The $WBD overhang was tough for Lionsgate $LION If the merger failed, the WBD assets would hold market primacy. If the deal required asset sales, that would funnel more supply into the market. Moreover, even an old warhorse responds to a trumpet, and Felt and Burns would likely be on the field as buyers. With clarity, Lionsgate now has more parties to sell to, at the project level and the studio level. Scale and IP matter more than ever. Being a bit undersized is a feature, not a bug, and it’s the reason why Lionsgate is the last great Library that can be acquired.

9/ Alexey: “For reference, a film typically needs to gross 2.5x its production budget at the worldwide box office to break even.” JFC. Let’s get to film finance. Lionsgate distributes a lot of movies but only very rarely would they underwrite a movie to gross 2.5x its production budget. That’s not their business. They often have co-financing partners, license foreign territory rights, and avail themselves of tax credits. Moreover, many of their mid-tier releases over-index on PVOD relative to big budget movies. But there is no typical Lionsgate movie. And we will get to that. Alexey observes that the 2024 film releases were not good business. He’s right. None of us were happy. I’ve already cited the pandemic, the strikes, the macro environment, the industry transformation, the SPAC, the PIPE, the spin, the re-fi. And Joe Drake walked the plank. Action was taken. Confidence was restored. Joe Drake did a lot of good things as Chair of the Motion Picture Group (and he sold a couple of businesses to the company over the years), but toward the end of his tenure he was too transactional, too much of a short-term economic actor; while the risk-mitigated model may have protected the studio, it was not always as kind to international territorial partners, to the talent, to exhibitors and frankly to the brand. So Adam Fogelson was installed. He has his detractors. Relic is not one of them. Fogelson’s father, Andrew, was a legendary film marketing professional and served as President of Marketing for Warner Bros. for many years. Adam spent 15 years at Universal, becoming President of Marketing & Distribution and eventually Chairman of Universal Pictures. He later broke off to start STX and had his Icarus moment. While that venture did not ultimately achieve its goals, we learn more in failure than success, and “struggle our way to wisdom” and I am wholly convinced that he’s a better studio executive and businessman for it. Yes, we’ve been under-achieving. I want and expect more from mid-tier releases going forward and I believe we will get more. And Lionsgate remains the largest supplier of independent movies to the international marketplace. Again, I was disappointed this year with Greenland 2, I Can Only Imagine 2, Strangers 3, Power Ballad, and Mutiny. (But not with Fall 2). So let’s start with Greenland 2. This was an STX property and its budget was fully-financed by a European financier. So right away, any analysis of box office performance as a multiple of the production budget is essentially meaningless to Lionsgate shareholders. Yes, Lionsgate had to offer consideration for domestic rights, and commit to a minimum screen release and P&A spend. But nobody outside the company has read the deal memo or has any idea of what the low, base, and high case content analysis suggests. Nobody knows the Pay-TV / SVOD rate card, the PVOD economics, or the contribution from the re-activation of the original Greenland in the library. Do I wish it had grossed $10M more? Sure. But they knew how much to press or not press the marketing spend going into the release and they knew the efficient frontier to recoup in first position, earn a fee and eventually get to the net / backend. Hits have a back-end. Losers pay a vigorish to the distributor. This is the loan shark business and Alexey has not the first clue about how Lionsgate Studios actually functions in different settings. And there’s only so much we’re gonna tell him. And his model is going to be wrong. As David Mamet writes in Speed-the-Plow: “Charlie, permit me to tell you: two things I’ve learned, 25 years in the entertainment industry. Two things which are always true. The first one: there is not net. And I forget the second one.” Film project accounting is notoriously and intentionally opaque and they can’t say it, but I can. So if Alexey cannot read the subtext or doesn’t understand the rules of the game, just don’t cover the stock. Back to Greenland 2 – it’s not our movie and the ending is awful, and it was a missed opportunity. I Can Only Imagine 2 – again in partnership with Kingdom Story, we probably didn’t get hurt too badly, but the lesson here is you can’t franchise everything. Strangers 3 – we knew this was going to be tough after Strangers 2, but they essentially shot all three at once, I am sure they had financing partners, and they made money on these dogs. Couldn’t not release the third entry. Power Ballad. This was a festival or film market pick-up. It had a very limited release. I don’t know what they paid or how it was structured. For all I know the rights were exchanged just for a minimum screen commitment. I have no idea what the return was here, but they obviously built their release plan against the business case. Mutiny. I have no idea what they paid for the domestic rights, but the box