical distribution (outside of the U.S. and Canada) generally follows the same cycle as domestic theatrical distribution. Historically, the international distribution cycle begins a few months after the start of the domestic distribution cycle. However, due, in part, to international box office growth, as well as film piracy in international markets, a much higher percentage of films are being released simultaneously with the U.S. and international markets, or even earlier in certain international markets.

We construct release schedules taking into account moviegoer attendance patterns and competition from other studios' scheduled theatrical releases. We use either wide (generally, more than 2,000 screens nationwide) or limited initial releases, depending on the film. We believe that we generally spend significantly less on P&A for a given film than other studios and design our marketing plans to cost-effectively reach a large audience.

Producing, marketing and distributing a motion picture can involve significant risks and costs, and can cause our financial results to vary depending on the timing of a motion picture’s release. For example, marketing costs are generally incurred before and throughout the theatrical release of a film and, to a lesser extent, other distribution windows, and are expensed as incurred. Therefore, we typically incur losses with respect to a particular film prior to and during the film’s theatrical exhibition, and profitability for the film may not be realized until after its theatrical release window.

However, we may revise the release date of a motion picture as the production schedule changes or in such a manner as we believe is likely to maximize revenues or for other business reasons. Additionally, there can be no assurance that any of the motion pictures scheduled for release will be completed, that completion will occur in accordance with the anticipated schedule or budget, or that the film will ever be released.

Theatrical Releases

In fiscal 2015 (i.e., the twelve-month period ending March 31, 2015), we released 13 motion pictures theatrically in the U.S., which included both Lionsgate and Summit Entertainment label films developed and produced in-house, films co-developed and co-produced and films acquired from third parties. Such titles also included: (i) films acquired or produced by CBS Films (with which we have a multi-year partnership that includes distribution initiatives by us across all media, including theatrical and home entertainment platforms (except U.S. pay television), as well as sales in international markets (with the exception of The DUFF)); and (ii) films released through our wholly-owned subsidiary, CodeBlack Films, a vertically integrated film production and distribution company (that also maintains output agreements for films it produces or co-produces for certain international markets including the Middle East, North Africa and South Africa).

Fiscal 2015 Theatrical Releases
Title
Release Date
Label
Draft Day
April 4, 2014
Summit
Frankie & Alice
April 4, 2014
CodeBlack Films
The Quiet Ones
April 25, 2014
Lionsgate
America
June 27, 2014
Lionsgate
Step Up: All In
August 8, 2014
Summit
The Expendables 3
August 15, 2014
Lionsgate
Addicted
October 10, 2014
CodeBlack Films
John Wick
October 24, 2014
Summit
Saw 10th Anniversary
October 31, 2014
Lionsgate
The Hunger Games: Mockingjay - Part 1
November 21, 2014
Lionsgate
Mortdecai
January 23, 2015
Lionsgate
The DUFF
January 23, 2015
CBS Films
The Divergent Series: Insurgent
March 20, 2015
Summit

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We also release several titles for Pantelion Films, our joint venture with Televisa, and acquire several platform titles per year that are released theatrically through Roadside Attractions. Roadside Attractions’ pictures typically have a commercially viable cast in select genres that also translate well across all home entertainment platforms, and frequently utilize an early or day-and-date release with theatrical windowing strategy to maximize revenue.

In fiscal 2015, we released the following 10 motion pictures theatrically through these arrangements:


Fiscal 2015 Theatrical Releases
Title
Release Date
Partnership/ Label
Words and Pictures
May 23, 2014
Roadside Attractions
A Most Wanted Man
July 25, 2014
Roadside Attractions
Cantinflas
August 29, 2014
Pantelion Films
The Skeleton Twins
September 12, 2014
Roadside Attractions
Mas Negro Que La Noche
September 26, 2014
Pantelion Films
Dear White People
October 17, 2014
Roadside Attractions
The Homesman
November 14, 2014
Roadside Attractions
Spare Parts
January 16, 2015
Pantelion Films
‘71
February 27, 2015
Roadside Attractions
A La Mala
February 27, 2015
Pantelion Films
            
Commencing in fiscal 2016, we will release certain films from both the Lionsgate and Summit Entertainment labels through our new specialty film distribution label, Lionsgate Premiere. Lionsgate Premiere will encompass a diverse slate of up to 15 films annually, many of which will be released in theatres, as well as across a broad spectrum of digital platforms. It will also focus on customizing innovative multiplatform and other release strategies for its slate of films in order to capitalize on the fast-changing motion picture environment, reach affinity audiences with branded content and targeted marketing and enhance the profitability of individual films.

Over the last 15 years, Lionsgate, Summit Entertainment and affiliated companies have distributed films that have earned 77 Academy Award ® nominations, won 20 Academy Awards ® and have been nominated and won numerous Golden Globe ® Awards, Screen Actors Guild Awards ®, BAFTA Awards and Spirit Awards.

Motion Pictures - Home Entertainment

Home entertainment distribution involves the marketing, promotion and sale and/or lease of DVDs and Blu-ray discs to wholesalers and retailers who then sell or rent the DVDs and Blu-ray discs to consumers for private viewing, and through a broad range of digital media platforms. Our U.S. home entertainment distribution operation aims to exploit our film and television content library of approximately 16,000 motion picture titles and television episodes and programs, consisting of titles from, among others, Lionsgate, our subsidiaries, affiliates and joint ventures such as Summit Entertainment, Artisan Entertainment, CodeBlack Films, Grindstone Entertainment Group, Modern Entertainment, Trimark, Pantelion Films and Roadside Attractions, as well as titles from third parties such as A&E, Disney-ABC Domestic Television, LeapFrog Entertainment, Marvel, MGA Entertainment, Miramax, Saban Entertainment, StudioCanal, Tyler Perry Studios and Zoetrope Corporation. Home entertainment revenue consists of packaged media revenue and digital media revenue.

Packaged Media
We distribute or sell our titles directly to retailers such as Wal-Mart, Best Buy, Target, Costco and others who buy large volumes of our DVDs and Blu-ray discs to sell directly to consumers. Sales to Wal-Mart accounted for approximately 45% of net home entertainment packaged media revenue in fiscal 2015. No other customer accounted for more than 10% of our

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revenues in fiscal 2015. We also directly distribute our titles to the rental market through Netflix, Redbox, Rentrak and others. The DVDs and Blu-ray discs for new titles in the U.S. include an UltraViolet digital copy, a home entertainment industry standard that allows consumers who have purchased film and television content to access their content at any time by downloading or streaming it from the cloud to various devices supported by participating UltraViolet retailers.

We also release several direct-to-video titles through our subsidiary, Grindstone Entertainment Group, a fully integrated company with marketing and technology expertise that excels in turnkey acquisitions while utilizing the Lionsgate brand to maximize results on all platforms. Grindstone Entertainment Group acquires and/or produces approximately 30 motion pictures per year, both as finished pictures and as “pre-buys” based on script, cast and genres, and creates targeted key art, marketing materials and release plans, which we then distribute on DVD, VOD and other media.

Moreover, we acquire and distribute approximately 50 titles annually that have commercial potential in home entertainment and ancillary markets, and numerous digital only titles.

Additionally, we distribute television product including series such as Mad Men, Nurse Jackie, Orange Is The New Black, The Royals, Weeds, Duck Dynasty, Hannibal, library titles such as Saved by the Bell, Will and Grace, Little House on the Prairie, certain Disney-ABC Domestic Television series, as well as premiere children's brands including Saban Entertainment’s Power Rangers and Julius, Jr., LeapFrog Entertainment's LeapFrog, MGA Entertainment's LalaLoopsy and Bratz, American Greetings' Care Bears, and our catalog of Teenage Mutant Ninja Turtles, Marvel Animated Features, and Speed Racer: The Next Generation.

In fiscal 2015, three of our theatrical releases debuted at number one on DVD - Divergent, The Hunger Games: Mockingjay - Part 1 (which both held the number one spot for two weeks) and Draft Day. Additionally, in fiscal 2015, five of our titles debuted at number one on the Rentrak On-Demand VOD charts - Legends of Hercules, I, Frankenstein, Divergent, John Wick and The Hunger Games: Mockingjay - Part 1 (which held the number one spot for two weeks). Moreover, in calendar 2014, The Hunger Games: Catching Fire was the number two selling DVD (and number two for all home entertainment platforms) and Divergent was the number ten selling DVD (and in the top 12 for all home entertainment platforms).

We shipped approximately 70 million DVD and Blu-ray finished units during fiscal 2015. In calendar 2014, we had an approximate 10% market share for packaged media, making us the number five studio in marketshare overall. We also maintained a box office-to-home entertainment conversion rate of approximately 15% above that of the industry average in calendar 2014. Box office-to-home entertainment conversion rate is calculated as the ratio of the total of both first cycle DVD release revenues and total digital platform revenues for a theatrical release compared to the total North American box-office revenues from such theatrical release.

Digital Media

Digital distribution involves delivering content by electronic means directly to consumer devices including in-home devices (such as set-top boxes from cable, satellite and teleco companies, connected or “smart” in-home devices like televisions and Blu-ray players, game consoles and HDMI dongles) and mobile devices (such as smart phones, tablets and personal computers). The key distribution methods today, of which Lionsgate is an active participant, include transactional (both rental and purchase), subscription and ad-supported.

Lionsgate delivers content through a broad spectrum of media platforms, including first run theatrical films, television series, our extensive movie catalog, certain titles not available on DVD and third party product. Distribution partners include Comcast, DirecTV, Time Warner Cable, Cox Cable, Charter, AT&T UVerse, Verizon FiOS and Dish, and via digital platforms such as iTunes, Amazon, Wal-Mart's Vudu, Microsoft's Xbox, Sony's PlayStation Network, Google Play, Netflix, Best Buy/CinemaNow, Hulu, Barnes & Noble/Nook, M-Go and others. We also distribute digital content through our branded “Lionsgate” channels like BeFit, our dedicated fitness network.

Additionally, we currently have over 3,500 films and television episodes in active distribution in the SVOD market and license our library titles and television shows to established providers such as Amazon, Streampix (Comcast), DISH Network, EPIX, Hulu and Netflix.

With respect to digital ventures, we have recently announced partnerships with both Tribeca Enterprises and Comic-Con International: San Diego to launch separate SVOD services. Tribeca Short List, our service with Tribeca Enterprises, a diversified global media company which owns and operates the Tribeca Film Festival, is expected to launch in the second half of 2015 and encompass a prestigious selection of Lionsgate and Tribeca titles as well as critically-acclaimed films drawn from

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around the world, curated by Tribeca and leading voices in contemporary culture and be refreshed on a weekly basis. Our service with Comic-Con is also expected to launch in the second half of 2015, and contain a broad portfolio of content including original short-form content created exclusively for the channel’s subscribers, films and television series from Lionsgate and other studios designed to appeal to Comic-Con’s fan base as well as exclusive archived footage from Comic-Con’s 45-year history.

We also formed a strategic collaboration with Alibaba Group to offer Lionsgate Entertainment World, a subscription streaming service for mainland China that is available exclusively through Alibaba's latest generation set-top box. In addition to providing Alibaba's consumers with a broad and deep Lionsgate portfolio of curated hit film and television content, the service enables Alibaba subscribers to enjoy exclusive behind-the-scenes footage, features and other premium content not available anywhere else in China along with access to VIP membership benefits such as screening invitations and special merchandise.


Motion Pictures - Television

We currently have more than 2,500 films and television episodes in active distribution in the pay television, domestic cable, free television and AVOD markets. Pay television rights include rights granted to cable, direct broadcast satellite and other services paid for by subscribers. AVOD rights include rights granted to digital services supported by advertisements. We license our library titles and new product to major cable channels, such as pay networks including EPIX, HBO, Starz and Showtime, as well as basic cable channels including USA Networks, FX, Turner Networks, BET, Pop (our joint venture with CBS), SyFy, Lifetime, MTV, Comedy Central, Spike, AMC Networks, ABC Family, Reelz, Telemundo, UniMás and Mundo Fox. We license library content to major AVOD services including Hulu, Crackle and Amazon.

We also directly distribute, including, in some cases, our home entertainment rights, VOD, PPV and EST content to multichannel video programming distributors ("MVPDs") such as Comcast, Time Warner, Cox Communications, DirecTV, DISH Network, Charter Communications, AT&T U-verse, Verizon FiOS and Cablevision.

During fiscal 2015, we completed significant basic cable licensing agreements with, among others, Turner, BET, Spike, USA, Pop, AMC, OWN, Oxygen, Lifetime and Mundo Fox, and continue to distribute our new Lionsgate theatrical titles through EPIX, our joint venture with Viacom, Paramount Pictures and MGM, as well as our Summit Entertainment theatrical titles through HBO and Showtime.

Motion Pictures - International

The primary components of our international business are, on a territory by territory basis through third parties or directly through our international divisions: (i) the licensing of rights in all media of our in-house feature film product on an output basis; (ii) the licensing of rights in all media of our in-house product on a pre-sales basis; (iii) the licensing and sale of third party feature films on an agency basis; and (iv) direct distribution.

We sell or license rights in all media on a territory by territory basis (other than the territories where Lionsgate self-distributes) of (i) our in-house Lionsgate and Summit Entertainment feature film product, and (ii) films produced by third parties such as Alcon Entertainment, Black Label Media, CBS Films, River Road Entertainment, Thunder Road Pictures and other independent producers. Films licensed by us in fiscal 2015 included such in-house productions as Now You See Me 2, Sicario, Deepwater Horizon, La La Land and Nerve. Third party films for which we were engaged as exclusive sales agent in fiscal 2015 included The Last Face, A Monster Calls and Love the Coopers.

Through our pre-sales and output arrangements, we generally cover the majority of the production budget or acquisition cost of new theatrical releases we distribute internationally. Our output agreements for Lionsgate feature films currently cover eleven territories including Australia/New Zealand, Benelux (Belgium/Netherlands/Luxembourg), Canada, CIS (Commonwealth of Independent States), Eastern Europe, France, Germany/Austria, Italy, Poland, Scandinavia and Spain. Our output arrangements

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for Summit Entertainment feature films currently cover the same territories as for Lionsgate feature films plus the United Kingdom. We also distribute theatrical titles in Latin America through our partnership with IDC, certain theatrical titles in China through our financing relationship with Hunan TV & Broadcast Intermediary Co. Ltd., and certain television and library titles in Asia through our Celestial Tiger Entertainment joint venture.

In August 2014, in a move reflecting the increasing globalization of our business, we relocated our international sales operations to London, England.

Lionsgate UK

We self-distribute motion pictures (including Summit Entertainment releases commencing production after July 1, 2015) in the United Kingdom and Ireland through Lionsgate UK. The company was acquired by us in October 2005 and has since established a reputation in the United Kingdom as a leading producer and distributor and acquirer of commercially successful and critically acclaimed product. Recently released theatrical titles include Testament of Youth, What We Did On Our Holiday, Chef, Locke and The Hunger Games: Mockingjay - Part 1. Upcoming fiscal 2016 releases include A Little Chaos, Brooklyn, Criminal, London Has Fallen, Sicario and The Hunger Games: Mockingjay - Part 2.

Motion Pictures - Other

Interactive Ventures and Games

Our Interactive Ventures and Games division develops our digital investment strategy as well as our operational initiatives for both our own and third party intellectual property for traditional and digital media adaptation through, among other things, the production and global distribution of multi-platform games, the licensing of content for games and mobile devices, and development of branded online services and experiences including virtual and augmented reality. Recent initiatives include: the Company’s acquisition of an interest in Telltale Games, a leading and award-winning independent developer and publisher of games and pioneer of the episodic delivery of digital gaming content; the Company’s collaboration with Starbreeze Studios and 505 Games, two independent creators, publishers and distributors of computer and video games, on exclusive downloadable John Wick content for the PAYDAY 2 game worldwide; and the Company’s strategic partnership and investment in the Finnish games developer Next Games.

Global Franchise Management and Strategic Partnerships

The Company’s Global Franchise Management and Strategic Partnership division broadly covers all theatrical promotions and branded partnerships, licensed consumer products and location-based entertainment initiatives. Our goal is to drive incremental revenue and deepen fan engagement across our film and television properties via meaningful brand extensions, a direct model consumer products business and location-based entertainment venues around the world. Recent initiatives include: a strategic alliance with Samsung to conduct consumer promotional activities to support the releases of The Hunger Games: Mockingjay - Part 1 and The Divergent Series: Insurgent; a Hunger Games traveling exhibition scheduled to open in New York in summer 2015; The Hunger Games in StageAround scheduled to open in London in summer 2016; and a Lionsgate theme park attraction scheduled to open in Dubai in fall 2016.

