---
title: "Why there’s no money in making movies"
url: https://modern-mba.com/case/lionsgate
sector: "Media & entertainment"
sector_url: https://modern-mba.com/sector/media-and-entertainment
aired: 2024-01-14
published: 2026-08-26
updated: 2026-08-28
reading_time_minutes: 14
charts: 15
video: https://www.youtube.com/watch?v=tgPeZfnfB5s
author: "Yishan Lin"
author_url: https://www.linkedin.com/in/yishanlin/
publisher: Modern MBA
license: "© Modern MBA, all rights reserved. Quote and cite with credit and a link; republishing needs written permission."
---

# Why there’s no money in making movies

Every studio in the Big Five is a rounding error inside a conglomerate — movies are one line beside cable, theme parks, semiconductors, and news. Lionsgate is the rare studio with nothing underneath it, so every flop lands on the balance sheet. This case study follows two decades of that exposure: the indie jackpot, the Hunger Games peak, and the $4.4 billion Starz acquisition that now costs more than the entire company is worth.

## Key figures

- **$4.4B for Starz** — Against a company now worth about $2.1 billion in total
- **9.7%** — Starz monthly churn, the highest of any streaming service
- **$3.7B of $30B** — Filmed entertainment inside Paramount, beside $21.4B of television

## The argument

The Big Five do not survive on movies, they survive on everything else. Filmed entertainment is $3.7 billion inside Paramount against $21.4 billion of television; $13.8 billion inside Warner Bros. Discovery against $23.2 billion of television; $8.1 billion inside Disney against $28.7 billion of parks. Sony makes movies beside semiconductors and financial services. A flop is absorbed. Lionsgate has exactly two businesses — movies and television — so a flop is simply a loss.

That exposure is why the company's history reads as two jackpots and a long wait between them. Saw grossed $100 million on a $1 million budget and reset the trajectory; the Hunger Games and the Summit acquisition doubled revenue to $2.7 billion in a single year and lifted the motion picture division from $1,190 million to $2,329 million. But franchises end, and by 2016 the same division was falling while the majors kept releasing.

So Lionsgate bought its way out of being a supplier. It had made Mad Men for AMC and Orange Is the New Black for Netflix and captured none of the brand equity, so in 2016 it paid $4.4 billion for Starz to go direct-to-consumer. Starz is profitable — one of the very few streamers that is — but its operating income has fallen from $436 million to $107 million, it carries the highest churn of any service at 9.7%, and the whole of Lionsgate is now valued at around $2.1 billion. The parts are worth more than the whole.

## Charts

### Movies are one line in a conglomerate

Revenue by segment at each parent company, 2022, in millions. The studio is never the biggest business inside the company that owns it.

|  | Filmed entertainment | Largest other division |
| --- | --- | --- |
| Comcast | $11,632M | $66,318M |
| Disney | $8,146M | $28,705M |
| Warner Bros. Discovery | $13,798M | $23,186M |
| Paramount | $3,706M | $21,372M |
| Lionsgate | $1,323M | $1,760M |

Source: Modern MBA, “Why there’s no money in making movies”, aired January 2024. Chart: https://modern-mba.com/case/lionsgate#chart-1 · Sources: https://modern-mba.com/case/lionsgate#sources

### Good films flop routinely

Budget against domestic box office, in millions. None of these were bad films, and every one of them lost money in theaters.

|  | Domestic box office | Budget |
| --- | --- | --- |
| Blade Runner 2049 | $92M | −$185M |
| Edge of Tomorrow | $100M | −$178M |
| Sunshine | $4M | −$178M |
| Scott Pilgrim | $33M | −$110M |
| Cloud Atlas | $27M | −$102M |
| Kingdom of Heaven | $47M | −$110M |
| Fight Club | $37M | −$65M |