office to budget metric is again useless without the deal memo. They did give this a real marketing campaign, but it was a late August release with balloons on rivers. I think we’re learning Statham’s demo doesn’t really show up to theaters too easily (Working Man and Bee Keeper aside) and the accidental leak on Amazon Prime before the release didn’t help. But here is Producer Basil Iwanyk on The Town Podcast on August 13, 2026: “And what I’ve learned from the economics of Gerry [Butler] and [Jason] Statham movies is you truly should ignore the domestic box office. You know I’m not a math genius and there are many times where I’m like, oh my God, we’re going to lose money on this movie. But then you realize, no, it’s actually so profitable in the afterlife that even if a movie makes, you know, $14M and the movies costs, you know, $55M, you know none of that makes sense, right? You kind of go, that’s going to be a pooch. It makes them money…these movies, these Gerry movies and these Statham movies, the model that they have are profitable on every single one of them. I’m not kidding you – every single one of them.” A minute on Fall 2: Deadpoint. A Capstone Pictures production (shout out Obsession). Widest release was 1,700 screens. It did $5M in domestic box office. The predecessor was made for VOD, but went theatrical on a lark and made $7M domestically. The theatrical release was the marketing campaign for home video consumption. Calling this “underperformance” is just weird. The marketing campaign included a fan screening where audiences watched the movie propped on a high ledge, in a harness. smh. Alexey wrote, “Fall 2 was released on September 2 and has grossed $8m at the time of writing, below the prior Fall, which grossed $18m on a $3m production budget.” Fall 2 had grossed $13M by the time his report was published. But none of it matters. Now am I saying that we should be happy with hitting low cases, or with not being too badly hurt on misses, or being a studio that isn’t competing for meaningful market-share on each release? Of course not! I’m saying we had to recapitalize the whole company, complete the spin, survive the meager downstream window from a terrible 2024 slate and essentially play injured. But this is a business of shots on goal, and I am sure more and higher quality shots are coming. But just to anchor us - in the end, it’s library, library, library, comrades. And another Hunger Games or John Wick, or Saw, or Housemaid will be born at some point. And I’d bet dollars to donuts that Naruto will be the biggest of them all. But look, Alexey doesn’t understand project level film economics, and he demonstrably doesn’t understand them at Lionsgate, so he shouldn’t be publishing on the topic. What I have been noticing recently, which is more salient, is that the other legacy studios are starting to mine and monetize their libraries more. Right now I see a lot of 20-film bundles being offered at a buck-a-movie. That concerns me more than anything Alexey wrote in his report. Because for years “Ça ne vaut pas la peine”. It wasn’t worth it for the majors to spend their time selling their library titles. I suspect with AI tools, even though they didn’t have a Jim Packer or a Ron Schwartz doing it for 20 years, now these other players have tools to pick up library margin that they may as well grab. But my initial concern quickly flipped – the majors are beginning to understand the value of our key asset and our long history of high-volume diversified slates. But back to Alexey’s counterfeit explanation on film profit economics: “Don’t talk about things you don’t understand.” – Logan Roy No Deal Memo. No Greenlight model. No DCF analysis. Look I don’t have a problem with directional observation that the studio has been in recovery on the motion picture segment, but be fair, consider context, and show humility. Yes the hits have been carrying us. It’s a business of hits. You have power law distributions at play, these are VC bets and like in VC, granularity is key. Risk mitigation is important and the hits have long tails. As Burns says, “singles and doubles, and every once in a while we get a frachise.” In the meantime, you have a library engine feeding this optionality cycle funded by…YES! PRODUCTION LOANS – CHEAP OPM THAT IS PROJECT LEVEL AND NON-RECOURSE. “We've got to stick to our model and put 40 - 50 movies a year into the library, continue to make television shows, probably invest somewhere between $1.2B and $1.5B of content, make money on almost every single piece of content, put it in the library and continue to ring the cash register.” – March 2024 (I think it was M.B.)

$LION.US 1/ Alexey Philippov’s LION Report Analyst TipRanks Data: #4,644 out of 5,004 Wall Street analysts Alexey opens his report with: “May the Odds Be Ever in Your Favor”; Initiating at Underweight with a $9 PT He’s citing a famous Hunger Games line, known to be a loaded farewell to a mass of kids headed toward certain, violent doom. Is he chirping / shading on publication? Or really that tone deaf? And why now? We are at the mid-point between quarterly reports and after the stock has already fallen by $6.00 per share, he comes out with a sell rating as he initiates. All other analysts are constructive on the name and are offside relative to price action. Is Alexey trying to be the brave, divergent perspective by piling on?