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Polone: Why Key Lionsgate Execs Got Fired Just Before Their Hunger Games Blew Up

Joe Drake, Stanley Tucci, Gary Ross, Liam Hemsworth, Jennifer Lawrence, Josh Hutcherson, Nina Jacobson, John Feltheimer, Alli Shearmur==
The Cinema Society & Calvin Klein Collection host a screening of "The Hunger Games"==
SVA Theater, NYC==
March 20, 2012==
©Patrick McMullan==
Photo - Nicholas Hunt / PatrickMcMullan.com==
== Lionsgate execs both departed and present with the Hunger Games crew (left to right): Former Motion Picture Group president Joe Drake, Stanley Tucci, director Gary Ross, Liam Hemsworth, Jennifer Lawrence, Josh Hutcherson, producer Nina Jacobson, chairman/CEO Jon Feltheimer, and former production president Alli Shearmur.

There is a strange recurring phenomenon in the entertainment industry, in which executives are fired shortly before projects they initiated become unusually successful. After Mark Canton was fired from Columbia Pictures in 1996, that studio released Men in Black, My Best Friend’s Wedding, and Air Force One, hits all green-lit under his watch. Lloyd Braun and Susan Lyne at ABC were fired just in time to miss the hugely rated runs of Lost, Desperate Housewives, and Grey’s Anatomy, all developed by their regime. Soon after Disney CEO Bob Iger declared “off with your head” to his studio boss Dick Cook, the film division had its biggest live-action triumph with Alice in Wonderland. The regularity with which executives' firings lead to their former company’s seemingly magical financial gain makes me wonder if a superstitious studio or network CEO ever thought of firing his executives to actually ensure the success of upcoming projects. Perhaps that is the explanation for the surprising sacking of the Lionsgate executives who acquired, developed, and supervised the production of The Hunger Games, not too long before the film's huge and company-transforming $153 million victory at the box office last weekend.

I've known the guy who runs Lionsgate, chairman and CEO Jon Feltheimer, for a long time, and he doesn’t strike me as someone who would think there is a metaphysical link between letting go of executives and how well their unreleased projects would do. He is truly a great executive and has built Lionsgate from what was a joke of a company into a true rival of the major studios. He has done this largely through acquisitions: The company's deal in January to buy Summit Entertainment, the home of Twilight, for roughly $700 million (after assumption of debt and cash on the balance sheet) is just the latest big purchase; previously, Lionsgate took over Trimark, Artisan, Mandate, Debmar Mercury, and the TV Guide network with clear success. To a lesser extent, the growth was also thanks to creative moves: Lionsgate's television studio has risen from nothing to offering such hits as Mad Men, Weeds, and Nurse Jackie.

So why would a thriving company fire its motion picture group president, Joe Drake, and its production president, Alli Shearmur, giving their jobs to those who held the same positions at Summit? (Head of distribution David Spitz didn't get fired, but he has been demoted to No. 2 behind incoming Summit executive David Fay; the future is unclear for marketing president Tim Palen and publicity head Julie Fontaine, who did an excellent job building prerelease awareness and interest in The Hunger Games on a relatively modest budget. It is certainly possible that their discharge has only been postponed because their job on The Hunger Games is still under way and it would be deleterious to the movie’s prospects to replace them before or just after the release date.) One explanation for the shuffle is that Feltheimer just felt that the incoming Summit executives who have taken his former team's place are better, and this was a convenient opportunity for an upgrade. But this reasoning seems unlikely: Though Summit's co-CEOs, Patrick Wachsberger and Robert Friedman, and production and acquisition president Erik Feig, deserve great credit for developing and producing the megasuccessful Twilight franchise five years ago, they have, of late, unleashed a rain of bombs reminiscent of the allied attack on Dresden, including Drive Angry, The Beaver, Three Musketeers, 50/50, Man on a Ledge, and Gone. While Drake and his Lionsgate team have had some failures like Warrior and Abduction, they also distributed the very successful Expendables. And they were operating during a time of overwhelming distraction; over the past couple of years, corporate raider Carl Ichan made regular attempts to influence company policy and possibly take over the board of directors, which couldn’t have made decision-making on the actual business of producing movies any easier. It takes a while for a new crew to gel, and it seems that was finally happening recently at Lionsgate. And most important, it is just plain weird to fire a bunch of people right as what everyone knows is going to be the biggest hit the company has ever had comes to market. 

The second, more likely scenario is that the housecleaning happened for another reason: To close the Summit deal, it could have been mandated (intentional pun) that Drake and others would have to be replaced by Summit's top execs. Which would lead to the next obvious question: Was the merger worth dumping these key executives? Judging by opinions from investment houses, analysts seem to think the revenue from the one remaining Twilight sequel and the home video cash stream from its antecedents will more than pay for Summit's purchase price and assumed debt. There is also a planned sequel to Summit's successful Red and the value of its relatively small non-Twilight library, which contains The Hurt Locker, Knowing, Letters to Juliet, and others, all of which mitigates the losses taken on the mini-studio's recent batch of underperforming releases. So, excluding the personnel changes, it seems like a good buy. But those same analysts also conservatively predict that The Hunger Games franchise will result in $1.2 to $1.4 billion in additional revenue for Lionsgate. Buying a project and helping develop it into a successful movie isn’t like buying a library of finished and released films: It is an art that can be done well by people with taste and experience, not something that can be valued on a discounted cash-flow study. When The Hunger Games novel was being shopped to the various studios by producer Nina Jacobson, there were many who wanted it and some who passed. The Summit executives didn’t buy it; Lionsgate's Drake and Shearmur did. And buying a cinematic or best-selling book doesn’t automatically yield success: Big-name novels like The Bonfire of the Vanities have been realized onscreen with disastrous results. In this case, Lionsgate’s executives did everything right.

Decisions by human beings can translate into billions of dollars when it comes to filmmaking. Though it is difficult to assign a value to a studio executive team, equal care should be taken when assessing the worth of human capital in a merger. Of course, we’ll never know if the old guys would have done a better job than the new guys had they been allowed to keep their jobs, but I do know from personal experience that it sucks more to be fired when you’re scoring than when you’re not, and I feel bad for those who are falling out of Lionsgate right now after their biggest score ever.

Follow Gavin Polone on Twitter: @gavinpolone

Photo: Nicholas Hunt/Patrick McMullan