Source: Modern MBA, “Why there’s no money in making movies”, aired January 2024. Chart: https://modern-mba.com/case/lionsgate#chart-2 · Sources: https://modern-mba.com/case/lionsgate#sources

### Everything is decided in a fortnight

Avengers: Endgame domestic box office by week, in millions. By week fifteen it is taking nothing at all.

|  | US dollars |
| --- | --- |
| WK1 | $473M |
| WK2 | $187M |
| WK3 | $81M |
| WK4 | $40M |
| WK5 | $26M |
| WK6 | $12M |
| WK7 | $7M |
| WK8 | $6M |
| WK9 | $3M |
| WK12 | $1M |
| WK15 | $0M |

Source: Modern MBA, “Why there’s no money in making movies”, aired January 2024. Chart: https://modern-mba.com/case/lionsgate#chart-3 · Sources: https://modern-mba.com/case/lionsgate#sources

### The international half

Box office by territory against budget, in millions. Overseas now out-earns domestic on almost everything that travels.

|  | Domestic | International |
| --- | --- | --- |
| Avengers Endgame | $858M | $1,930M |
| Top Gun Maverick | $718M | $754M |
| Pirates At World's End | $309M | $652M |
| The Batman | $396M | $397M |

Source: Modern MBA, “Why there’s no money in making movies”, aired January 2024. Chart: https://modern-mba.com/case/lionsgate#chart-4 · Sources: https://modern-mba.com/case/lionsgate#sources

### A library is recurring revenue

Titles owned by Lionsgate. Buying Artisan Entertainment for $220 million took it from 1,500 to over 8,000 in a single year.

|  | Counts |
| --- | --- |
| 2001 | 1,500 |
| 2002 | 2,000 |
| 2003 | 2,000 |
| 2004 | 8,000 |

Source: Modern MBA, “Why there’s no money in making movies”, aired January 2024. Chart: https://modern-mba.com/case/lionsgate#chart-5 · Sources: https://modern-mba.com/case/lionsgate#sources

### The indie edge was real

Domestic box office against budget for the indie films that proved the model, in millions. The bar to clear was far lower than a major's.

|  | Domestic box office | Budget |
| --- | --- | --- |
| The Passion of the Christ | $371M | −$30M |
| My Big Fat Greek Wedding | $241M | −$5M |
| The Blair Witch Project | $140M | −$1M |

Source: Modern MBA, “Why there’s no money in making movies”, aired January 2024. Chart: https://modern-mba.com/case/lionsgate#chart-6 · Sources: https://modern-mba.com/case/lionsgate#sources

### The first jackpot

Lionsgate revenue and net income, in millions. Saw and Fahrenheit 9/11 more than doubled the company in one year.

|  | Revenue | Net income |
| --- | --- | --- |
| 1999 | $78M | −$9M |
| 2000 | $184M | −$4M |
| 2001 | $188M | $6M |
| 2002 | $235M | −$43M |
| 2003 | $302M | $1M |
| 2004 | $376M | −$92M |
| 2005 | $838M | $20M |
| 2006 | $945M | $6M |
| 2007 | $977M | $15M |

Source: Modern MBA, “Why there’s no money in making movies”, aired January 2024. Chart: https://modern-mba.com/case/lionsgate#chart-7 · Sources: https://modern-mba.com/case/lionsgate#sources

### Six straight years of losses

Chasing the majors meant bigger budgets, and bigger budgets meant bigger flops. Revenue grew every year and the bottom line stayed red.

|  | Revenue | Net income |
| --- | --- | --- |
| 2007 | $977M | −$15M |
| 2008 | $1,361M | −$87M |
| 2009 | $1,466M | −$180M |
| 2010 | $1,489M | −$30M |
| 2011 | $1,583M | −$30M |
| 2012 | $1,587M | −$39M |

Source: Modern MBA, “Why there’s no money in making movies”, aired January 2024. Chart: https://modern-mba.com/case/lionsgate#chart-8 · Sources: https://modern-mba.com/case/lionsgate#sources