Music

Our film and television music departments creatively oversee music for our theatrical and television slates, respectively. Our music strategy is to service the Company’s creative divisions’ music needs, while providing music for use in marketing our films and television shows. For our theatrical slate, the work of the music department includes overseeing songs, scores and soundtracks for all of our productions, co-productions and acquisitions, and for our television slate, the work of the music department includes overseeing music staffing, scores and soundtracks for all of our television productions. Music revenues are derived from the sales and licensing of music from our films and television programs, and the theatrical exhibition of our films and the television broadcasts of our productions.


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Ancillary Revenues

Ancillary revenues are derived from the licensing of non-theatrical uses of our films and television programs to distributors who, in turn, make a motion picture or television program available to airlines, hotels, schools, oil rigs, public libraries, prisons, community groups, the armed forces, ships at sea and others.


Television Production- Domestic Television

Our television business consists of the development, production, syndication and distribution of television programs. We generate revenue principally from the licensing and distribution of such programming to broadcast television networks, pay and basic cable networks, digital platforms and syndicators of first-run programming, which license programs on a station-by-station basis. Each of these platforms acquire a mix of original and library programming.

First-run syndication is programming exhibited on television stations without prior exhibition on a network or cable service. We distribute programming after its initial exhibition on a network, basic cable network or premium subscription service for domestic exhibition on television stations, cable networks or VOD services (known as “off-network syndicated programming”). Off-network syndicated programming and first run domestic syndicated programming, as well as programming distributed internationally, can be sold in successive cycles of sales which may occur on an exclusive or non-exclusive basis. In addition, television programming is sold on home video (packaged media and via digital delivery) and across all other applicable ancillary revenue streams including music publishing, touring and integration. As with film production, we use tax credits, subsidies, and other incentive programs for television production in order to maximize our returns and ensure fiscally responsible production models. For further information regarding television distribution, see Motion Pictures - Television above.

We currently produce, syndicate and distribute over 30 television shows on more than 20 networks. Scripted and reality programming produced or co-produced by us includes, among others, the following:

Television Programming
Title
Platform
Chasing Life
ABC Family
Deadbeat
Hulu
Mad Men
AMC
Manhattan
WGN
Nashville
ABC
Nurse Jackie
Showtime
Orange Is The New Black
Netflix
The Royals
E!
Deal With It
TBS
Way Out West
TruTV

We also produce and/or distribute first-run syndicated series such as The Wendy Williams Show, Family Feud, Hell’s Kitchen, South Park, Tyler Perry’s House of Payne and Celebrity Name Game through our subsidiary, Debmar-Mercury.
Over the past 10 years, our television programming has earned 161 Emmy ® Award nominations, has won 25 Emmy ® Awards, and has been nominated and won numerous Golden Globe ® Awards and Screen Actors Guild ® Awards.

Television Production- International

We continue to expand our television business internationally through sales and distribution of original Lionsgate television series, third party television programming and format acquisitions.


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Television Production-Home Entertainment

For information regarding television production home entertainment revenue, see Motion Pictures - Home Entertainment above.

Television Production- Other

Other revenues are derived from, among others, product integration in our television episodes and programs, the sales and licensing of music from the television broadcasts of our productions, and from the licensing of our television programs to ancillary markets. For additional information, see Motion Pictures - Other above.

Joint Ventures, Partnerships and Ownership Interests

Our joint ventures, partnerships and ownership interests support our strategy of diversifying our company in an attempt to create a multiplatform global industry leader in entertainment. As a corollary, we are regularly evaluating our existing properties, libraries and other assets and businesses in order to determine whether they continue to enhance our competitive position in the industry, have the potential to generate significant long-term returns, represent an optimal use of our capital and are aligned with our goals. Consequently, when appropriate, we discuss potential strategic transactions with third parties for purchase of our properties, libraries or other assets or businesses that we factor into these evaluations. As a result of our evaluations, we may, from time to time, determine to sell individual properties, libraries or other assets or businesses. From time to time, we may also enter into additional joint ventures, strategic transactions and similar arrangements for individual properties, libraries or other assets or businesses.

Atom Tickets. In August 2014, we acquired an interest in Atom Tickets, a theatrical movie discovery service. Atom Tickets is an Android and iOS app designed to make going to the movies easy again - it’s movie-going for the twenty-first century. We own an approximately 18.1% interest in Atom Tickets.
 
 
 
Celestial Tiger Entertainment. In January 2012, we formed Celestial Tiger Entertainment, a joint venture with Saban Capital Group, Inc. and Celestial Pictures, a company wholly-owned by Astro Malaysia Holdings Sdn. Bhd. Celestial Tiger Entertainment is a diversified media company that focuses on the operation of branded pay television channels, content creation and content distribution targeted at Asian consumers. It operates a powerful bouquet of distinct pay television channels including: CELESTIAL MOVIES, a premier 24-hour first-run Chinese movie service in Asia and beyond; CELESTIAL CLASSIC MOVIES, a gateway to an array of Chinese movie masterpieces; cHK, a one-stop channel for cool, chic, and contemporary celebrity-powered Hong Kong entertainment; KIX, an ultimate destination for action entertainment; and THRILL, Asia's only regional horror and suspense movie channel. As one of Asia's largest vertically integrated independent entertainment companies, Celestial Tiger Entertainment produces original content which complements its channels business. Celestial Tiger Entertainment is also the exclusive sales agent for us in Greater China and Southeast Asia, and represents our television content and vast feature film library in Japan and Korea. We own a 16% interest in Celestial Tiger Entertainment.

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DEFY Media. In June 2007, we acquired an interest in Break Media, a multi-platform digital media company and a leader in male-targeted content creation and distribution. In October 2013, Break Media merged with Alloy Digital to create DEFY Media. DEFY Media is a top digital producer and programmer for 13 to 34 year olds, and a large owner of YouTube channels and leading media brands across the comedy, lifestyle and gaming verticals. Each month, DEFY-produced content generates 500 million video views and reaches 125 million viewers across its 50 million YouTube subscribers, 80 million unique web visitors and consumers of its apps, which have been downloaded over 22 million times. DEFY Media brands include Smosh, recently named by Variety as a top brand for 13-17 year olds, Break, known for its program Prank It Forward, and Screen Junkies, home to the influential digital series Honest Trailers. Many of the world’s top brands partner with DEFY to build immersive advertising solutions that deliver access to this influential audience. With uniquely integrated capabilities in content development, studio production, distribution and promotion, DEFY Media is built for content delivery in the digital age. We own an approximately 16.0% economic interest in DEFY Media.
 
 
 
EPIX. In April 2008, we formed EPIX, a joint venture with Viacom, its Paramount Pictures unit and MGM. EPIX is a premium movie and original programming entertainment service delivering the latest movie releases, classic film franchises, original documentaries, comedy and music events on television, on demand, online and on devices. EPIX has pioneered the development and proliferation of “TV Everywhere.” It was the first premium network to provide multi-platform access to its content online at EPIX.com and was the first premium network to launch on Xbox 360, PlayStation® 3 and 4, Android phones and tablets, Windows 8.1 and Roku® players. EPIX is available to authenticated subscribers on hundreds of devices including Xbox One, Chromecast and Apple® iPads® and iPhones® and is the only premium service providing all its programming on all platforms, delivering more movies than any other premium network, with thousands of titles available for streaming. Through relationships with cable, satellite and telco partners, EPIX is available to over 50 million homes nationwide. We own a 31.2% interest in EPIX.
 
 
 
Pantelion Films. In September 2010, we launched Pantelion Films, a joint venture with Videocine, an affiliate of Televisa, which produces, acquires and distributes a slate of English and Spanish language feature films that target Hispanic moviegoers in the U.S. Pantelion Films, the first major Latino Hollywood studio and the new face of Hispanic entertainment, provides Hispanic moviegoers with a steady source of exciting and original films, including world-class Latino actors, directors and writers. From comedies and dramas to family movies and romantic comedies, Pantelion Films produces and acquires movies that speak directly to acculturated and Spanish-dominant Hispanics alike. Pantelion Films’ fiscal 2015 theatrical slate included the following films: Cantinflas, 2014’s second-highest-grossing foreign-language film in the U.S., Mas Negro Que La Noche, Spare Parts and A La Mala. We own a 49% interest in Pantelion Films.


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Roadside Attractions. In July 2007, we acquired an interest in Roadside Attractions, an independent theatrical distribution company. In just over a decade, Roadside Attractions’ films have grossed over $200 million and garnered thirteen Academy Award® nominations. Roadside has released such films as A Most Wanted Man, Dear White People, The Skeleton Twins, All Is Lost, Mud, Winter’s Bone, The Cove, Arbitrage, Margin Call and Super Size Me. Its upcoming slate includes Love & Mercy, Mr. Holmes and Z for Zachariah. We own a 43% interest in Roadside Attractions.
 
 
 
Pop. Entered into in March 2013, Pop (formerly TV Guide Network), our joint venture with CBS, is an entertainment television destination seen in approximately 80 million homes with programming that celebrates fandom and what’s popping in culture. The partnership combines CBS’s programming, production and marketing assets with our resources in motion pictures, television and digitally delivered content. Pop’s ownership structure is comprised of the company with the number one broadcast network and many of the top first-run syndication series (Entertainment Tonight, The Insider) and the studio that produces and distributes the blockbuster Hunger Games, Twilight and Divergent franchises and produces such award-winning TV series as Mad Men and Orange is the New Black. We own a 50% interest in Pop.
 
 
 
Telltale Games. In February 2015, we acquired an interest in Telltale Games, a leading and award-winning independent developer and publisher of games for every major interactive platform from home consoles and PC to mobile and tablet devices, and pioneer of the episodic delivery of digital gaming content. Founded in 2004 by games industry veterans, Telltale Games has quickly become an industry leader with numerous honors and awards from the Academy of Interactive Arts and Sciences, BAFTA, the IMGA, and more, as well as being named Studio of the Year in 2012, after establishing a model for successful episodic game creation and digital publishing. Telltale Games’ reputation for quality has been established across more than two dozen different product releases over the years with recognition and acclaim from publications like IGN, The New York Times, and Variety, including over 100 "Game of the Year" awards from publications like USA Today, Yahoo! Games, Wired, Spike TV VGAs, E!, Official Xbox Magazine, The Telegraph, Metactitic, and more. Telltale Games is a fully licensed third party publisher on consoles from Microsoft, Sony, and Nintendo, and also publishes games on the PC, Mac, and Apple iOS platforms. We own an approximately 14% economic interest in Telltale Games.
 
 
 
Next Games. In July 2014, we entered into a strategic partnership and acquired an interest in games developer Next Games. Next Games, founded in 2013 by design veterans from Rovio, Supercell and Disney, is a mobile games development company headquartered in Helsinki, Finland, with a focus on crafting visually impressive, highly engaging games. We invested $2.0 million in Next Games for a small minority ownership interest.
 
 
 
Starz. Starz is a leading integrated global media and entertainment company with operating units that provide premium subscription video programming on domestic U.S. pay television channels (Starz Networks), global content distribution (Starz Distribution) and animated television and movie production (Starz Animation). We currently own approximately 4.6% of Starz common stock outstanding and 14.7% of the total voting power of Starz common stock.


Intellectual Property

We are currently using a number of trademarks including “ARTISAN HOME ENTERTAINMENT,” “THE BLAIR WITCH PROJECT,” “DIRTY DANCING,” “FAMILY HOME ENTERTAINMENT,” “LIONS GATE HOME ENTERTAINMENT,” “MAD MEN,” “ORANGE IS THE NEW BLACK,” “DIVERGENT,” “INSURGENT” and “RESERVOIR DOGS” in connection with our domestic home entertainment distribution, “ARTISAN ENTERTAINMENT,” “GHOST HOUSE PICTURES,” “GRINDSTONE ENTERTAINMENT GROUP,” “SUMMIT ENTERTAINMENT,” “LIONS GATE FILMS,” “LGF FILMS,” “MANDATE PICTURES” and “TRIMARK PICTURES” in connection with films distributed domestically and licensed internationally, and “DEBMAR/MERCURY,” “LIONS GATE TELEVISION” and “TRIMARK TELEVISION” in connection with licenses to free, pay and cable television and digital platforms. Additionally, through Summit Entertainment, we are using the trademarks “BREAKING DAWN,” “NEW MOON,” “ECLIPSE,” “SUMMIT ENTERTAINMENT,” “THE

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TWILIGHT SAGA” “and TWILIGHT” as well as various other trademarks derived from and associated with the Twilight franchise.

The trademarks “ARTISAN ENTERTAINMENT,” “BREAKING DAWN,” “DIRTY DANCING,” “ECLIPSE,” “LIONS GATE ENTERTAINMENT,” “LIONS GATE FILMS,” “LIONS GATE HOME ENTERTAINMENT,” “LIONS GATE PICTURES,” “LIONSGATE,” “MAD MEN,” “NEW MOON,” “RESERVOIR DOGS,” “SAW,” “SUMMIT ENTERTAINMENT,” “THE BLAIR WITCH PROJECT,” “THE TWILIGHT SAGA,” “TRIMARK PICTURES,” “TV GUIDE,” “TV GUIDE NETWORK,” “TWILIGHT,” “ORANGE IS THE NEW BLACK” and “DIVERGENT,” among others, are registered with the U.S. Patent and Trademark Office and various international trademark authorities or are pending registration. We also have the exclusive right to use “HUNGER GAMES,” “CATCHING FIRE” and “MOCKINGJAY” and own other trademarks relating to The Hunger Games books and motion pictures. We regard our trademarks as valuable assets and believe that our trademarks are an important factor in marketing our products.

Motion picture piracy is extensive in many parts of the world, including South America, Asia and certain Eastern European countries, and is made easier by technological advances and the conversion of motion pictures into digital formats. This trend facilitates the creation, transmission and sharing of high quality unauthorized copies of motion pictures in theatrical release on DVDs, Blu-ray discs, from pay-per-view through set-top boxes and other devices and through unlicensed broadcasts on free television and the internet. The proliferation of unauthorized copies of these products has had and will likely continue to have an adverse effect on our business, because these products reduce the revenue we receive from our products.

Competition

Television and motion picture production and distribution are highly competitive businesses. We face competition from companies within the entertainment business and from alternative forms of leisure entertainment, such as travel, sporting events, outdoor recreation, video games, the internet and other cultural and computer-related activities. We compete with the major studios, numerous independent motion picture and television production companies, television networks, pay television systems and digital media platforms for the acquisition of literary and film properties, the services of performing artists, directors, producers and other creative and technical personnel and production financing, all of which are essential to the success of our entertainment businesses. In addition, our motion pictures compete for audience acceptance and exhibition outlets with motion pictures produced and distributed by other companies. Likewise, our television product faces significant competition from independent distributors as well as major studios. As a result, the success of any of our motion pictures and television product is dependent not only on the quality and acceptance of a particular film or program, but also on the quality and acceptance of other competing motion pictures or television programs released into the marketplace at or near the same time.

Given such competition, we operate with a different business model than many others. We typically emphasize a lower cost structure, risk mitigation, reliance on financial partnerships and innovative financial strategies. Our cost structures are designed to utilize our flexibility and agility as well as the entrepreneurial spirit of our employees, partners and affiliates, in order to provide creative entertainment content to serve diverse audiences worldwide.

Social Responsibility

We are committed to acting responsibly and making a positive difference in the local and global community through Lionshares, the umbrella for our companywide commitment to our communities. Lionshares is a volunteer program that seeks to provide opportunities for employees within the Lionsgate family to partner with a diverse range of charitable organizations. The program not only enriches the Lionsgate work experience through cultural and educational outreach, but also positively interacts and invests in the local and global community. Specifically, Lionshares strives to:

Provide diverse activities intended to appeal to a broad range of interests.
Partner with leading organizations with expertise in these areas.
Create an effectual and influential impact through human contact.
Share time and experience, not just among Lionsgate employees, but with the greater community as well.

