Lionsgate Entertainment: Calling “Action” for Stalled Product Sales
The Challenge
Lionsgate Films had a series of problems and challenges. First, it was becoming apparent that retailers were having trouble selling-through several of its DVD titles, potentially triggering a sizable buyback.
At the same time, the studio had to continue promoting other releases. It contacted ICON, which was able to tackle both issues with a single barter solution.
How ICON Uncovered Value
The relationship started simply enough. When the studio found that certain DVDs weren’t moving through its retail partners, ICON offered to purchase the excess inventoryWhile this can refer to a client's physical inventory of merchandise (which, if it represents an undervalued asset, could form the basis of a corporate barter transaction), in the corporate barter world, inventory more commonly refers to a supply of advertising time/space purchased in advance by the barter company, which client companies use as fulfillment to complete their side of a corporate barter agreement. at book valueThe value of something as shown on bookkeeping records and as distinguished from market value; the value of an asset equal to cost less depreciation. in exchange for long-term advertising commitments. In the entertainment business, where promotion is critical to success, this was a “no-brainer” for Lionsgate, which quickly retired its fulfillmentThe process through which ICON delivers the goods and services clients have purchased from ICON using trade credit or cash or both. Also referred to as the back end of a corporate barter transaction. obligation.
With one successful transaction behind them, both sides began to think more creatively. Could corporate barterThe creation of value by exchanging a client's unwanted or undervalued asset for the promise to purchase over a period of time from the corporate-barter company a defined set of goods and/or services, called fulfillment. (Sometimes mistakenly referred to as Corporate Trade.) be elevated to a more strategic level, using trade creditAn alternative currency used in the corporate barter industry; one of ICON's financial options. (Note that this term is properly used only in the singular, i.e., never trade credits.) fulfillment to generate ongoing funding? Indeed, it could. In an industry where promotion never stops, cashU.S. federal banknotes; one of ICON's financial options. is king – and Lionsgate needs plenty of it to keep the wheels turning. ICON has since provided cash to fund various expenditures, including printing and advertising, in exchange for long-term purchasing agreements.
Result
Lionsgate continues working with ICON on a variety of agreements. As the studio’s EVP for structured financing put it, “There is a lot of room to grow” this relationship.