### The Hunger Games year

Lionsgate motion picture revenue, in millions. One franchise and the Summit acquisition doubled the division in twelve months.

|  | US dollars |
| --- | --- |
| 2004 | $309M |
| 2006 | $812M |
| 2008 | $1,151M |
| 2010 | $1,119M |
| 2012 | $1,190M |
| 2013 | $2,329M |
| 2014 | $2,183M |
| 2015 | $1,820M |
| 2016 | $1,677M |

Source: Modern MBA, “Why there’s no money in making movies”, aired January 2024. Chart: https://modern-mba.com/case/lionsgate#chart-9 · Sources: https://modern-mba.com/case/lionsgate#sources

### Briefly competing with Marvel

Highest-grossing films of the era, in millions. Three of the top nine were Lionsgate — and then the franchise ended.

|  | US dollars |
| --- | --- |
| Force Awakens | $742M |
| Avengers | $623M |
| Iron Man 3 | $409M |
| Hunger Games | $408M |
| Catching Fire | $407M |
| Guardians | $333M |
| Mockingjay | $323M |
| Skyfall | $297M |
| Winter Soldier | $260M |

Source: Modern MBA, “Why there’s no money in making movies”, aired January 2024. Chart: https://modern-mba.com/case/lionsgate#chart-10 · Sources: https://modern-mba.com/case/lionsgate#sources

### A questionable price

Notable studio acquisitions of the past decade, in billions. Starz cost more than Marvel, Lucasfilm, or Dreamworks.

|  | US dollars |
| --- | --- |
| MGM | $8.5B |
| Pixar | $7.4B |
| Starz | $4.4B |
| Lucasfilm | $4.1B |
| Marvel | $4.0B |
| Dreamworks | $3.8B |
| Miramax | $0.8B |

Source: Modern MBA, “Why there’s no money in making movies”, aired January 2024. Chart: https://modern-mba.com/case/lionsgate#chart-11 · Sources: https://modern-mba.com/case/lionsgate#sources

### The first subscription canceled

Monthly subscriber churn by streaming service. A cheap complementary add-on is the easiest thing to drop, which is the flaw in the whole thesis.

|  | Percentages |
| --- | --- |
| Starz | 9.7% |
| Showtime | 8.2% |
| Apple TV | 7.1% |
| Peacock | 7.0% |
| Paramount+ | 6.9% |
| Max | 6.5% |
| Hulu | 5.0% |
| Disney+ | 4.9% |
| Netflix | 3.4% |

Source: Modern MBA, “Why there’s no money in making movies”, aired January 2024. Chart: https://modern-mba.com/case/lionsgate#chart-12 · Sources: https://modern-mba.com/case/lionsgate#sources

### Profitable, and shrinking

Starz operating income, in millions. One of the few streamers that makes money — and it has lost three quarters of it since the acquisition.

|  | US dollars |
| --- | --- |
| 2016 | $406M |
| 2017 | $438M |
| 2018 | $429M |
| 2019 | $436M |
| 2020 | $293M |
| 2021 | $290M |
| 2022 | $155M |
| 2023 | $107M |

Source: Modern MBA, “Why there’s no money in making movies”, aired January 2024. Chart: https://modern-mba.com/case/lionsgate#chart-13 · Sources: https://modern-mba.com/case/lionsgate#sources

### Worth less than what it bought

Lionsgate market capitalization, in billions. It peaked in 2016, the year it paid $4.4 billion for Starz, and has not recovered since.

|  | US dollars |
| --- | --- |
| 2011 | $1.2B |
| 2013 | $3.9B |
| 2014 | $4.9B |
| 2016 | $6.1B |
| 2017 | $3.5B |
| 2019 | $2.2B |
| 2021 | $3.5B |
| 2022 | $1.2B |
| 2023 | $2.1B |