Since its founding in August 2012, Lionshares has formed corporate partnerships and worked closely with organizations such as the Special Olympics, International Medical Corp., Children’s Hospital of Los Angeles, My Friend’s Place, The United

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Friends of the Children and Westside Food Bank. For further information about our social responsibility initiatives, see www.lionsgate.com/corporate/volunteer.
Employees
As of May 11, 2015, we had 719 full-time employees in our worldwide operations. We also utilize many consultants in the ordinary course of our business and hire additional employees on a project-by-project basis in connection with the production of our motion pictures and television programming. We believe that our employee and labor relations are good.

Corporate History

We are a corporation organized under the laws of the Province of British Columbia, resulting from the merger of Lions Gate Entertainment Corp. and Beringer Gold Corp. on November 13, 1997. Beringer Gold Corp. was incorporated under the Business Corporation Act (British Columbia) on May 26, 1986 as IMI Computer Corp. Lions Gate Entertainment Corp. was incorporated under the Canada Business Corporations Act using the name 3369382 Canada Limited on April 28, 1997, amended its articles on July 3, 1997 to change its name to Lions Gate Entertainment Corp., and on September 24, 1997, continued under the Business Corporation Act (British Columbia).

Financial Information About Segments and Foreign and Domestic Operations

Financial and other information by reporting segment and geographic area as of March 31, 2015 and 2014 and for each of the three years in the period ended March 31, 2015 is set forth in Note 14 to our consolidated financial statements.

Available Information

Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy statements and amendments to those reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Exchange Act, are available, free of charge, on our website at www.lionsgate.com as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission (the “SEC”). The Company's Disclosure Policy, Corporate Governance Guidelines, Standards for Director Independence, Code of Business Conduct and Ethics for Directors, Officers and Employees, Code of Ethics for Senior Financial Officers, Policy on Shareholder Communications, Related Person Transaction Policy, Charter of the Audit & Risk Committee, Charter of the Compensation Committee and Charter of the Nominating and Corporate Governance Committee and any amendments thereto are also available on the Company's website, as well as in print to any shareholder who requests them. The information posted on our website is not incorporated into this Annual Report on Form 10-K.

The SEC maintains an internet site that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC at www.sec.gov. The public may read and copy any materials we file with the SEC at the SEC's Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.

This Annual Report on Form 10-K contains references to our trademarks and to trademarks belonging to other entities. Solely for convenience, trademarks and trade names referred to in this Annual Report on Form 10-K, including logos, artwork and other visual displays, may appear without the ® or TM symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensor to these trademarks and trade names. We do not intend our use or display of other companies’ trade names or trademarks to imply a relationship with, or endorsement or sponsorship of us by, any other company.

ITEM 1A. RISK FACTORS.

You should carefully consider the risks described below as well as other information included in, or incorporated by reference into in this Form 10-K. The risks described below are not the only ones facing the Company. Additional risks that we are not presently aware of, or that we currently believe are immaterial, may also become important factors that affect us. All of these risks and uncertainties could adversely affect our business, financial condition, operating results, liquidity and prospects.


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We face substantial capital requirements and financial risks.

Our business requires a substantial investment of capital. The production, acquisition and distribution of motion pictures and television programs require a significant amount of capital. A significant amount of time may elapse between our expenditure of funds and the receipt of revenues from our motion pictures or television programs. This time lapse may require us to fund a significant portion of our capital requirements from our credit facilities or other financing sources. Although we intend to continue to reduce the risks of our production exposure through financial contributions from broadcasters and distributors, tax credit programs, government and industry programs, other studios and co-financiers and other sources, we cannot assure you that we will continue to successfully implement these arrangements or that we will not be subject to substantial financial risks relating to the production, acquisition, completion and release of future motion pictures and television programs. In addition, if we increase (through internal growth or acquisition) our production slate or our production budgets, we may be required to increase overhead and/or make larger up-front payments to talent and, consequently, bear greater financial risks. Any of the foregoing could have a material adverse effect on our business, financial condition, operating results, liquidity and prospects.

The costs of producing and marketing feature films is high and may increase in the future, which may make it more difficult for a film to generate a profit or compete against other films. The costs of producing and marketing feature films generally increase from year to year, which may make it more difficult for our films to generate a profit or compete against other films. A continuation of this trend would leave us more dependent on other media, such as home entertainment, television, international markets and digital, which revenues may not be sufficient to offset an increase in the cost of motion picture production and marketing. If we cannot successfully exploit these other media, it could have a material adverse effect on our business, financial condition, operating results, liquidity and prospects.

Budget overruns may adversely affect our business. While our business model requires that we be efficient in the production of our motion pictures and television programs, actual motion picture and television production costs may exceed their budgets. The production, completion and distribution of motion pictures and television productions can be subject to a number of uncertainties, including delays and increased expenditures due to disruptions or events beyond our control. As a result, if a motion picture or television production incurs substantial budget overruns, we may have to seek additional financing from outside sources to complete production or fund the overrun ourselves. We cannot make assurances regarding the availability of such financing or on terms acceptable to us, nor can we assure you that we will recoup these costs. Increased costs incurred with respect to a particular film may result in any such film not being ready for release at the intended time and the postponement to a potentially less favorable date, all of which could cause a decline in box office performance, and, thus, the overall financial success of such film. Budget overruns could also prevent a picture from being completed or released. Any of the foregoing could have a material adverse effect on our business, financial condition, operating results, liquidity and prospects.

We may not be able to generate sufficient cash to service all of our indebtedness, and we may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.

Our ability to make scheduled payments or to refinance our debt obligations depends on our financial and operating performance, which is subject to prevailing economic and competitive conditions and to certain financial, business and other factors beyond our control. We cannot assure you that we will maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness. If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay capital expenditures, sell assets or operations, seek additional capital or restructure or refinance our indebtedness. We cannot assure you that we would be able to take any of these actions, that these actions would be successful and permit us to meet our scheduled debt service obligations or that these actions would be permitted under the terms of our existing or future debt agreements, including our credit facilities and the indenture governing our senior secured notes. In the absence of such cash flows or capital resources, we could face substantial liquidity problems and might be required to dispose of material assets or operations to meet our debt service and other obligations. Our credit facilities and the indenture governing our senior secured notes restrict our ability to dispose of assets and use the proceeds from such dispositions. We may not be able to consummate those dispositions or to obtain the proceeds which we could realize from them and these proceeds may not be adequate to meet any debt service obligations then due.

If we cannot make scheduled payments on our debt, we will be in default and, as a result:

our debt holders could declare all outstanding principal and interest to be due and payable;
the lenders under our credit facilities could terminate their commitments to lend us money;
the holders of our secured debt could foreclose against the assets securing their borrowings; and/or
we could be forced into bankruptcy or liquidation.


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If our level of corporate debt increases, it could adversely affect our ability to raise additional capital to fund our operations, require us to dedicate substantial capital to servicing our debt obligations, expose us to interest rate risk, limit our ability to pursue strategic business opportunities, affect our ability to react to changes in the economy or our industry and prevent us from meeting our debt obligations.

As of March 31, 2015, our corporate debt was $718.0 million (carrying value - $714.1 million). In addition, our production
loan obligations were $600.9 million.

On July 19, 2013, we redeemed $432.0 million of our 10.25% Senior Secured Second-Priority Notes (the “10.25% Senior Notes”), issued $225.0 million of our 5.25% Senior Secured Second-Priority Notes (the “5.25% Senior Notes”) and borrowed $225.0 million under our Second Lien Credit and Guarantee Agreement dated July 19, 2013 (the “Term Loan Due 2020”). On March 17, 2015, we redeemed the Term Loan Due 2020 and borrowed $375 million under our Second Lien Credit and Guarantee Agreement dated March 17, 2015 (the "Term Loan Due 2022"). On March 17, 2015, the April 2009 3.625% Notes were called for redemption and in April 2015, the holders of the notes converted substantially all of the outstanding principal amounts into common shares. On May 4, 2015, we amended the Term Loan Due 2022 to increase the aggregate principal amount to $400 million.

A substantial degree of leverage could have important consequences, including the following:

it may limit our ability to obtain additional debt or equity financing for working capital, capital expenditures, motion picture and television development, production and distribution, debt service requirements, acquisitions or general corporate or other purposes, or limit our ability to obtain such financing on terms acceptable to us;
a portion of our cash flows from operations will be dedicated to the payment of principal and interest on our indebtedness and will not be available for other purposes, including funding motion picture and television production, development and distribution and other operating expenses, capital expenditures and future business opportunities;
the debt service requirements of our indebtedness could make it more difficult for us to satisfy our financial obligations;
certain of our borrowings, including borrowings under our secured credit facilities are at variable rates of interest, exposing us to the risk of increased interest rates;
it may limit our ability to adjust to changing market conditions and place us at a competitive disadvantage compared to our competitors that have less debt;
it may limit our ability to pursue strategic acquisitions and other business opportunities that may be in our best interests;
we may be vulnerable to a downturn in general economic conditions or in our business; and/or
we may be unable to carry out capital spending that is important to our growth.

Despite our current indebtedness levels, we and our subsidiaries may be able to incur additional debt in the future.

Although each of our credit facilities and the indentures governing our senior secured notes contains covenants that, among other things, limit our ability to incur additional indebtedness, including guarantees, make restricted payments and investments, and grant liens on our assets, the covenants contained in such debt documents provide a number of important exceptions and thus, do not prohibit us or our subsidiaries from doing so. Such exceptions will provide us substantial flexibility to incur indebtedness, grant liens and expend funds to operate our business. For example, under the terms of the indenture governing our senior secured notes (i) with few restrictions, we may incur indebtedness in connection with certain film and television financing arrangements, including without limitation, purchasing or acquiring rights in film or television productions or financing print and advertising expenses, and such indebtedness may be secured by liens senior to the liens in respect of our senior secured notes, and (ii) in limited circumstances, we may make investments in assets that are not included in the borrowing base supporting our senior secured notes, in each case, without having to meet the leverage ratio tests for debt incurrence or to fit such investments within the restricted payments “build up basket” or within other categories of funds applicable to making investments and other restricted payments under the indenture governing our senior secured notes.

In addition, we may incur additional indebtedness through our senior secured credit facility. We may borrow up to $800 million under the senior secured credit facility. At March 31, 2015, we have no borrowings under our senior secured credit facility, and no letters of credit outstanding. We could borrow some or all of the remaining permitted amount in the future. The amount we have available to borrow under this facility depends upon our borrowing base, which in turn depends on the value of our existing library of films and television programs, as well as accounts receivable and cash held in collateral accounts. If new debt is added to our and our subsidiaries' existing debt levels, this has the potential to magnify the risks discussed above relating to our ability to service our indebtedness and the potential adverse impact our high level of indebtedness could have on us.


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An increase in the ownership of our common shares by certain shareholders could trigger a change in control under the agreements governing our long-term indebtedness.

The agreements governing certain of our long-term indebtedness contain change in control provisions that are triggered when any of our shareholders, directly or indirectly, acquires ownership or control in excess of a certain percentage of our common shares. As of May 11, 2015, three of our shareholders, Mark H. Rachesky, M.D., Capital World Investors, and Capital Research Global Investors, and their respective affiliates, beneficially owned approximately 27.3%, 5.7% and 5.4%, respectively, of our outstanding common shares.

Under certain circumstances, including the acquisition of ownership or control by a person or group in excess of 50% of our common shares, the holders of our senior secured notes and our convertible senior subordinated notes may require us to repurchase all or a portion of such notes upon a change in control and the holders of our convertible senior subordinated notes may be entitled to receive a make whole premium based on the price of our common shares on the change in control date. We may not be able to repurchase these notes upon a change in control because we may not have sufficient funds. Further, we may be contractually restricted under the terms of our secured credit facilities from repurchasing all of the notes tendered by holders upon a change in control. Our failure to repurchase our senior secured notes upon a change in control would cause a default under the indentures governing the senior secured notes and the convertible senior subordinated notes and a cross-default under our secured credit facilities.

Our secured credit facilities also provide that a change in control, which includes a person or group acquiring ownership or control in excess of 50% of our outstanding common shares, will be an event of default that permits lenders to accelerate the maturity of borrowings thereunder and to enforce security interests in the collateral securing such debt, thereby limiting our ability to raise cash to purchase our outstanding senior secured notes and convertible senior subordinated notes. Any of our future debt agreements may contain similar provisions.

Restrictive covenants may adversely affect our operations.

Our credit facilities and the indenture governing our senior secured notes contain various covenants that, subject to certain exceptions, limit our ability to, among other things:

incur or assume additional debt or provide guarantees in respect of obligations of other persons;
issue redeemable stock and preferred stock;
pay dividends or distributions or redeem or repurchase capital stock;
prepay, redeem or repurchase debt that is junior in right of payment to our senior secured notes;
make loans, investments and capital expenditures;
incur liens;
engage in sale/leaseback transactions;
restrict dividends, loans or asset transfers from our subsidiaries;
sell or otherwise dispose of assets, including capital stock of subsidiaries;
consolidate or merge with or into, or sell substantially all of our assets to, another person;
enter into transactions with affiliates; and
enter into new lines of business.

These covenants may prevent us from raising additional financing, competing effectively or taking advantage of new business opportunities. In addition, the restrictive covenants in our credit facilities require us to maintain specified financial ratios and satisfy other financial condition tests and the indenture governing our senior secured notes, outside of specified exceptions, requires us to satisfy certain financial tests in order to engage in activities such as incurring debt or making restricted payments. Our ability to comply with these covenants or meet those financial ratios and tests can be affected by events beyond our control (such as a change in control event), and we cannot assure you that we will meet them. See “An increase in the ownership of our common shares by certain shareholders could trigger a change in control under the agreements governing our long-term indebtedness.” Upon the occurrence of an event of default under our credit facilities, the indenture governing our senior secured notes or the agreements governing our other financing arrangements, the holders of such debt could elect to declare all amounts outstanding to be immediately due and payable and the lenders under our credit facilities could terminate all commitments to extend further credit. Further, the holders of our secured debt that is secured by a first priority or other senior lien, could proceed against the collateral granted to them to secure that indebtedness, which collateral represents substantially all of our assets. If the holders of our debt accelerate the repayment of borrowings, we cannot assure you that we will have sufficient cash flow or assets to repay our debt, or borrow sufficient funds to refinance such indebtedness. Even if we are able to obtain new financing, it may not be on commercially reasonable terms, or terms that are acceptable to us.


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Variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly.


Certain of our borrowings, primarily borrowings under our senior credit facility are at variable rates of interest and expose us to interest rate risk. If interest rates increase, our debt service obligations on the variable rate indebtedness would increase even though the amount borrowed remained the same. The applicable margin with respect to loans under our senior secured credit facility is a percentage per annum equal to 2.50% plus an adjusted rate based on LIBOR.

Assuming that our senior secured credit facility is fully drawn, based on the applicable LIBOR in effect as of March 31, 2015, each quarter point change in interest rates would result in a $2.0 million change in annual interest expense. In the future, we may enter into interest rate swaps, involving the exchange of floating for fixed rate interest payments, to reduce interest rate volatility.

We have had losses in the past, and we cannot assure future profitability.

Even though we have reported operating income for fiscal years 2010 through 2015, we had an operating loss for fiscal year 2009. We have also reported net losses for the fiscal years 2009 through 2012. Our retained earnings were $13.7 million at March 31, 2015. We cannot assure you that we will operate profitably in future periods and, if we do not, we may not be able to meet our debt service requirements, working capital requirements, capital expenditure plans, production slate, acquisition and releasing plans or other cash needs. Our inability to meet those needs could have a material adverse effect on our business, financial condition, operating results, liquidity and prospects.

We may incur significant write-offs if our feature films and other projects do not perform well enough to recoup production, marketing and distribution costs.

We are required to amortize capitalized production costs over the expected revenue streams as we recognize revenue from the associated films or other projects. The amount of production costs that will be amortized each quarter depends on, among other things, how much future revenue we expect to receive from each project. Unamortized production costs are evaluated for impairment each reporting period on a project-by-project basis. If estimated remaining revenue is not sufficient to recover the unamortized production costs, the unamortized production costs will be written down to fair value. In any given quarter, if we lower our previous forecast with respect to total anticipated revenue from any individual feature film or other project, we may be required to accelerate amortization or record impairment charges with respect to the unamortized costs, even if we have previously recorded impairment charges for such film or other project.  Such impairment charges could adversely impact our business, operating results and financial condition.

Our revenues and results of operations may fluctuate significantly.

