If we need an illustration of the changing world of media we have to look no farther than the battle between the (vaguely) Vancouver-based film company Lions Gate Entertainment Corp. and activist investor Carl Icahn.
Lions Gate is the little movie company that could, starting out in North Vancouver with a few low-budget films and relentlessly building itself up as a player in the industry. Now largely operating out of Los Angeles, although it's still listed as Canadian based, its successes include television's Mad Men, and film's very lucrative, albeit blood-splattered, Saw franchise (no truth to the rumour that it's spinning out other film franchises named Drill and Chisel).
Icahn is a famous American corporate gadflyr whose modus operandi is to buy a position in a company and then agitate relentlessly to drive the stock price up. This agitation usually involves complaining, about and often subverting, various strategic intitiatives a company makes.
Icahn is currently trying to lift this stake in Lions Gate from 18.9% to 29.9% so that he can have more say in how Lions Gate is being run.
And right now, he wants more say in Lions Gate's ambitions to take over old Hollywood. It's expected (by industry analysts) to be pursuing a couple of biggie movie companies, namely MGM -- the company that had a lot ot do with making Hollywood what it is -- and Miramax, which was big in the latter years of the 20th Century.
Both are rumored to be struggling, victims of a changing media landscape.
Movies on your computer
Like the newspapers and television industries, the film landscape has been thrown into turmoil in the past five years because of the Internet . Moviegoers now have the ability to simply download a film to their laptops instead of lining up in the rain to get into a movie theatre where they have to pay outrageous prices for butter-slathered popcorn.
I don't watch movies on my computer, because I need a larger screen (the eyes are the first to go) but apparently almost everyone under 35 does. The typical movie date has changed from cuddling in the back row of a theatre to cuddling up to the LCD screen in a matchbox-sized apartment.
And that spells trouble for the traditional film industry structure. Like the aforementioned industries, the film industry is being disintermediated by the Internet.
That's what Icahn and Lions Gate are scrapping over.
Lions Gate apparently figures the best strategy to fight this trend is to bulk up. So it's recently bought TV Guide, which has a film business, for $255 million. And now it's circling around traditional film distribution companies like MGM.
Presumably, the idea is that it can extend its low-cost, high-return model to these companies and thus survive in the new world.
Icahn appears to have a different attitude. He's already complaining that Lions Gate paid far too much for TV Guide, and will likely pay too much for MGM or any of the film companies that are currently on the auction block. The solution, he indicates, is to get leaner, not to bulk up.
Is he right? Who knows?
But their argument over strategy will be interesting to watch because it goes right to the heart of change in the media world.