Source: Modern MBA, “Why there’s no money in making movies”, aired January 2024. Chart: https://modern-mba.com/case/lionsgate#chart-14 · Sources: https://modern-mba.com/case/lionsgate#sources

### Falling from Starz

Lionsgate revenue and net income, in millions. Revenue held; the bottom line did not, ending in a $2 billion write-down.

|  | Revenue | Net income |
| --- | --- | --- |
| 2015 | $2,399M | $182M |
| 2016 | $2,347M | $43M |
| 2017 | $3,201M | $15M |
| 2018 | $4,129M | $468M |
| 2019 | $3,680M | −$300M |
| 2020 | $3,890M | −$296M |
| 2021 | $3,272M | −$34M |
| 2022 | $3,604M | −$205M |
| 2023 | $3,855M | −$2,019M |

Source: Modern MBA, “Why there’s no money in making movies”, aired January 2024. Chart: https://modern-mba.com/case/lionsgate#chart-15 · Sources: https://modern-mba.com/case/lionsgate#sources


## Takeaways

1. The Big Five take over **80%** of the domestic box office, and none of them lives or dies on it. **Paramount** books **$3,706 million** of filmed entertainment against **$21,372 million** of television; **Warner Bros. Discovery** **$13,798 million** of studios against **$23,186 million** of television; **Disney** **$8,146 million** of movies and TV against **$28,705 million** of parks and cruises.
2. **Lionsgate** has two businesses and no cushion: **$1,323 million** of movies and **$1,760 million** of television. There is no cable division, no theme park, and no consumer electronics arm to absorb a bad year, which is the single fact that shapes everything that follows.
3. And bad years are structural, not exceptional. **Blade Runner 2049** spent **$185 million** and took **$92 million** domestically; **Cloud Atlas** **$102 million** against **$27 million**; **Sunshine** **$178 million** against **$4 million**; **Edge of Tomorrow** **$178 million** against **$100 million**. Good films flop routinely.
4. Which is why the majors have got conservative. Average production budgets run **$229 million** at the top of the range against **$38 million** at the bottom, and the studios release roughly **10 to 25** films a year. Fewer, larger, safer — superhero films, remakes, and sequels where the ROI is knowable.
5. The economics are brutally front-loaded. **Avengers: Endgame** took **$473 million** in its opening week and **$187 million** in its second, then **$81 million**, **$40 million**, and **$26 million** — down to **$0** by week fifteen. **The Batman** went **$173 million**, **$91 million**, **$48 million**, **$27 million**. Everything after the first fortnight is a tail.
6. International is where the real money now sits. **Avengers: Endgame** took **$858 million** domestically and **$1,930 million** overseas against a **$400 million** budget; **Top Gun: Maverick** **$718 million** and **$754 million** on **$180 million**; **Pirates of the Caribbean: At World's End** **$309 million** and **$652 million** on **$300 million**.
7. That purchase was the smartest thing the company did. It brought a library of over **8,000** titles — Terminator 2, Total Recall, Basic Instinct, Reservoir Dogs — taking Lionsgate from **1,500** owned titles to **8,000** in a year. Old films earn through syndication indefinitely, which is recurring revenue in a business that has almost none.
8. Then the indie jackpot landed. **Saw** grossed **$100 million** on a **$1 million** budget, Fahrenheit 9/11 **$220 million** on **$6 million**, and Diary of a Mad Black Woman **$50 million** on **$5 million**. Revenue went from **$376 million** to **$838 million** in a single year and the motion picture division from **$309 million** to **$755 million**.
9. Indie was a real structural edge, not luck. **The Passion of the Christ** made **$371 million** domestically on a **$30 million** budget, **My Big Fat Greek Wedding** **$241 million** on **$5 million**, and **The Blair Witch Project** **$140 million** on **$1 million**. Lionsgate's films ran at a half to a third of major-studio budgets, so the hit rate needed to clear was far lower.
10. Chasing the majors undid that. Between 2007 and 2012 revenue grew from **$977 million** to **$1,587 million** while net income ran **−$15 million**, **−$87 million**, **−$180 million**, **−$30 million**, **−$30 million**, and **−$39 million** — six consecutive losing years, because bigger films meant bigger flops in Conan the Barbarian, Gamer, and Punisher: War Zone.
11. **The Hunger Games** rewrote the company in one year. It took **$690 million** worldwide on an **$80 million** budget, and combined with the **$400 million** **Summit** acquisition — which came with the Twilight franchise — total revenue nearly doubled to **$2.7 billion** and the motion picture division jumped from **$1,190 million** to **$2,329 million**.
12. Television was the quieter, better business. **Mad Men** made **AMC** a must-watch network at **$2–3 million** an episode, **Orange Is the New Black** did the same for **Netflix**, and the TV division grew from **$100 million** in 2007 to **$500 million** by 2015 — at operating margins that regularly beat the movie side.
13. But Lionsgate captured none of the brand. Nobody knew **Mad Men** was made by Lionsgate; the credit and the subscribers went to **AMC** and **Netflix**. That is the frustration the Starz deal was meant to solve — owning the customer instead of supplying the people who do.
14. So in 2016 Lionsgate paid **$4.4 billion** for **Starz** — roughly four times revenue. Set against the rest of the decade that is the outlier: **MGM** went to Amazon for **$8.5 billion** with James Bond attached, **Pixar** for **$7.4 billion**, **Lucasfilm** for **$4.1 billion**, **Marvel** for **$4.0 billion**, **Dreamworks** for **$3.8 billion**, and **Miramax** for **$0.8 billion**.
15. Its structural weakness is being an add-on. **Starz** carries the highest monthly churn of any service at **9.7%**, against **8.2%** at **Showtime**, **7.1%** at **Apple TV**, **6.5%** at **Max**, **5.0%** at **Hulu**, and **3.4%** at **Netflix**. A complementary subscription is the first thing canceled when discretionary spending tightens.
16. The market has repriced the whole thing. Lionsgate's market capitalization peaked at **$6.1 billion** in 2016 — the year of the Starz deal — and has since run **$3.5 billion**, **$3.2 billion**, **$2.2 billion**, **$2.3 billion**, **$3.5 billion**, **$1.2 billion**, and **$2.1 billion**. The studio, the television business, and Starz together are worth about half what Starz alone cost.