Our results of operations are difficult to predict and depend on a variety of factors. Our results of operations depend significantly upon the commercial success of the motion pictures and television programming that we distribute, which cannot be predicted with certainty.  In particular, the underperformance at the box office of one or more motion pictures in any period may cause our revenue and earnings results for that period (and potentially, subsequent periods) to be less than anticipated, in some instances to a significant extent. Accordingly, our results of operations may fluctuate significantly from period to period, and the results of any one period may not be indicative of the results for any future periods.

Our results of operations also fluctuate due to the timing, mix, number and availability of our theatrical motion picture and home entertainment releases, as well as license periods for our content.   Our operating results may increase or decrease during a particular period or fiscal year due to differences in the number and/or mix of films released compared to the corresponding period in the prior year or prior fiscal year.

Moreover, our results of operations may be impacted by the success of all of our theatrical releases, including critically acclaimed and award winning films. We cannot assure you that we will manage the production, acquisition and distribution of all future motion pictures successfully including critically acclaimed, award winning and/or commercially popular films or that we will produce or acquire motion pictures that will receive critical acclaim or perform well commercially. Any inability to achieve such commercial success could have a material adverse effect on our business, financial condition, operating results, liquidity and prospects.

Our operating results also fluctuate due to our accounting practices (which are standard for the industry) which may cause us to recognize the production and marketing expenses in different periods than the recognition of related revenues, which may occur

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in later periods. For example, in accordance with generally accepted accounting principles and industry practice, we are required to expense film advertising costs as incurred, but are also required to recognize the revenue from any motion picture or television program over the entire revenue stream expected to be generated by the individual picture or television program. In addition, we amortize film and television programming costs using the "individual-film-forecast" method. Under this accounting method, we amortize film and television programming costs for each film or television program based on the following ratio:

Revenue earned by title in the current period
Estimated total future revenues by title as of the beginning of the year

We regularly review, and revise when necessary, our total revenue estimates on a title-by-title basis. This review may result in a change in the rate of amortization and/or a write-down of the film or television asset to its estimated fair value. Results of operations in future years depend upon our amortization of our film and television costs. Periodic adjustments in amortization rates may significantly affect these results.

In addition, the comparability of our results may be affected by changes in accounting guidance or changes in our ownership of certain assets and businesses. For example, in fiscal 2011, we retrospectively deconsolidated our interest in Pop (formerly TV Guide Network) due to new accounting guidance and now account for our holding in that business under the equity method of accounting. Accordingly, our results of operations from year to year may not be directly comparable to prior reporting periods.

As a result of the foregoing and other factors, our results of operations may fluctuate significantly from period to period, and the results of any one period may not be indicative of the results for any future period.

We have few output agreements with cable and broadcast channels. We distribute our library of motion picture titles and television episodes and programs through EPIX, certain broadcast channels such as Pop (which exhibit our films, but license such rights on a film-by-film, rather than an output basis) and, specifically, for certain Summit Entertainment motion picture titles, through Showtime Networks and HBO. We cannot assure you that we will be able to secure other output agreements on acceptable terms, if at all. Without multiple output agreements that typically contain guaranteed minimum payments, our revenues may be subject to greater volatility, which could have a material adverse effect on our business, financial condition, operating results, liquidity and prospects.

We do not have long-term arrangements with many of our production or co-financing partners. We typically do not enter into long term production contracts with the creative producers of the films we produce, acquire or distribute. Moreover, we generally have certain derivative rights that provide us with distribution rights to, for example, prequels, sequels and remakes of certain films we produce, acquire or distribute. However, there is no guarantee that we will produce, acquire or distribute future films by any creative producer or co-financing partner, and a failure to do so could adversely affect our business, financial condition, operating results, liquidity and prospects.

We rely on a few major retailers and distributors and the loss of any of those retailers or distributors could reduce our revenues and operating results. Wal-Mart represented approximately 8% of our revenues in fiscal 2015. In addition, a small number of other retailers and distributors account for a material percentage of our revenues. We do not have long-term agreements with retailers. We cannot assure you that we will continue to maintain favorable relationships with our retailers and distributors or that they will not be adversely affected by economic conditions. If any of these retailers or distributors reduces or cancels a significant order or becomes bankrupt, it could have a material adverse effect on our business, financial condition, operating results, liquidity and prospects.

Our revenues and results of operations are vulnerable to currency fluctuations. We report our revenues and results of operations in U.S. dollars, but a significant portion of our revenues is earned outside of the U.S. Our currency exposure is between Canadian dollars, British pound sterling, Euros, Australian dollars and U.S. dollars. We cannot accurately predict the impact of future exchange rate fluctuations on revenues and operating margins, and fluctuations could have a material adverse effect on our business, financial condition, operating results, liquidity and prospects. From time to time, we may experience currency exposure on distribution and production revenues and expenses from foreign countries, which could have a material adverse effect on our business, financial condition, operating results, liquidity and prospects.

Failure to manage future growth may adversely affect our business.

We are subject to risks associated with possible acquisitions, business combinations, or joint ventures. From time to time, we engage in discussions and activities with respect to possible acquisitions, sale of assets, business combinations, or joint ventures intended to complement or expand our business, some of which may be significant transactions for us. We may not realize the anticipated benefit from any of the transactions we pursue. Regardless of whether we consummate any such transaction, the

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negotiation of a potential transaction (including associated litigation and proxy contests), as well as the integration of the acquired business, could require us to incur significant costs and cause diversion of management's time and resources. Any such transaction could also result in impairment of goodwill and other intangibles, development write-offs and other related expenses. Any of the foregoing could have a material adverse effect on our business, financial condition, operating results, liquidity and prospects.

We may be unable to integrate any business that we acquire or have acquired or with which we combine or have combined. Integrating any business that we acquire or have acquired or with which we combine or have combined may be distracting to our management and disruptive to our business and may result in significant costs to us. We could face several challenges in the consolidation and integration of information technology, accounting systems, personnel and operations. If any such integration is unsuccessful, or if the integration takes longer than anticipated, there could be a material adverse effect on our business, financial condition, operating results, liquidity and prospects. We may have difficulty managing the combined entity in the short term if we experience a significant loss of management personnel during the transition period after the significant acquisition.

Claims against us relating to any acquisition or business combination may necessitate our seeking claims against the seller for which the seller may not indemnify us or that may exceed the seller's indemnification obligations. There may be liabilities assumed in any acquisition or business combination that we did not discover or that we underestimated in the course of performing our due diligence. Although a seller generally will have indemnification obligations to us under an acquisition or merger agreement, these obligations usually will be subject to financial limitations, such as general deductibles and maximum recovery amounts, as well as time limitations. We cannot assure you that our right to indemnification from any seller will be enforceable, collectible or sufficient in amount, scope or duration to fully offset the amount of any undiscovered or underestimated liabilities that we may incur. Any such liabilities, individually or in the aggregate, could have a material adverse effect on our business, financial condition, operating results, liquidity and prospects.

We may not be able to obtain additional funding to meet our requirements. Our ability to grow through acquisitions, business combinations and joint ventures, to maintain and expand our development, production and distribution of motion pictures and television programs, and to fund our operating expenses depends upon our ability to obtain funds through equity financing, debt financing (including credit facilities) or the sale or syndication of some or all of our interests in certain projects or other assets or businesses. If we do not have access to such financing arrangements, and if other funds do not become available on terms acceptable to us, there could be a material adverse effect on our business, financial condition, operating results, liquidity and prospects.

Our dispositions may not aid our future growth. If we determine to sell individual properties, libraries or other assets or businesses, we will benefit from the net proceeds realized from such sales. However, our revenues may suffer in the long term due to the disposition of a revenue generating asset, or the timing of such dispositions may be poor, causing us to fail to realize the full value of the disposed asset, all of which may diminish our ability to service our indebtedness and repay our notes and our other indebtedness at maturity. Furthermore, our goal of building a diversified platform for future growth may be inhibited if the disposed asset contributed in a significant way to the diversification of our business platform.

Limitations on control of joint ventures may adversely impact our operations.

We hold our interests in certain businesses as a joint venture or in partnership with non-affiliated third parties. As a result of such arrangements, we may be unable to control the operations, strategies and financial decisions of such joint venture or partnership entities which could, in turn, result in limitations on our ability to implement strategies that we may favor and may limit our ability to transfer our interests. Consequently, any losses experienced by these entities could adversely impact our results of operations and the value of our investment.

A significant portion of our filmed and television content library revenues comes from a small number of titles.

We depend on a limited number of titles in any given fiscal quarter for the majority of the revenues generated by our filmed and television content library. In addition, many of the titles in our library are not presently distributed and generate substantially no revenue. If we cannot acquire new product and the rights to popular titles through production, distribution agreements, acquisitions, mergers, joint ventures or other strategic alliances, it could have a material adverse effect on our business, financial condition, operating results, liquidity and prospects.

We are limited in our ability to exploit a portion of our filmed and television content library.

Our rights to the titles in our filmed and television content library vary; in some cases, we have only the right to distribute titles in certain media and territories for a limited term. We cannot assure you that we will be able to renew expiring rights on acceptable terms and that any failure to renew titles generating a significant portion of our revenue would not have a material adverse effect on our business, financial condition, operating results, liquidity and prospects.

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Our success depends on external factors in the motion picture and television industry.

Our success depends on the commercial success of motion pictures and television programs, which is unpredictable. Generally, the popularity of our motion pictures and television programs depends on many factors, including the critical acclaim they receive, the format of their initial release (for example, theatrical or direct-to-video), their actors and other key talent, their genre and their specific subject matter, audience reaction, the quality and acceptance of motion pictures or programs that our competitors release into the marketplace at or near the same time, critical reviews, the availability of alternative forms of entertainment and leisure activities, general economic conditions and other tangible and intangible factors, many of which we do not control and all of which may change. We cannot predict the future effects of these factors with certainty. In addition, because a motion picture's or television program's performance in ancillary markets, such as home video and pay and free television, is often directly related to its box office performance or television ratings, poor box office results or poor television ratings may negatively affect future revenue streams. Our success will depend on the experience and judgment of our management to select and develop new investment and production opportunities. We cannot make assurances that our motion pictures and television programs will obtain favorable reviews or ratings, that our motion pictures will perform well at the box office or in ancillary markets or that broadcasters will license the rights to broadcast any of our television programs in development or renew licenses to broadcast programs in our library. The failure to achieve any of the foregoing could have a material adverse effect on our business, financial condition, operating results, liquidity and prospects.

Global economic turmoil and regional economic conditions in the U.S. could adversely affect our business. Global economic turmoil may cause a general tightening in the credit markets, lower levels of liquidity, increases in the rates of default and bankruptcy, levels of intervention from the U.S. federal government and other foreign governments, decreased consumer confidence, overall slower economic activity and extreme volatility in credit, equity and fixed income markets. A decrease in economic activity in the U.S. or in other regions of the world in which we do business could adversely affect demand for our films, thus reducing our revenues and earnings. A decline in economic conditions could reduce performance of our theatrical, television and home entertainment releases. In addition, an increase in price levels generally, could result in a shift in consumer demand away from the entertainment we offer, which could also adversely affect our revenues and, at the same time, increase our costs. Moreover, financial institution failures may cause us to incur increased expenses or make it more difficult to finance any future acquisitions, or engage in other financing activities. We cannot predict the timing or the duration of any downturn in the economy and we are not immune to the effects of general worldwide economic conditions.

Licensed distributors' failure to promote our programs may adversely affect our business. We generally do not control the timing and manner in which our licensed distributors distribute our motion pictures or television programs; their decisions regarding the timing of release and promotional support are important in determining success. Any decision by those distributors not to distribute or promote one of our motion pictures, television programs or related products or to promote our competitors' motion pictures, television programs or related products to a greater extent than they promote ours could have a material adverse effect on our business, financial condition, operating results, liquidity and prospects.

We could be adversely affected by strikes or other union job actions. We are directly or indirectly dependent upon highly specialized union members who are essential to the production of motion pictures and television programs. A strike by, or a lockout of, one or more of the unions that provide personnel essential to the production of motion pictures or television programs could delay or halt our ongoing production activities, or could cause a delay or interruption in our release of new motion pictures and television programs, which could have a material adverse effect on our business, financial condition, operating results, liquidity and prospects.

We face substantial competition in all aspects of our business.

We are smaller and less diversified than many of our competitors. Unlike us, an independent distributor and producer, most of the major U.S. studios are part of large diversified corporate groups with a variety of other operations, including television networks and cable channels that can provide both the means of distributing their products and stable sources of earnings that may allow them to better offset fluctuations in the financial performance of their motion picture and television operations. In addition, the major studios have more resources with which to compete for ideas, storylines and scripts created by third parties as well as for actors, directors and other personnel required for production. The resources of the major studios may also give them an advantage in acquiring other businesses or assets, including film libraries, that we might also be interested in acquiring.

The motion picture industry is highly competitive and at times may create an oversupply of motion pictures in the market. The number of motion pictures released by our competitors, particularly the major studios, may create an oversupply of product in the market, reduce our share of box office receipts and make it more difficult for our films to succeed commercially. The limited supply of motion picture screens compounds this product oversupply problem. Oversupply may become most pronounced during peak release times, such as school holidays and national holidays, when theater attendance is expected to be highest. As a result

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of changes in the theatrical exhibition industry, including reorganizations and consolidations, and major studio releases occupying more screens, the number of screens available to us when we want to release a picture may decrease. If the number of motion picture screens decreases, box office receipts, and the correlating future revenue streams, such as from home entertainment and pay and free television, of our motion pictures may also decrease. Moreover, we cannot guarantee that we can release all of our films when they are otherwise scheduled due to production or other delays, or a change in the schedule of a major studio. Any such change could adversely impact a film's financial performance. In addition, if we cannot change our schedule after such a change by a major studio because we are too close to the release date, the major studio's release and its typically larger promotion budget may adversely impact the financial performance of our film.

We must successfully respond to rapid technological changes and alternative forms of delivery or storage to remain competitive.

The entertainment industry in general continues to undergo significant developments as advances in technologies and new methods of product delivery and storage, or certain changes in consumer behavior driven by these developments emerge. Consumers are spending an increasing amount of time on the internet and on mobile devices, and are increasingly viewing content on a time-delayed or on-demand basis from the internet, on their televisions and on handheld or portable devices. We and our distributors must adapt our businesses to changing consumer behavior and preferences and exploit new distribution channels. If we cannot successfully exploit these and other emerging technologies, it could have a material adverse effect on our business, financial condition, operating results, liquidity and prospects.

We face risks from doing business internationally.

We distribute motion picture and television productions outside the U.S., in the United Kingdom and Ireland through Lionsgate UK, and through various output agreements and third party licensees elsewhere, and derive revenues from these sources. As a result, our business is subject to certain risks inherent in international business, many of which are beyond our control. These risks include:

laws and policies affecting trade, investment and taxes, including laws and policies relating to the repatriation of funds and withholding taxes, and changes in these laws;
the Foreign Corrupt Practices Act and similar laws regulating interactions and dealings with foreign government officials;
changes in local regulatory requirements, including restrictions on content; differing cultural tastes and attitudes;
differing degrees of protection for intellectual property;
financial instability and increased market concentration of buyers in foreign television markets, including in European pay television markets;
the instability of foreign economies and governments;
fluctuating foreign exchange rates;
the spread of communicable diseases in such jurisdictions, which may impact business in such jurisdictions; and
war and acts of terrorism.

Events or developments related to these and other risks associated with international trade could adversely affect our revenues from non-U.S. sources, which could have a material adverse effect on our business, financial condition, operating results, liquidity and prospects.

Protecting and defending against intellectual property claims may have a material adverse effect on our business.

Our ability to compete depends, in part, upon successful protection of our intellectual property. We attempt to protect proprietary and intellectual property rights to our productions through available copyright and trademark laws and licensing and distribution arrangements with reputable international companies in specific territories and media for limited durations. Despite these precautions, existing copyright and trademark laws afford only limited practical protection in certain countries where we distribute our products. As a result, it may be possible for unauthorized third parties to copy and distribute our productions or certain portions or applications of our intended productions, which could have a material adverse effect on our business, financial condition, operating results, liquidity and prospects.