## Common questions

### Why do the big studios survive flops when smaller ones can't?

Because movies are one line item in a conglomerate. Filmed entertainment is $3.7 billion inside Paramount against $21.4 billion of television, $13.8 billion inside Warner Bros. Discovery against $23.2 billion of television, and $11.6 billion inside Comcast against $66.3 billion of cable. Disney's movie and TV business is $8.1 billion against $28.7 billion of parks. A $150 million write-off is absorbed by the rest of the business. Lionsgate has only movies and television, so the same write-off is simply a loss.

### Why did Lionsgate buy Starz?

To stop being a supplier. Lionsgate made Mad Men for AMC and Orange Is the New Black for Netflix — both defining hits — and captured none of the brand equity or subscriber growth they generated. Buying Starz in 2016 for $4.4 billion was meant to fast-track it into direct-to-consumer without building a platform from scratch, so a hit show would bring subscribers rather than just a licensing fee. The logic was sound; the price was roughly four times revenue.

### Was $4.4 billion too much for Starz?

By the standards of the decade around it, yes. Amazon paid $8.5 billion for MGM with James Bond, Vikings, and The Handmaid's Tale attached. Disney paid $7.4 billion for Pixar, $4.1 billion for Lucasfilm and Star Wars, and $4.0 billion for Marvel. Starz cost $4.4 billion with Power and Outlander. The whole of Lionsgate — studio, television business, and Starz combined — is now worth about $2.1 billion.

### Is Starz actually a bad business?

No, and that is the awkward part. Starz is one of very few profitable streaming services, priced deliberately as a cheap complement rather than a Netflix replacement, with no sports, no kids programming, and no news. The problems are that its profits are shrinking — operating income has fallen from $436 million to $107 million — and that being an add-on makes it the first subscription canceled, which shows up as the highest churn of any service at 9.7%.

### How does a movie actually make money after theaters?

Through a sequence of windows, each cheaper and wider than the last. Theatrical comes first and is where the most is recouped — The Batman cleared its $200 million budget in two domestic weeks. Then home entertainment or TVOD, which is what DVD, Blu-ray, and digital rental collapsed into. Then subscription streaming, often split into two or three sub-windows sold to the highest bidder first. Then cable television, and finally syndication, which runs indefinitely and is why old libraries are so valuable.

### Why is a movie's opening weekend so important?

Because the drop-off is immediate and steep. Avengers: Endgame took $473 million in week one and $187 million in week two, then $81 million, $40 million, and $26 million, reaching zero by week fifteen. The Batman went $173 million, $91 million, $48 million, $27 million. Roughly everything is decided in the first fortnight, which is why marketing spend is concentrated on a single weekend and why studios fight over holiday release dates.

### What made Lionsgate successful in the 2000s?

Cheap films and an old library. Its movies were made on a half to a third of major-studio budgets, so the bar for profitability was much lower — Saw grossed $100 million on a $1 million budget, and the wider indie wave proved the point with The Passion of the Christ at $371 million on $30 million and The Blair Witch Project at $140 million on $1 million. Buying Artisan Entertainment for $220 million took the company from 1,500 to over 8,000 owned titles, and old films earn through syndication forever.

### What was Lionsgate's 10/90 television model?

Skip the pilot: Lionsgate would produce ten episodes straight, and if those ten hit an agreed ratings or viewership target, the buyer was contractually obliged to order the remaining ninety. It gave Lionsgate predictable high-margin work and gave the network delivery certainty. It failed because it assumes audience interest is static when in practice most shows fade by their midpoint — FX ended up bound to ninety episodes of a Charlie Sheen sitcom whose ratings had collapsed.

### What happens to Lionsgate now?

The company is separating Lionsgate and Starz into distinct entities, which is an admission that the 2016 combination destroyed rather than created value. Television is still the bright spot — it remains the leading independent supplier, with series running on HBO Max, Apple TV, Starz, Showtime, Netflix, and Amazon. The real asset is the film and television library, and the plausible buyers are the tech companies with enough cash that several billion dollars is a rounding error.

## Discussion

- The Big Five absorb a flop because filmed entertainment is a fraction of their revenue — $8.1 billion of movies against $28.7 billion of parks at Disney. Lionsgate has only movies and television, so a flop is simply a loss. What does that do to which films get made?
- Saw grossed $100 million on a $1 million budget and reset the company's trajectory. How should a business plan around outcomes it cannot manufacture on demand?
- If the majors' film divisions are effectively subsidized by television, parks, or semiconductors, what is the film business actually for inside those companies?
- Lionsgate's history reads as two jackpots and a long wait between them. Is that a strategy problem or the nature of the industry — and how would you tell?
- You run Lionsgate. Do you seek the shelter of a larger portfolio, or is there a version of standalone that works? Argue the harder side.

## Sources

Segment revenue, operating margins, debt, net income, and market capitalization from Lionsgate annual reports and filings for the years shown; box office, budget, and territory figures as presented in the episode; comparator studio budgets, streaming subscriber counts, churn rates, and acquisition prices from company disclosures and reported figures

---

From [Modern MBA](https://modern-mba.com/). Read this case in full at [https://modern-mba.com/case/lionsgate](https://modern-mba.com/case/lionsgate), or watch the episode at https://www.youtube.com/watch?v=tgPeZfnfB5s.