Litigation may also be necessary to enforce our intellectual property rights, to protect our trade secrets, or to determine the validity and scope of the proprietary rights of others or to defend against claims of infringement or invalidity. Any such litigation, infringement or invalidity claims could result in substantial costs and the diversion of resources and could have a material adverse effect on our business, financial condition, operating results, liquidity and prospects. We cannot assure you that infringement or invalidity claims will not materially adversely affect our business, financial condition, operating results, liquidity and prospects.


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Our more successful and popular film or television products or franchises may experience higher levels of infringing activity, particularly around key release dates. Alleged infringers have claimed and may claim that their products are permitted under fair use or similar doctrines, that they are entitled to compensatory or punitive damages because our efforts to protect our intellectual property rights are illegal or improper, and that our key trademarks or other significant intellectual property are invalid. Such claims, even if meritless, may result in adverse publicity or costly litigation. We vigorously defend our copyrights and trademarks from infringing products and activity, which can result in litigation. We may receive unfavorable preliminary or interim rulings in the course of litigation, and there can be no assurance that a favorable final outcome will be obtained in all cases. Regardless of the validity or the success of the assertion of any such claims, we could incur significant costs and diversion of resources in enforcing our intellectual property rights or in defending against such claims, which could have a material adverse effect on our business, financial condition, operating results, liquidity and prospects.

Others may assert intellectual property infringement claims against us.

One of the risks of the film and television production business is the possibility that others may claim that our productions and production techniques misappropriate or infringe the intellectual property rights of third parties with respect to their previously developed films and televisions series, stories, characters, other entertainment or intellectual property. Irrespective of the validity or the successful assertion of such claims, we could incur significant costs and diversion of resources in defending against them, which could have a material adverse effect on our business, financial condition, operating results, liquidity and prospects.

Our business involves risks of liability claims for media content, which could adversely affect our business, results of operations and financial condition.

As a distributor of media content, we may face potential liability for:

defamation;
invasion of privacy;
negligence;
copyright or trademark infringement (as discussed above); and
other claims based on the nature and content of the materials distributed.

These types of claims have been brought, sometimes successfully, against producers and distributors of media content. Any imposition of liability that is not covered by insurance or is in excess of insurance coverage could have a material adverse effect on our business, financial condition, operating results, liquidity and prospects.

Piracy of motion pictures may reduce the gross receipts from the exploitation of our films.

Motion picture piracy is extensive in many parts of the world, including South America, Asia, and certain Eastern European countries, and is made easier by technological advances and the conversion of motion pictures into digital formats. This trend facilitates the creation, transmission and sharing of high quality unauthorized copies of motion pictures in theatrical release on DVDs, Blu-ray discs, from pay-per-view through set-top boxes and other devices and through unlicensed broadcasts on free television and the internet. The proliferation of unauthorized copies of these products has had and will likely continue to have an adverse effect on our business, because these products reduce the revenue we receive from our products. Additionally, in order to contain this problem, we may have to implement elaborate and costly security and anti-piracy measures, which could result in significant expenses and losses of revenue. We cannot assure you that even the highest levels of security and anti-piracy measures will prevent piracy.

In particular, unauthorized copying and piracy are prevalent in countries outside of the U.S., Canada and Western Europe, whose legal systems may make it difficult for us to enforce our intellectual property rights. While the U.S. government has publicly considered implementing trade sanctions against specific countries that, in its opinion, do not make appropriate efforts to prevent copyright infringements of U.S. produced motion pictures, there can be no assurance that any such sanctions will be enacted or, if enacted, will be effective. In addition, if enacted, such sanctions could impact the amount of revenue that we realize from the international exploitation of motion pictures. If no embargoes or sanctions are enacted, or if other measures are not taken, we may lose revenue as a result of motion picture piracy.

We face cybersecurity and similar risks, which could result in the disclosure of confidential information, disruption of our businesses, damage to our brands and reputation, legal exposure and financial losses.

Our online, mobile and app offerings, as well as our internal systems, involve the storage and transmission of our proprietary and personal information, and we and our partners rely on various technology systems in connection with the production and distribution

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of programming. Although we monitor our security measures regularly, they may be breached due to employee error, computer malware, viruses, hacking and phishing attacks, or otherwise. Additionally, outside parties may attempt to fraudulently induce employees or users to disclose sensitive or confidential information in order to gain access to our data. Because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and often are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. Any such breach or unauthorized access could result in a loss of our proprietary information, a disruption of our distribution business or a reduction of the revenues we are able to generate from such distribution, damage to our brands and reputation, and significant legal and financial exposure, including from regulatory or consumer actions related to consumer data collection and other data privacy concerns, each of which could potentially have an adverse effect on our business.

Our success depends on certain key employees.

Our success depends to a significant extent on the performance of a number of senior management personnel and other key employees, including production and creative personnel. We do not currently have significant “key person” life insurance policies for any of our employees. We have entered into employment agreements with our top executive officers and production executives. However, although it is standard in the motion picture industry to rely on employment agreements as a method of retaining the services of key employees, these agreements cannot assure us of the continued services of such employees. In addition, competition for the limited number of business, production and creative personnel necessary to create and distribute our entertainment content is intense and may grow in the future. Our inability to retain or successfully replace, where necessary, members of our senior management and other key employees could have a material adverse effect on our business, financial condition, operating results, liquidity and prospects.

To be successful, we need to attract and retain qualified personnel.

Our success continues to depend to a significant extent on our ability to identify, attract, hire, train and retain qualified professional, creative, technical and managerial personnel. Competition for the caliber of talent required to produce and distribute our motion pictures and television programs continues to increase. We cannot assure you that we will be successful in identifying, attracting, hiring, training and retaining such personnel in the future. If we were unable to hire, assimilate and retain qualified personnel in the future, such inability would have a material adverse effect on our business, financial condition, operating results, liquidity and prospects.

While we believe we currently have adequate internal control over financial reporting, we are required to assess our internal control over financial reporting on an annual basis and any future adverse results from such assessment could result in a loss of investor confidence in our financial reports and have an adverse effect on our securities.

Section 404 of the Sarbanes-Oxley Act of 2002 and the accompanying rules and regulations promulgated by the SEC to implement it, require us to include in our Annual Report on Form 10-K an annual report by our management regarding the effectiveness of our internal control over financial reporting. The report includes, among other things, an assessment of the effectiveness of our internal control over financial reporting as of the end of our fiscal year. This assessment must include disclosure of any material weaknesses in our internal control over financial reporting identified by management. During this process, if our management identifies one or more material weaknesses in our internal control over financial reporting that cannot be remediated in a timely manner, we will be unable to assert such internal control is effective. While we currently believe our internal control over financial reporting is effective, the effectiveness of our internal controls in future periods is subject to the risk that our controls may become inadequate because of changes in conditions, and, as a result, the degree of compliance of our internal control over financial reporting with the applicable policies or procedures may deteriorate. If we are unable to conclude that our internal control over financial reporting is effective (or if our independent auditors disagree with our conclusion), we could lose investor confidence in the accuracy and completeness of our financial reports, which would have an adverse effect on our securities.

Changes in, or interpretations of, tax rules and regulations, and changes in geographic operating results, may adversely affect our effective tax rates.

We are subject to income taxes in the U.S. and foreign tax jurisdictions. We also conduct business and financing activities between our entities in various jurisdictions and we are subject to complex transfer pricing regulations in the countries in which we operate. Although uniform transfer pricing standards are emerging in many of the countries in which we operate, there is still a relatively high degree of uncertainty and inherent subjectivity in complying with these rules. Our future effective tax rates could be affected by changes in tax laws or the interpretation of tax laws, by changes in the amount of revenue or earnings that we derive from international sources in countries with high or low statutory tax rates, or by changes in the valuation of our deferred tax assets and liabilities. Unanticipated changes in our tax rates could affect our future results of operations.

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In addition, we may be subject to examination of our income tax returns by federal, state, and foreign tax jurisdictions. We regularly assess the likelihood of outcomes resulting from possible examinations to determine the adequacy of our provision for income taxes. In making such assessments, we exercise judgment in estimating our provision for income taxes. While we believe our estimates are reasonable, we cannot assure you that final determinations from any examinations will not be materially different from those reflected in our historical income tax provisions and accruals. Any adverse outcome from any examinations may have an adverse effect on our business and operating results, which could cause the market price of our securities to decline.

As of March 31, 2014, we concluded that it was more likely than not that our deferred tax assets were realizable and that a significant portion of the related valuation allowance previously established was no longer needed. This conclusion was based upon our expectation of sufficient future taxable income to fully utilize these assets. Based on our current assessment, we continue to believe that substantially all of our deferred tax assets will be realized. There is no assurance that we will attain our future expected levels of taxable income or that a valuation allowance against new or existing deferred tax assets will not be necessary in the future.

We incur costs and demands upon management as a result of complying with the laws and regulations affecting public companies.

We have incurred, and will continue to incur, significant legal, accounting and other expenses associated with corporate governance and public company reporting requirements, including requirements under the Sarbanes-Oxley Act of 2002, as well as rules implemented by the SEC and the New York Stock Exchange (the “NYSE”). These rules and regulations, which require significant legal and financial compliance costs, may make it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage than was previously available. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our Board of Directors or as our executive officers.

Certain shareholders own a majority of our outstanding common shares.

As of May 11, 2015, five of our shareholders beneficially owned an aggregate of 70,362,773 of our common shares, or approximately 47.6% of the outstanding shares. In addition, one of these shareholders, Mark H. Rachesky, M.D., the beneficial owner of approximately 27.3% of our outstanding common shares, currently serves as the Chairman of our Board of Directors. Accordingly, these five shareholders, collectively, have the power to exercise substantial influence over us and on matters requiring approval by our shareholders, including the election of directors, the approval of mergers and other significant corporate transactions. This concentration of ownership may make it more difficult for other shareholders to effect substantial changes in our company and may also have the effect of delaying, preventing or expediting, as the case may be, a change in control of our company.

Sales of a substantial number of shares of our common shares, or the perception that such sales might occur, could have an adverse effect on the price of our common shares, and therefore our ability to raise additional capital to fund our operations.

As of May 11, 2015, approximately 38.5% of our common shares were held beneficially by certain individuals and institutional investors who each had ownership of equal to or greater than 5% of our common shares. We also filed a resale registration statement to enable certain shareholders who received our common shares in connection with our acquisition of Summit Entertainment in January 2012 and certain holders of debt convertible into our common shares, to resell our common shares. Sales by such individuals and institutional investors of a substantial number of shares of our common shares into the public market, or the perception that such sales might occur, could have an adverse effect on the price of our common shares, which could materially impair our ability to raise capital through the sale of common shares or debt that is convertible into our common shares.

Our online activities are subject to a variety of laws and regulations relating to privacy and child protection, which, if violated, could subject us to an increased risk of litigation and regulatory actions.

In addition to our company websites and applications, we use third-party applications, websites, and social media platforms to promote our projects and engage consumers, as well as monitor and collect certain information about users of our online forums. A variety of laws and regulations have been adopted in recent years aimed at protecting children using the internet such as the Children's Online Privacy and Protection Act of 1998 (“COPPA”). COPPA sets forth, among other things, a number of restrictions on what website operators can present to children under the age of 13 and what information can be collected from them. There are also a variety of laws and regulations governing individual privacy and the protection and use of information collected from such individuals, particularly in relation to an individual's personally identifiable information (e.g., credit card numbers). Many foreign countries have adopted similar laws governing individual privacy, including safeguards which relate to the interaction with children. If our online activities were to violate any applicable current or future laws and regulations, we could be subject to litigation and regulatory actions, including fines and other penalties.

28



Any decisions to reduce or discontinue paying cash dividends to our shareholders or repurchase our common shares pursuant to our previously announced share repurchase program could cause the market price for our common shares to decline.

Our payment of quarterly cash dividends and repurchases of our common shares pursuant to our share purchase program will be subject to, among other things, our financial position and results of operations, available cash and cash flow, capital requirements, and other factors. Any reduction or discontinuance by us of the payment of quarterly cash dividends or repurchases of our common shares pursuant to our share repurchase program could cause the market price of our common shares to decline. Moreover, in the event our payment of quarterly cash dividends or repurchases of our common shares are reduced or discontinued, our failure or inability to resume paying cash dividends or repurchasing our common shares at historical levels could result in a lower market valuation of our common shares.

ITEM 1B. UNRESOLVED STAFF COMMENTS.
Not applicable.

ITEM 2. PROPERTIES.

Our corporate office is located at 250 Howe Street, 20th Floor, Vancouver, BC V6C 3R8. Our principal executive offices are located at 2700 Colorado Avenue, Suite 200, Santa Monica, California, 90404. At the Santa Monica address, we occupy approximately 159,058 square feet. Our lease expires in August 2023. In Santa Monica, California, we also lease a 4,389 square foot space, a 30,107 square foot space, and a 9,123 square foot space (which leases expire in March 2016, and June 2016, and March 2017 respectively). In New York, we currently occupy approximately 7,803 square feet as per a lease that expires in August 2022.

We believe that our current facilities are adequate to conduct our business operations for the foreseeable future. We believe that we will be able to renew these leases on similar terms upon expiration. If we cannot renew, we believe that we could find other suitable premises without any material adverse impact on our operations.

ITEM 3. LEGAL PROCEEDINGS.

From time to time, the Company is involved in certain claims and legal proceedings arising in the normal course of business. While the resolution of these matters cannot be predicted with certainty, we do not believe, based on current knowledge, that the outcome of any currently pending legal proceedings in which the Company is currently involved will have a material adverse effect on the Company's consolidated financial position, results of operations or cash flow.

For a discussion of certain claims and legal proceedings, see Note 15 - Commitments and Contingencies to our consolidated financial statements, which discussion is incorporated by reference into this Part I, Item 3, Legal Proceedings.


ITEM 4. MINE SAFETY DISCLOSURES.

Not Applicable.


29


PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Market Information
Our common shares are listed on the NYSE under the symbol “LGF.”

As of May 11, 2015, the closing price of our common shares on the NYSE was $30.56.
The following table presents the high and low sale prices of our common shares on the NYSE for each period, based on inter-dealer prices that do not include retail mark-ups, mark-downs or commissions, and cash dividends declared for each period:
Common shares (per share)
 
 
 
 
 
 
Market prices
 
Dividends Declared
2016 fiscal year
High
 
Low
 
First quarter (through May 11, 2015)
$
34.38

 
$
30.35

 
$

2015 fiscal year
High
 
Low
 
Dividends Declared
Fourth quarter
$
34.87

 
$
27.55

 
$
0.07

Third quarter
35.75

 
29.00

 
0.07

Second quarter
34.15

 
27.46

 
0.07

First quarter
29.82

 
24.80

 
0.05

2014 fiscal year
High
 
Low
 
Dividends Declared
Fourth quarter
$
33.99

 
$
24.54

 
$
0.05

Third quarter
37.75

 
27.93

 
0.05

Second quarter
37.81

 
27.66

 

First quarter
30.57

 
22.25

 


Holders
As of May 11, 2015, there were approximately 612 shareholders of record.

Dividends
The Company declared a quarterly dividend of $0.05, $0.07, $0.07 and $0.07 per share of common shares for the four quarters of the year ended March 31, 2015, respectively. The most recent dividend is payable May 22, 2015 to shareholders of record as of March 31, 2015. We expect to pay quarterly dividends each quarter; however, the amount of dividends, if any, that we pay to our shareholders is determined by our Board of Directors, at its discretion, and is dependent on a number of factors, including our financial position, results of operations, cash flows, capital requirements and restrictions under our credit agreements, and shall be in compliance with applicable law. We cannot guarantee the amount of dividends paid in the future, if any.
Lions Gate is also limited in its ability to pay dividends on its common shares by restrictions under the Business Corporations Act (British Columbia) relating to the solvency of Lions Gate before and after the payment of a dividend and by the terms of its credit facility and indentures governing certain of its notes.

Securities Authorized for Issuance Under Equity Compensation Plans

The information required by this item is incorporated by reference to our Proxy Statement for our 2015 Annual General Meeting of Stockholders to be filed with the SEC within 120 days after the end of the fiscal year ended March 31, 2015.


30


Taxation

The following is a general summary of certain Canadian federal income tax consequences to U.S. Holders (who, at all relevant times, deal at arm's length with the Company) of the purchase, ownership and disposition of common shares. For the purposes of this Canadian income tax discussion, a “U.S. Holder” means a holder of common shares who (1) for the purposes of the Income Tax Act (Canada) (the "ITA") is not, has not, and will not be, or deemed to be, resident in Canada at any time while he, she or it holds common shares, (2) at all relevant times is a resident of the United States under the Canada-United States Tax Convention (1980) (the “Convention”) and is eligible for benefits under the Convention, (3) is not a “foreign affiliate” as defined in the ITA of a person resident in Canada, and (4) does not and will not use or be deemed to use the common shares in carrying on a business in Canada. This summary does not apply to a U.S. Holder that is an insurer or an “authorized foreign bank” within the meaning of the ITA. Such U.S. Holders should seek tax advice from their advisors.

This summary is not intended to be, and should not be construed to be, legal or tax advice to any prospective investor and no representation with respect to the tax consequences to any particular investor is made. The summary does not address any aspect of any provincial, state or local tax laws or the tax laws of any jurisdiction other than Canada or the tax considerations applicable to non-U.S. Holders. Accordingly, prospective investors should consult with their own tax advisors for advice with respect to the income tax consequences to them having regard to their own particular circumstances, including any consequences of an investment in common shares arising under any provincial, state or local tax laws or the tax laws of any jurisdiction other than Canada.

This summary is based upon the current provisions of the ITA, the regulations thereunder and the proposed amendments thereto publicly announced by the Department of Finance, Canada before the date hereof and our understanding of the current published administrative policies and assessing practices of the Canada Revenue Agency published in writing prior to the date hereof. No assurance may be given that any proposed amendment will be enacted in the form proposed, if at all. This summary does not otherwise take into account or anticipate any changes in law, whether by legislative, governmental or judicial action.

The following summary applies only to U.S. Holders who hold their common shares as capital property. In general, common shares will be considered capital property of a holder where the holder is neither a trader nor dealer in securities, does not hold the common shares in the course of carrying on a business and is not engaged in an adventure in the nature of trade in respect thereof. This summary does not apply to a U.S. Holder that is a “financial institution” within the meaning of the mark-to-market rules contained in the ITA or to holders who have entered into a “derivative forward agreement” or a “synthetic disposition arrangement” as these terms are defined in the ITA.

Amounts in respect of common shares paid or credited or deemed to be paid or credited as, on account or in lieu of payment of, or in satisfaction of, dividends to a shareholder who is not a resident of Canada within the meaning of the ITA will generally be subject to Canadian non-resident withholding tax. Canadian withholding tax applies to dividends that are formally declared and paid by the Company and also to deemed dividends that may be triggered by a cancellation of common shares if the cancellation occurs otherwise than as a result of a simple open market transaction. For either deemed or actual dividends, withholding tax is levied at a basic rate of 25%, which may be reduced pursuant to the terms of an applicable tax treaty between Canada and the country of residence of the non-resident shareholder. Under the Convention, the rate of Canadian non-resident withholding tax on the gross amount of dividends received by a U.S. Holder, which is the beneficial owner of such dividends, is generally 15%. However, where such beneficial owner is a company that owns at least 10% of the voting shares of the company paying the dividends, the rate of such withholding is 5%.

In addition to the Canadian withholding tax on actual or deemed dividends, a U.S. Holder also needs to consider the potential application of Canadian capital gains tax. A U.S. Holder will generally not be subject to tax under the ITA in respect of any capital gain arising on a disposition of common shares (including, generally, on a purchase by the Company on the open market) unless at the time of disposition such shares constitute taxable Canadian property of the holder for purposes of the ITA and such U.S. Holder is not entitled to relief under the Convention. If the common shares are listed on a designated stock exchange (which includes the NYSE) at the time they are disposed of, they will generally not constitute taxable Canadian property of a U.S. Holder unless, at any time during the 60-month period immediately preceding the disposition of the common shares, the U.S. Holder, persons with whom he, she or it does not deal at arm's length, or the U.S. Holder together with such non-arm's length persons, owned 25% or more of the issued shares of any class or series of the capital stock of the Company and at any time during the immediately preceding 60-month period, the shares derived their value principally from one or any combination of (i) real or immovable property situated in Canada, (ii) Canadian resource properties, (iii) timber resource properties, and (iv) options in respect of, or interests in, such properties. Assuming that the common shares have never derived their value principally from any of the items listed in (i)-(iv) above, capital gains derived by a U.S. Holder from the disposition of common shares will generally not be subject to tax in Canada.


31


Issuer Purchases of Equity Securities

On May 31, 2007, our Board of Directors authorized the repurchase of up to $50 million of our common shares. On each of May 29, 2008 and November 6, 2008, our Board of Directors authorized additional repurchases up to an additional $50 million of our common shares. Thereafter, on December 17, 2013, our Board of Directors authorized the Company to further increase its stock repurchase plan to $300 million. To date, approximately $210.1 million of the Company’s common shares have been purchased, leaving approximately $89.9 million of authorized potential purchases. The remaining $89.9 million of the Company’s common shares may be purchased from time to time at the Company’s discretion, including quantity, timing and price thereof, and will be subject to market conditions. Such purchases will be structured as permitted by securities laws and other legal requirements.

During the period from the authorization date through March 31, 2015, 5,342,218 common shares have been repurchased at a cost of approximately $144.8 million, including commission costs. The share repurchase program has no expiration date.

The following table sets forth information with respect to our common shares purchased by us during the three months ended March 31, 2015:

ISSUER PURCHASES OF EQUITY SECURITIES
Period
(a) Total Number of Shares Purchased
 
(b) Average Price Paid per Share
 
(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
 
(d) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
January 1, 2015 - January 31, 2015
431,918

 
$
29.81

 
431,918

 
$
89,931,883

February 1, 2015 - February 28, 2015

 

 

 

March 1, 2015 - March 31, 2015

 

 

 

Total
431,918

 
$
29.81

 
431,918

 
$
89,931,883


Additionally, during the three months ended March 31, 2015, 110,343 common shares were withheld upon the vesting of restricted share units and share issuances to satisfy minimum statutory federal, state and local tax withholding obligations.
Stock Performance Graph

The following graph compares our cumulative total shareholder return with those of the NYSE Composite Index and the S&P Movies & Entertainment Index for the period commencing March 31, 2010 and ending March 31, 2015. All values assume that $100 was invested on March 31, 2010 in our common shares and each applicable index and all dividends were reinvested.

The comparisons shown in the graph below are based on historical data and we caution that the stock price performance shown in the graph below is not indicative of, and is not intended to forecast, the potential future performance of our common shares.

32


 
 
3/10
 
3/11
 
3/12
 
3/13
 
3/14
 
3/15
Lions Gate Entertainment Corporation
 
100.00

 
100.16

 
223.08

 
380.93

 
429.88

 
550.04

NYSE Composite
 
100.00

 
115.43

 
115.55

 
131.73

 
156.07

 
165.47

S&P Movies & Entertainment
 
100.00

 
124.54

 
132.96

 
189.08

 
246.68

 
300.40

_______

The graph and related information are being furnished solely to accompany this Form 10-K pursuant to Item 201(e) of Regulation S-K. They shall not be deemed “soliciting materials” or to be “filed” with the SEC (other than as provided in Item 201), nor shall such information be incorporated by reference into any future filing under the Securities Act or the Exchange Act, except to the extent that we specifically incorporate it by reference into such filing.

ITEM 6. SELECTED FINANCIAL DATA.
The consolidated financial statements for all periods presented in this Form 10-K are prepared in conformity with U.S. GAAP.
The Selected Consolidated Financial Data below includes the results of Summit Entertainment from its acquisition date of January 13, 2012 onwards. The Selected Consolidated Financial Data below also includes the results of Maple Pictures from the date of consolidation of July 18, 2007, through the date of sale of August 10, 2011. Due to the acquisition of Summit Entertainment and the consolidation and subsequent sale of our interest in Maple Pictures, the Company’s results of operations for the years ended March 31, 2015, 2014, 2013, 2012, and 2011 and financial positions as at March 31, 2015, 2014, 2013, 2012, and 2011 are not directly comparable to prior reporting periods.

33


 
Year Ended March 31,
 
2015
 
2014
 
2013
 
2012
 
2011
 
(Amounts in thousands, except per share amounts)
Statement of Operations Data:
 
 
 
 
 
 
 
 
 
Revenues
$
2,399,640

 
$
2,630,254

 
$
2,708,141

 
$
1,587,579

 
$
1,582,720

Expenses:
 
 
 
 
 
 
 
 
 
Direct operating
1,315,775

 
1,369,381

 
1,390,569

 
908,402

 
795,746

Distribution and marketing
591,491

 
739,461

 
817,862

 
483,513

 
547,226

General and administration
263,507

 
254,925

 
218,341

 
168,864

 
171,407

Gain on sale of asset disposal group

 

 

 
(10,967
)
 

Depreciation and amortization
6,586

 
6,539

 
8,290

 
4,276

 
5,811

Total expenses
2,177,359

 
2,370,306

 
2,435,062

 
1,554,088

 
1,520,190

Operating income
222,281

 
259,948

 
273,079

 
33,491

 
62,530

Other expenses (income):
 
 
 
 
 
 
 
 
 
Interest expense
 
 
 
 
 
 
 
 
 
Cash interest
39,657

 
48,960

 
75,322

 
62,430

 
38,879

Amortization of debt discount and deferred financing costs
12,819

 
17,210

 
18,258

 
15,681

 
16,301

Total interest expense
52,476

 
66,170

 
93,580

 
78,111

 
55,180

Interest and other income
(2,790
)
 
(6,030
)
 
(4,036
)
 
(2,752
)
 
(1,742
)
Loss on extinguishment of debt
11,664

 
39,572

 
24,089

 
967

 
14,505

Total other expenses, net
61,350

 
99,712

 
113,633

 
76,326

 
67,943

Income (loss) before equity interests and income taxes
160,931

 
160,236

 
159,446

 
(42,835
)
 
(5,413
)
Equity interests income (loss)
52,477

 
24,724

 
(3,075
)
 
8,412

 
(20,712
)
Income (loss) before income taxes
213,408

 
184,960

 
156,371

 
(34,423
)
 
(26,125
)
Income tax provision (benefit)
31,627

 
32,923

 
(75,756
)
 
4,695

 
4,256

Net income (loss)
$
181,781

 
$
152,037

 
$
232,127

 
$
(39,118
)
 
$
(30,381
)
 
 
 
 
 
 
 
 
 
 
Basic net income (loss) per common share
$
1.31

 
$
1.11

 
$
1.73

 
$
(0.30
)
 
$
(0.23
)
Diluted net income (loss) per common share
$
1.23

 
$
1.04

 
$
1.61

 
$
(0.30
)
 
$
(0.23
)
 
 
 
 
 
 
 
 
 
 
Weighted average number of common shares outstanding:
 
 
 
 
 
 
 
 
 
Basic
139,048

 
137,468

 
134,514

 
132,226

 
131,176

Diluted
151,778

 
154,415

 
149,370

 
132,226

 
131,176

 
 
 
 
 
 
 
 
 
 
Dividends declared per common share
$
0.26

 
$
0.10

 
$

 
$

 
$

 
 
 
 
 
 
 
 
 
 
Balance Sheet Data (at end of period):
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
102,697

 
25,692

 
62,363

 
64,298

 
86,419

Investment in films and television programs
1,381,829

 
1,274,573

 
1,244,075

 
1,329,053

 
607,757

Total assets
3,292,089

 
2,851,632

 
2,760,869

 
2,787,995

 
1,569,153

Corporate debt:
 
 
 
 
 
 
 
 
 
Senior revolving credit facility

 
97,619

 
338,474

 
99,750

 
69,750

Other senior debt
600,000

 
447,753

 
432,277

 
909,024

 
226,331

Convertible senior subordinated notes and other financing obligations
114,126

 
131,788

 
87,167

 
108,276

 
110,973

Total liabilities
2,449,802

 
2,267,094

 
2,404,343

 
2,698,210

 
1,430,298

Total shareholders’ equity
842,287

 
584,538

 
356,526

 
89,785

 
138,855



34


ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Overview

Lions Gate Entertainment Corp. (“Lionsgate,” the “Company,” “we,” “us” or “our”) is a premier next generation global content leader with a strong and diversified presence in motion picture production and distribution, television programming and syndication, home entertainment, digital distribution, channel platforms and international distribution and sales. We operate primarily through two reporting segments: Motion Pictures and Television Production.
Revenues
Our revenues are derived from the Motion Pictures and Television Production segments, as described below. Our revenues are derived from the U.S., Canada, the U.K., and other foreign countries. None of the non-U.S. countries individually comprised greater than 10% of total revenues for the years ended March 31, 2015, 2014 and 2013.

Motion Pictures. Our Motion Pictures segment includes revenues derived from the following:
Theatrical. Theatrical revenues are derived from the domestic theatrical release of motion pictures licensed to theatrical exhibitors on a picture-by-picture basis (directly distributed by us in the U.S. and through a sub-distributor in Canada). The revenues from Canada are reported net of distribution fees and release expenses of the Canadian sub-distributor. The financial terms that we negotiate with our theatrical exhibitors in the U.S. generally provide that we receive a percentage of the box office results and are negotiated on a picture-by-picture basis.
Home Entertainment. Home Entertainment revenues are derived from the sale or rental of our film productions and acquired or licensed films (including theatrical and direct-to-video releases) and certain television programs, to retail stores and through digital media platforms. In addition, we have revenue sharing arrangements with certain digital media platforms which generally provide that, in exchange for a nominal or no upfront sales price, we share in the rental or sales revenues generated by the platform on a title-by-title basis. We distribute a library of approximately 16,000 motion picture titles and television episodes and programs. We categorize our Home Entertainment revenue as follows:
Packaged media revenue: Packaged media revenue consists of the sale or rental of DVDs and Blu-ray discs.
Digital media revenue: Digital media revenue consists of revenues generated from pay-per-view and video-on-demand platforms, electronic sell-through (“EST”), and digital rental.
Television. Television revenues are primarily derived from the licensing of our theatrical productions and acquired films to the domestic cable, satellite, and free and pay television markets.
International. International revenues are derived from the licensing of our productions, acquired films, our catalog product and libraries of acquired titles from our international subsidiaries, and revenues from our distribution to international sub-distributors, on a territory-by-territory basis. International revenues also includes revenues from the direct distribution of our productions, acquired films, and our catalog product and libraries of acquired titles in the United Kingdom.
Motion Pictures - Other. Other revenues are derived from, among others, our interactive ventures and games division, our global franchise management and strategic partnerships division, the sales and licensing of music from the theatrical exhibition of our films and the television broadcast of our productions, and from the licensing of our films and television programs to ancillary markets.
Television Production. Our Television Production segment includes revenues derived from the following:
Domestic Television. Domestic television revenues are derived from the licensing and syndication to domestic markets of one-hour and half-hour series, television movies, mini-series and non-fiction programming.
International. International television revenues are derived from the licensing and syndication to international markets of one-hour and half-hour series, television movies, mini-series and non-fiction programming.


35


Home Entertainment. Home entertainment revenues are derived from the sale or rental of television production movies or series to retail stores and through digital media platforms. We distribute a library of approximately 16,000 motion picture titles and television episodes and programs. Home entertainment revenue consists of packaged media revenue and digital media revenue.

Television Production - Other. Other revenues are derived from, among others, product integration in our television episodes and programs, the sales and licensing of music from the television broadcasts of our productions, and from the licensing of our television programs to ancillary markets. For additional information, see Motion Pictures - Other above.
Expenses
Our primary operating expenses include direct operating expenses, distribution and marketing expenses and general and administration expenses.
Direct operating expenses include amortization of film and television production or acquisition costs, participation and residual expenses, provision for doubtful accounts, and foreign exchange gains and losses. Participation costs represent contingent consideration payable based on the performance of the film to parties associated with the film, including producers, writers, directors or actors. Residuals represent amounts payable to various unions or “guilds” such as the Screen Actors Guild, Directors Guild of America, and Writers Guild of America, based on the performance of the film in certain ancillary markets or based on the individual’s (i.e., actor, director, writer) salary level in the television market.
Distribution and marketing expenses primarily include the costs of theatrical “prints and advertising” (“P&A”) and of DVD/Blu-ray duplication and marketing. Theatrical P&A includes the costs of the theatrical prints delivered to theatrical exhibitors and the advertising and marketing cost associated with the theatrical release of the picture. DVD/Blu-ray duplication represents the cost of the DVD/Blu-ray product and the manufacturing costs associated with creating the physical products. DVD/Blu-ray marketing costs represent the cost of advertising the product at or near the time of its release or special promotional advertising.
General and administration expenses include salaries and other overhead.

CRITICAL ACCOUNTING POLICIES
The preparation of our financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates, judgments and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. The application of the following accounting policies, which are important to our financial position and results of operations, requires significant judgments and estimates on the part of management. As described more fully below, these estimates bear the risk of change due to the inherent uncertainty of the estimate. In some cases, changes in the accounting estimates are reasonably likely to occur from period to period. Accordingly, actual results could differ materially from our estimates. To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations will be affected. We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. For a summary of all of our accounting policies, including the accounting policies discussed below, see Note 2 to our consolidated financial statements.
Accounting for Films and Television Programs. We capitalize costs of production and acquisition, including financing costs and production overhead, to investment in films and television programs. These costs for an individual film or television program are amortized and participation and residual costs are accrued to direct operating expenses in the proportion that current year’s revenues bear to management’s estimates of the ultimate revenue at the beginning of the current year expected to be recognized from the exploitation, exhibition or sale of such film or television program. Ultimate revenue includes estimates over a period not to exceed ten years following the date of initial release of the motion picture. For an episodic television series, the period over which ultimate revenues are estimated cannot exceed ten years following the date of delivery of the first episode, or, if still in production, five years from the date of delivery of the most recent episode, if later. For previously released film or television programs acquired as part of a library, ultimate revenue includes estimates over a period not to exceed twenty years from the date of acquisition.
Due to the inherent uncertainties involved in making such estimates of ultimate revenues and expenses, these estimates have differed in the past from actual results and are likely to differ to some extent in the future from actual results. In addition, in the normal course of our business, some films and titles are more successful than anticipated and some are less successful than anticipated. Our management regularly reviews and revises when necessary its ultimate revenue and cost estimates, which may result in a change in the rate of amortization of film costs and participations and residuals and/or write-down of all or a

36


portion of the unamortized costs of the film or television program to its estimated fair value. Our management estimates the ultimate revenue based on experience with similar titles or title genre, the general public appeal of the cast, actual performance (when available) at the box office or in markets currently being exploited, and other factors such as the quality and acceptance of motion pictures or programs that our competitors release into the marketplace at or near the same time, critical reviews, general economic conditions and other tangible and intangible factors, many of which we do not control and which may change.
An increase in the estimate of ultimate revenue will generally result in a lower amortization rate and, therefore, less film and television program amortization expense, while a decrease in the estimate of ultimate revenue will generally result in a higher amortization rate and, therefore, higher film and television program amortization expense, and also periodically results in an impairment requiring a write-down of the film cost to the title’s fair value. These write-downs are included in amortization expense within direct operating expenses in our consolidated statements of operations. Investment in films and television programs is stated at the lower of amortized cost or estimated fair value. The valuation of investment in films and television programs is reviewed on a title-by-title basis, when an event or change in circumstances indicates that the fair value of a film or television program is less than its unamortized cost. In determining the fair value of our films and television programs, we employ a discounted cash flows ("DCF") methodology with assumptions for cash flows. Key inputs employed in the DCF methodology include estimates of a film's ultimate revenue and costs as well as a discount rate. The discount rate utilized in the DCF analysis is based on our weighted average cost of capital plus a risk premium representing the risk associated with producing a particular film or television program. The fair value of any film costs associated with a film or television program that we plan to abandon is zero. As the primary determination of fair value is determined using a DCF model, the resulting fair value is considered a Level 3 measurement (as defined in Note 10 to our consolidated financial statements). Additional amortization is recorded in the amount by which the unamortized costs exceed the estimated fair value of the film or television program. Estimates of future revenue involve measurement uncertainty and it is therefore possible that reductions in the carrying value of investment in films and television programs may be required as a consequence of changes in our future revenue estimates.
Revenue Recognition. Revenue from the theatrical release of feature films is recognized at the time of exhibition based on our participation in box office receipts. Revenue from the sale of DVDs and Blu-ray discs in the retail market, net of an allowance for estimated returns and other allowances, is recognized on the later of receipt by the customer or “street date” (when it is available for sale by the customer). Under revenue sharing arrangements, including digital and EST arrangements, such as download-to-own, download-to-rent, video-on-demand, and subscription video-on-demand, revenue is recognized when we are entitled to receipts and such receipts are determinable. Revenues from television or digital licensing for fixed fees are recognized when the feature film or television program is available to the licensee for telecast. For television licenses that include separate availability “windows” during the license period, revenue is allocated over the “windows.” Revenue from sales to international territories are recognized when access to the feature film or television program has been granted or delivery has occurred, as required under the contract, and the right to exploit the feature film or television program has commenced. For multiple media rights contracts with a fee for a single film or television program where the contract provides for media holdbacks (defined as contractual media release restrictions), the fee is allocated to the various media based on our assessment of the relative fair value of the rights to exploit each media and is recognized as each holdback is released. For multiple-title contracts with a fee, the fee is allocated on a title-by-title basis, based on our assessment of the relative fair value of each title. The primary estimate involving revenue recognition is the estimate of sales returns associated with our revenue from the sale of DVD’s/Blu-ray discs in the retail market which is discussed separately below under the caption “Sales Returns Allowance.”
Sales Returns Allowance. Revenues are recorded net of estimated returns and other allowances. We estimate reserves for DVD/Blu-ray returns based on previous returns experience, point-of-sale data available from certain retailers, current economic trends, and projected future sales of the title to the consumer based on the actual performance of similar titles on a title-by-title basis in each of the DVD/Blu-ray businesses. Factors affecting actual returns include, among other factors, limited retail shelf space at various times of the year, success of advertising or other sales promotions, and the near term release of competing titles. We believe that our estimates have been materially accurate in the past; however, due to the judgment involved in establishing reserves, we may have adjustments to our historical estimates in the future. Our estimate of future returns affects reported revenue and operating income. If we underestimate the impact of future returns in a particular period, then we may record less revenue in later periods when returns exceed the estimated amounts. If we overestimate the impact of future returns in a particular period, then we may record additional revenue in later periods when returns are less than estimated. An incremental change of 1% in our estimated sales returns rate (i.e., provisions for returns divided by gross sales of related product) for home entertainment products would have had an impact of approximately $6.6 million, $8.6 million and $9.8 million on our total revenue in the fiscal years ended March 31, 2015, 2014, and 2013, respectively.
Provisions for Accounts Receivable. We estimate provisions for accounts receivable based on historical experience and relevant facts and information regarding the collectability of the accounts receivable. In performing this evaluation, significant

37


judgments and estimates are involved, including an analysis of specific risks on a customer-by-customer basis for our larger customers and an analysis of the length of time receivables have been past due. The financial condition of a given customer and its ability to pay may change over time or could be better or worse than anticipated and could result in an increase or decrease to our allowance for doubtful accounts, which is recorded in other direct operating expenses.
Income Taxes. We are subject to federal and state income taxes in the U.S. and in several foreign jurisdictions. We record deferred tax assets related to net operating loss carryforwards and certain temporary differences, net of applicable reserves. We recognize a future tax benefit to the extent that realization of such benefit is more likely than not, otherwise a valuation allowance is applied. In order to realize the benefit of our deferred tax assets, we will need to generate sufficient taxable income in the future. In previous years, we had historically provided a full valuation allowance against our net deferred tax assets because of our historical operating losses. Due to the profitability achieved in our fiscal year ended March 31, 2013, which resulted in a cumulative positive three year pre-tax income, and our current projections of profitability in the next few years, we determined that it was more likely than not that we will realize the benefit of certain of our deferred tax assets, including our net operating loss carryforwards, and, accordingly, the valuation allowance related to those assets was reversed as of March 31, 2013. In addition, due to certain financing transactions in the year ended March 31, 2014, we determined that it was more likely than not that we will realize the benefit of certain of our deferred tax assets in our Canadian tax jurisdiction, and accordingly, the valuation allowance related to those assets was reversed during the year ended March 31, 2014. However, the assessment as to whether there will be sufficient taxable income to realize our net deferred tax assets is an estimate which could change in the future depending primarily upon the actual performance of our Company. We will be required to continually evaluate the more likely than not assessment that our net deferred tax assets will be realized, and if operating results deteriorate, we may need to reestablish all or a portion of the valuation allowance through a charge to our income tax provision. Our net unreserved deferred tax assets at March 31, 2015 amounted to $50.1 million.
Our effective tax rates are affected by many factors, including the overall level of pre-tax income, the mix of pre-tax income generated across the various jurisdictions in which we operate, changes in tax laws and regulations in those jurisdictions, changes in valuation allowances on our deferred tax assets, tax planning strategies available to us and other discrete items. A 1% change in our effective income tax rate, excluding discrete items, would result in an increase or decrease in our income tax expense of approximately $2.1 million for the year ended March 31, 2015.
Goodwill. Goodwill is reviewed for impairment each fiscal year or between the annual tests if an event occurs or circumstances change that indicate it is more likely than not that the fair value of a reporting unit is less than its carrying value. We perform our annual impairment test as of January 1 in each fiscal year. We performed our last annual impairment test on our goodwill as of January 1, 2015 by first assessing qualitative factors to determine whether it was necessary to perform the two-step annual goodwill impairment test. Based on our qualitative assessments, including but not limited to, the results of our most recent quantitative impairment test, consideration of macroeconomic conditions, industry and market conditions, cash flows, and changes in our share price, we concluded that it was more likely than not that the fair value of our reporting units was greater than their carrying value.
Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board ("FASB") issued an accounting standard update relating to the recognition of revenue from contracts with customers, which will supersede most current U.S. GAAP revenue recognition guidance, including industry-specific guidance. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration for which the entity expects to be entitled in exchange for those goods or services. The new revenue recognition standard provides a five-step analysis of transactions to determine when and how revenue is recognized. The guidance, as currently issued, will be effective for our fiscal year beginning April 1, 2017, and can be applied either retrospectively or under a cumulative-effect transition method. We are currently evaluating the impact that the adoption of this new guidance will have on our consolidated financial statements.
In April 2015, the FASB issued an accounting standards update relating to the presentation of debt issuance costs. The accounting update requires companies to present debt issuance costs related to a recognized debt liability presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts, rather than as an asset.  The guidance is effective for our fiscal year beginning April 1, 2016, with early adoption permitted. We are planning to adopt the new guidance effective April 1, 2016. The adoption of this guidance is not expected to have a material impact on our consolidated financial statements.



38


RESULTS OF OPERATIONS
Fiscal 2015 Compared to Fiscal 2014
The following table sets forth segment information by business unit, and as a percentage of segment revenues, for the fiscal years ended March 31, 2015 and 2014:
 
Year Ended March 31,
 
 
 
2015
 
2014
 
Increase (Decrease)
 
Amount
 
% of Segment Revenues
 
Amount
 
% of Segment Revenues
 
Amount
 
Percent
 
(Amounts in millions)
 
 
Segment revenues(1)
 
 
 
 
 
 
 
 
 
 
 
Motion Pictures
$
1,820.1

 
 
 
$
2,182.9

 
 
 
$
(362.8
)
 
(16.6
)%
Television Production
579.5

 
 
 
447.4

 
 
 
132.1

 
29.5
 %
 
$
2,399.6

 
 
 
$
2,630.3

 
 
 
$
(230.7
)
 
(8.8
)%
Direct operating expenses
 
 
 
 
 
 
 
 
 
 
 
Motion Pictures
$
827.5

 
45.5
%
 
$
981.1

 
44.9
%
 
$
(153.6
)
 
(15.7
)%
Television Production
488.2

 
84.2

 
388.3

 
86.8

 
99.9

 
25.7
 %
 
$
1,315.7

 
54.8
%
 
$
1,369.4

 
52.1
%
 
$
(53.7
)
 
(3.9
)%
Distribution and marketing
 
 
 
 
 
 
 
 
 
 
 
Motion Pictures
$
555.4

 
30.5
%
 
$
710.0

 
32.5
%
 
$
(154.6
)
 
(21.8
)%
Television Production
36.1

 
6.2

 
29.5

 
6.6

 
6.6

 
22.4
 %
 
$
591.5

 
24.6
%
 
$
739.5

 
28.1
%
 
$
(148.0
)
 
(20.0
)%
Gross segment contribution
 
 
 
 
 
 
 
 
 
 
 
Motion Pictures
$
437.3

 
24.0
%
 
$
491.8

 
22.5
%
 
$
(54.5
)
 
(11.1
)%
Television Production
55.1

 
9.5

 
29.6

 
6.6

 
25.5

 
86.1
 %
 
$
492.4

 
20.5
%
 
$
521.4

 
19.8
%
 
$
(29.0
)
 
(5.6
)%
_________________________________________
(1)
Our largest component of revenue comes from home entertainment. The following table sets forth total home entertainment revenue for both the Motion Pictures and Television Production reporting segments for the fiscal years ended March 31, 2015 and 2014:
 
Year Ended March 31,
 
Increase (Decrease)
 
2015
 
2014
 
Amount
 
Percent
 
 
 
(Amounts in millions)
 
 
Home Entertainment Revenue
 
 
 
 
 
 
 
Motion Pictures
$
662.7

 
$
829.6

 
$
(166.9
)
 
(20.1
)%
Television Production
44.8

 
34.3

 
10.5

 
30.6
 %
 
$
707.5

 
$
863.9

 
$
(156.4
)
 
(18.1
)%
 



39


Motion Pictures Revenue
The table below sets forth the components of revenue and the changes in these components for the Motion Pictures reporting segment for the fiscal years ended March 31, 2015 and 2014.  
 
Year Ended March 31,
 
Increase (Decrease)
 
2015
 
2014
 
Amount
 
Percent
 
(Amounts in millions)
Motion Pictures
 
 
 
 
 
 
 
Theatrical
$
354.0

 
$
524.7

 
$
(170.7
)
 
(32.5
)%
Home Entertainment
662.7

 
829.6

 
(166.9
)
 
(20.1
)%
Television
270.2

 
225.3

 
44.9

 
19.9
 %
International (1)
495.0

 
543.4

 
(48.4
)
 
(8.9
)%
Other
38.2

 
59.9

 
(21.7
)
 
(36.2
)%
 
$
1,820.1

 
$
2,182.9

 
$
(362.8
)
 
(16.6
)%
                                           
(1)
The year ended March 31, 2014 includes a reclassification of Lionsgate UK (previously presented separately) amounting to $146.3 million to the International line item, in order to be consistent with the current fiscal year classification.
Motion Pictures — Theatrical Revenue
The following table sets forth the titles released from our Fiscal 2015 and Fiscal 2014 Theatrical Slates and titles released in other product categories that represented a significant portion of revenue for the fiscal years ended March 31, 2015 and 2014, respectively: 

40


Year Ended March 31,
2015
 
2014
 
Theatrical Release Date
 
 
Theatrical Release Date
Fiscal 2015 Theatrical Slate:
 
 
Fiscal 2014 Theatrical Slate:
 
The Divergent Series: Insurgent
March 2015
 
Divergent
March 2014
The Duff
February 2015
 
The Single Moms Club
March 2014
Mortdecai
January 2015
 
I, Frankenstein
January 2014
The Hunger Games: Mockingjay - Part 1
November 2014
 
The Legend of Hercules
January 2014
John Wick
October 2014
 
Tyler Perry's A Madea Christmas
December 2013
Addicted*
October 2014*
 
The Hunger Games: Catching Fire
November 2013
The Expendables 3
August 2014
 
Ender's Game
November 2013
Step Up All In
August 2014
 
Escape Plan
October 2013
The Quiet Ones
April 2014
 
You're Next
August 2013
Draft Day
April 2014
 
Red 2
July 2013
 
 
 
Now You See Me
May 2013
 
 
 
Peeples
May 2013
 
 
 
The Big Wedding
April 2013
Fiscal 2014 Theatrical Slate:
 
 
Fiscal 2013 Theatrical Slate:
 
Divergent
March 2014
 
Temptation: Confessions of a Marriage Counselor
March 2013
The Hunger Games: Catching Fire
November 2013
 
 
 
Managed Brands(1):
 
 
Managed Brands(1):
 
A Most Wanted Man
August 2014
 
Kevin Hart: Let Me Explain
July 2013
 
 
 
Mud
May 2013
 
 
 
Other Feature Film(2):
 
 
 
 
Instructions Not Included
August 2013
                                           
*
Limited release.
(1)
Managed Brands represents Direct-to-DVD motion pictures, acquired and licensed brands, third-party library product and ancillary-driven platform theatrical releases.
(2)
Other Feature Film includes certain specialty theatrical releases and other titles.
Theatrical revenue of $354.0 million decreased $170.7 million, or 32.5%, in fiscal 2015, as compared to fiscal 2014. Approximately $131.9 million of this decrease was driven by fewer films (as listed above) released from our Fiscal 2015 Theatrical Slate compared to our Fiscal 2014 Theatrical Slate and the relative performance of those films released. In particular, the box office performance of The Hunger Games: Mockingjay - Part 1 in fiscal 2015 was lower than the box office performance of The Hunger Games: Catching Fire and fiscal 2014 included the strong box office performance of Now You See Me. In addition, theatrical revenue from Managed Brands and Other Feature Film declined $38.8 million due to the theatrical revenues generated by the titles in the above table, and in particular, Instructions Not Included in fiscal 2014.


41


Motion Pictures — Home Entertainment Revenue
The following table sets forth the titles released on home entertainment from our theatrical slates in the fiscal years ended March 31, 2015 and 2014, in addition to titles from our theatrical slates and other product categories which contributed a significant amount of revenue in fiscal 2015 and fiscal 2014, respectively:
 
Year Ended March 31,
2015
 
2014
 
Packaged Media Release Date
 
 
Packaged Media Release Date
Fiscal 2015 Theatrical Slate:
 
 
Fiscal 2014 Theatrical Slate:
 
The Hunger Games: Mockingjay - Part 1
March 2015
 
The Hunger Games: Catching Fire
March 2014
John Wick
February 2015
 
Escape Plan
February 2014
Addicted
February 2015
 
Ender's Game
February 2014
The Expendables 3
November 2014
 
You're Next
January 2014
Step Up All In
November 2014
 
Red 2
November 2013
Draft Day
September 2014
 
Now You See Me
September 2013
The Quiet Ones
August 2014
 
Peeples
September 2013
 
 
 
The Big Wedding
August 2013
Fiscal 2014 Theatrical Slate:
 
 
 Fiscal 2013 Theatrical Slate:
 
Tyler Perry's A Madea Christmas
November 2014
 
Temptation: Confessions of A Marriage Counselor
July 2013
Divergent
August 2014
 
Snitch
June 2013
The Single Moms Club
July 2014
 
Warm Bodies
June 2013
I, Frankenstein
May 2014
 
The Last Stand
May 2013
The Legend of Hercules
April 2014
 
Texas Chainsaw 3D
May 2013
The Hunger Games: Catching Fire
March 2014
 
The Impossible
April 2013
 
 
 
The Twilight Saga: Breaking Dawn - Part 2
March 2013
 
 
 
Prior Theatrical Slates(1):
 
 
 
 
The Hunger Games
August 2012
 
 
 
Managed Brands:
 
 
 
 
Mud
August 2013
 
 
 
Duck Dynasty (multiple seasons)
Various
                                           
(1)
Prior Theatrical Slates includes our fiscal 2012 and prior theatrical slates and Summit titles theatrically released prior to the acquisition of Summit.


42


The following table sets forth the components of home entertainment revenue by product category for the fiscal years ended March 31, 2015 and 2014:
 
Year Ended March 31,
 
 
 
2015
 
2014
 
 
 
Packaged
Media
 
Digital
Media(1)
 
Total
 
Packaged
Media
 
Digital
Media(1)
 
Total
 
Total Increase (Decrease)
 
 
 
 
 
(Amounts in millions)
 
 
 
 
 
 
Home entertainment revenues(2)
 
 
 
 
 
 
 
 
 
 
 
 
 
Fiscal 2015 Theatrical Slate
$
128.4

 
$
35.8

 
$
164.2

 
$

 
$

 
$

 
$
164.2

Fiscal 2014 Theatrical Slate
106.6

 
88.0

 
194.6

 
209.7

 
49.5

 
259.2

 
(64.6
)
Fiscal 2013 Theatrical Slate
14.0

 
6.2

 
20.2

 
101.2

 
83.9

 
185.1

 
(164.9
)
Prior Theatrical Slates
28.0

 
18.2

 
46.2

 
64.4

 
20.0

 
84.4

 
(38.2
)
Total Theatrical Slates
277.0

 
148.2

 
425.2

 
375.3

 
153.4

 
528.7

 
(103.5
)
Managed Brands
147.5

 
74.9

 
222.4

 
199.5

 
80.6

 
280.1

 
(57.7
)
Other Feature Film
8.1

 
7.0

 
15.1

 
15.6

 
5.2

 
20.8

 
(5.7
)
 
$
432.6

 
$
230.1

 
$
662.7

 
$
590.4

 
$
239.2

 
$
829.6

 
$
(166.9
)
                                           
(1)
Digital media revenue consists of revenues generated from pay-per-view and video-on-demand platforms, EST, and digital rental.
(2)
Certain amounts in fiscal 2014 have been reclassified between product types in order to be consistent with the current fiscal year classification.
Home entertainment revenue of $662.7 million decreased $166.9 million, or 20.1%, in fiscal 2015, as compared to fiscal 2014. Of the $166.9 million decrease, approximately $103.5 million was from our theatrical slates, and $57.7 million was from Managed Brands. The decrease in home entertainment revenues from our theatrical slates was largely driven by the performance of the titles released in the current fiscal year from our Fiscal 2015 Theatrical Slate, as compared to the titles released in the prior fiscal year from our Fiscal 2014 Theatrical Slate, which included significant revenues from the release of The Hunger Games: Catching Fire, Now You See Me and Red 2 in fiscal 2014. The decrease was also, to a lesser extent, driven by fewer titles released on packaged media from our theatrical slates in fiscal 2015 as compared to fiscal 2014. These decreases in revenue were partially offset by contributions from our Fiscal 2014 Theatrical Slate in fiscal 2015, driven by the performance of Divergent and The Hunger Games: Catching Fire in the current fiscal year. The decrease in Managed Brands revenue was primarily due to the number and performance of titles released in fiscal 2015, as compared to the titles released in fiscal 2014, and in particular, a significant contribution from Mud in fiscal 2014.
Motion Pictures — Television Revenue
The following table sets forth the titles contributing significant motion pictures television revenue for the fiscal years ended March 31, 2015 and 2014:
 
Year Ended March 31,
2015
  
2014
Fiscal 2014 Theatrical Slate:
  
Fiscal 2014 Theatrical Slate:
Divergent
  
Now You See Me
Ender's Game
  
Fiscal 2013 Theatrical Slate:
Red 2
  
Snitch
The Hunger Games: Catching Fire
  
Temptation: Confessions of a Marriage Counselor
 
  
The Twilight Saga: Breaking Dawn - Part 2
 
  
The Possession
 
 
Warm Bodies
Prior Theatrical Slates:
 
 
The Hunger Games
 
 
The Twilight Saga: Breaking Dawn - Part 1
 
 


43


The following table sets forth the components of television revenue by product category for the fiscal years ended March 31, 2015 and 2014:
 
 
Year Ended March 31,
 
Increase (Decrease)
 
2015
 
2014
 
Amount
 
Percent
 
(Amounts in millions)
 
 
 
 
Television revenues(1)
 
 
 
 
 
 
 
Fiscal 2015 Theatrical Slate
$
16.3

 
$

 
$
16.3

 
n/m

Fiscal 2014 Theatrical Slate
98.3

 
24.4

 
73.9

 
n/m

Fiscal 2013 Theatrical Slate
17.6

 
94.4

 
(76.8
)
 
(81.4
)%
Prior Theatrical Slates
90.8

 
74.3

 
16.5

 
22.2
 %
Total Theatrical Slates
223.0

 
193.1

 
29.9

 
15.5
 %
Managed Brands
41.9

 
29.2

 
12.7

 
43.5
 %
Other Feature Film
5.3

 
3.0

 
2.3

 
76.7
 %
 
$
270.2

 
$
225.3

 
$
44.9

 
19.9
 %
 
n/m - Percentage not meaningful.
(1)
Certain amounts in fiscal 2014 have been reclassified between product types in order to be consistent with the current fiscal year classification.
Television revenue increased in fiscal 2015 as compared to fiscal 2014 due primarily to an increase in the contribution of revenue from our theatrical slates as listed above, and in particular, contributions from our Prior Theatrical Slates category reflecting television window openings for The Twilight Saga: Breaking Dawn - Part 1 and The Hunger Games and also, to a lesser extent, an increase in the contribution of revenue from our Managed Brands category reflecting the timing of television windows opening in the current fiscal year.
Motion Pictures — International Revenue
The following table sets forth the titles contributing significant motion pictures international revenue for the fiscal years ended March 31, 2015 and 2014:
 
Year Ended March 31,
2015
  
2014
Fiscal 2015 Theatrical Slate:
  
Fiscal 2014 Theatrical Slate:
Step Up All In
  
Escape Plan
The Divergent Series: Insurgent
  
Now You See Me
The Hunger Games: Mockingjay - Part 1
  
Red 2
 
 
The Hunger Games: Catching Fire
Fiscal 2014 Theatrical Slate:
 
Fiscal 2013 Theatrical Slate:
Divergent
 
The Twilight Saga: Breaking Dawn - Part 2
The Hunger Games: Catching Fire
 
 

44


The following table sets forth the components of international revenue by product category for the fiscal years ended March 31, 2015 and 2014:
 
 
Year Ended March 31,
 
Increase (Decrease)
 
2015
 
2014
 
Amount
 
Percent
 
(Amounts in millions)
 
 
 
 
International revenues(1)
 
 
 
 
 
 
 
Fiscal 2015 Theatrical Slate
$
209.7

 
$

 
$
209.7

 
n/m

Fiscal 2014 Theatrical Slate
99.4

 
273.9

 
(174.5
)
 
(63.7
)%
Fiscal 2013 Theatrical Slate
29.0

 
109.9

 
(80.9
)
 
(73.6
)%
Prior Theatrical Slates
47.2

 
64.3

 
(17.1
)
 
(26.6
)%
Total Theatrical Slates
385.3

 
448.1

 
(62.8
)
 
(14.0
)%
UK Third Party Product(2)
66.8

 
61.8

 
5.0

 
8.1
 %
Managed Brands
22.3

 
21.8

 
0.5

 
2.3
 %
Other Feature Film
20.6

 
11.7

 
8.9

 
76.1
 %
 
$
495.0

 
$
543.4

 
$
(48.4
)
 
(8.9
)%
 
(1)
Certain amounts in fiscal 2014 have been reclassified between product types in order to be consistent with the current fiscal year classification. Specifically, Lionsgate UK revenues in fiscal 2014 of $146.3 million, which were previously separately presented, have been combined within our international revenue product categories.
(2)
UK Third Party Product represents titles acquired separately for self-distribution in the U.K. territory.

International motion pictures revenue decreased in fiscal 2015 as compared to fiscal 2014, due primarily to a decrease in revenues from our theatrical slates, offset in part by increases in our Other Feature Film and UK Third Party Product categories. The decrease in our theatrical slates was primarily driven by a decrease in revenue from our Fiscal 2015 Theatrical Slate in the current fiscal year as compared to the revenue from our Fiscal 2014 Theatrical Slate in the prior fiscal year, due primarily to significant revenues from Now You See Me, Red 2 and Escape Plan in fiscal 2014, which were partially offset by higher international revenues from The Hunger Games: Mockingjay - Part 1 in fiscal 2015 as compared to The Hunger Games: Catching Fire in fiscal 2014.
Motion Pictures —Other Revenue
Other revenue included in motion pictures revenue decreased in fiscal 2015 as compared to fiscal 2014. Other revenue in fiscal 2014 primarily included revenue from the sale of a portion of our music catalog.
Television Production Revenue
The following table sets forth the components and the changes in the components of revenue that make up television production revenue for the fiscal years ended March 31, 2015 and 2014:
 
 
Year Ended March 31,
 
Increase (Decrease)
 
2015
 
2014
Amount
 
Percent
 
 
 
(Amounts in millions)
 
 
Television Production
 
 
 
 
 
 
 
Domestic television
$
415.2

 
$
326.1

 
$
89.1

 
27.3
 %
International
112.4

 
82.3

 
30.1

 
36.6
 %
Home entertainment revenue
 
 
 
 
 
 
 
Digital
34.3

 
22.8

 
11.5

 
50.4
 %
Packaged Media
10.5

 
11.5

 
(1.0
)
 
(8.7
)%
Total home entertainment revenue
44.8

 
34.3

 
10.5

 
30.6
 %
Other
7.1

 
4.7

 
2.4

 
51.1
 %
 
$
579.5

 
$
447.4

 
$
132.1

 
29.5
 %


45


Television Production - Domestic Television

 Domestic television revenue increased in fiscal 2015, as compared to fiscal 2014, primarily due to an increase in television episodes delivered in fiscal 2015, as compared to fiscal 2014. Television episodes delivered for original exhibition during fiscal 2015 and 2014 included the episode deliveries as shown in the table below:

 
 
Year Ended
 
 
 
Year Ended
 
 
March 31, 2015
 
 
 
March 31, 2014
 
 
Episodes
 
Hours
 
 
 
Episodes
 
Hours
Anger Management
1/2hr
35

 
17.5

 
Anger Management
1/2hr
38

 
19.0

Ascension
1hr
6

 
6.0

 
Mad Men - Season 6
1hr
11

 
11.0

Houdini
1hr
4

 
4.0

 
Mad Men - Season 7
1hr
3

 
3.0

Mad Men - Season 7
1hr
11

 
11.0

 
Nashville - Season 1
1hr
6

 
6.0

Manhattan - Season 1
1hr
13

 
13.0

 
Nashville - Season 2
1hr
19

 
19.0

Nashville - Season 2
1hr
3

 
3.0

 
Nurse Jackie - Season 6
1/2hr
12

 
6.0

Nashville - Season 3
1hr
17

 
17.0

 
Orange Is The New Black - Season 1
1hr
5

 
5.0

Nurse Jackie - Season 7
1/2hr
12

 
6.0

 
Orange Is The New Black - Season 2
1hr
13

 
13.0

Orange Is The New Black - Season 3
1hr
12

 
12.0

 
Other(1)
1/2hr & 1hr
69

 
40.0

Rosemary's Baby
1hr
4

 
4.0

 
 
 
 
 

The Royals - Season 1
1hr
9

 
9.0

 
 
 
 
 
 
Other(1)
1/2hr & 1hr
112

 
65.5

 
 
 
 
 
 
 
 
238

 
168.0

 
 
 
176

 
122.0

______________________
(1)
Other in fiscal 2015 includes episodes delivered for Alaska: Battle on the Bay, Christina Milian Turned Up (Season 1), Deadbeat (Season 2), Deal With It (Season 2), Deion's Family Playbook, Flea Market Flip (Seasons 4 & 5), Partners, and Way Out West. Other in fiscal 2014 includes episodes delivered for Saint George, Deadbeat, Deion's Family Playbook, Deal With It (Seasons 1 & 2) and Flea Market Flip (Season 3).
In addition to the titles mentioned in the table above, significant domestic television revenue was contributed in fiscal 2015 from Are We There Yet, Family Feud (Seasons 7 & 8), and The Wendy Williams Show (Season 5), and in fiscal 2014, from Family Feud (Season 6) and The Wendy Williams Show (Season 4).
Television Production - International Revenue
International revenue in fiscal 2015 increased as compared to fiscal 2014. International revenue in fiscal 2015 primarily included revenue from Anger Management, Mad Men (Season 6), Nashville (Seasons 2 & 3), and Orange Is The New Black (Seasons 1, 2 & 3). International revenue in fiscal 2014 primarily included revenue from Anger Management, Mad Men (Seasons 5 & 6), Nashville (Seasons 1 & 2), and Orange Is The New Black (Season 1).
Television Production - Home Entertainment Revenue
The increase in home entertainment revenue in fiscal 2015 as compared to fiscal 2014 is due to an increase in digital media revenue, largely driven by revenues from Mad Men (Season 7) and Manhattan (Season 1), offset in part by a slight decrease in packaged media revenue.

46


Direct Operating Expenses
The following table sets forth direct operating expenses by segment for the fiscal years ended March 31, 2015 and 2014:
 
 
Year Ended
 
Year Ended
 
March 31, 2015
 
March 31, 2014
 
Motion
Pictures
 
Television
Production
 
Total
 
Motion