Starz Entertainment Corp (STRZ) 2009 Q1 法說會逐字稿

Thank you, ladies and gentlemen, for standing by. Welcome to the fiscal 2009 Q1 earnings call. At this time all participants are in a listen only mode. Later we will conduct a question and answer session. Instructions will be given at that time. (OPERATOR INSTRUCTIONS) As a reminder this conference is being recorded.

I'll now turn the conference over to our Senior Vice President , Head of Investor Relations, Peter Wilkes. Please go

Good morning. Thank you for joining us on our Q1 call. We'll have opening remarks from Jon Feltheimer, our CEO; Michael Burns, our Vice Chairman; Steve Beeks, President and co-Chief Operating Officer; and Joe Drake, co-Chief Operating Officer and President of our Motion Picture Group; also joining us on the call are Jim Keegan, CFO; and Rick Prell, our Chief Accounting Officer. Following opening remarks we'll open the call to your questions.

Matters discussed on this call include forward-looking statements. Such statements are subject to a number of risks and uncertainties. Actual results in the future could differ materially and adversely from those described in the forward-looking statements as a result of various important factors including the risk factors set fourth in Lions Gate annual report on Form 10-K filed with the SEC on August 8, 2008. The Company undertakes no obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect any future events or circumstances. Jon?

Good morning and thank you for joining us today in the middle of the Summer. Q1 was a strong growth quarter for Lions Gate with revenues increasing more than 50% from last years first quarter. We achieved double digit revenue growth in all segments of our business, motion pictures, television, home entertainment, library, international and digital. Our first quarter EBITDA of $13 million before equity interest and net income of $7.1 million both reflect positive swings of $60 million from last years first quarter. Michael will talk and the rest of fiscal '09 and fiscal '10 in a few minutes. I'd like to begin this morning by noting that I'm delighted with the leadership that our co-COO Steve Beeks and Joe Drake have shown in refocusing some of our key businesses and positioning them for sustained growth. You'll be hearing from each of them in a few minutes.

As I run through our headlines into last call you can see how important our diversification has become and just how busy we've been closing our $340 million five year revolving credit facility with JPMorgan, we're very fortunate to have the opportunities that a combination of large cash reserves, a strong balance sheet and good credit present in the current market environment. Growing both the production and distribution sides of our television business, Weeds has been picked up by Showtime for not one but two seasons clearly defining its back end value. Partnering with Showtime and the new 13 episode pick up of Eddie Falco's comedy Nurse Jackie debuting in November, launching our 50/5 0 joint venture with ISH Entertainment, we announced the partnership just six months ago and already have five reality series shows slated to air this year and next.

Paris Hilton's new show for MTV has already been sold for original episodes to the IT network in the UK and we believe that it will be a very successful worldwide format. We've now established a strong beachhead in reality television on which we intend to build. Testing the Wendy Williams talk show in key markets around the U.S. for television syndication through Debmar Mercury next year. The show set new ratings records in New York last week where it was number one among woman 18to 34 from 7:00 a.m. to 8:00 p.m. First in its time period in Dallas among women in 18 to 34 and first in Detroit among all key women demos where it tripled its lead in. We believe Wendy can be the next generation Oprah for our Next Generation studio, concluding a new three year with our partner, Tyler Perry for film and DVD, thanks to the leadership of Joe Drake and Mike Pasternak. We expect to have Tyler's next five movies to this fiscal year and at least three after that and now we have important Tyler news coming on the television side that we expect Tyler and Debmar Mercury will be announcing in the next few weeks.

Growing our channel business, the success of our FearNet branded horror channel was underscored by its recent distribution deal with Time Warner Cable which takes it up to nearly 30 million subscribers, launching a new Asian television venture, our partner international television executive William Pfeiffer let Sony Pictures move into the Asian filmed entertainment market and he has just concluded a successful seven year tenure as CEO of Celestial Pictures in Hong Kong. We plan to leverage our action and horror content leadership into a branded channel to serve a new audience of more than 2 billion consumers. Teaming with market leader Eros International to bring Western content and formats to an Indian marketplace of 1.3 billion new consumers, forging new alliances in the digital space with an innovative revenue sharing deal with Google's YouTube. Under the leadership of new digital executive Curt Marvis, we've become the first studio to align ourselves with YouTube in reaching out to the next generation of filmed entertainment consumers and breaking the 50 million unique monthly visitors worldwide mark at the break.com network. Break is quickly emerging as a leader in the young men's online space and since January of this year alone, break's new online properties such as Chicapedia and Cage Potato already account for more than 10 million unique visitors a month. Break's revenues in their most recent quarter have grown over 180% from the same quarter last year.

As I mentioned I'm very pleased with the leadership exhibited by Joe and Steve and I'll turned call over to them to discuss a few of their recent initiatives. Following their remarks Michael will discuss how we're translating all of these growth initiatives to the bottom line as Mandate, Debmar, and other recent Lions Gate investments begin to generate meaningful returns. Steve?

Thank you, Jon. Q1 was a great quarter for Lion's Gate and continued the strong start to 2008 for the home entertainment industry overall, which are performing very well so far this year. Packaged media is steady or even up over last year, and is projected to grow by at least 1% year-over-year by year-end. High margin digital and VOD revenues are also up significantly as expected. Catalog revenues, an important barometer of the industry's health are up 2% for calendar '08 to date. BluRay for the first six months of the calendar year, were $260 million up 330% from the first six months of last year. With more than 50% of all Blu Ray disk's projected sales projected to occur in the calendar Q4 holiday season, we believe that BluRay sales are on track to exceed $1 billion this year, and we expect substantial further growth next year.

Digital revenues, which include all VOD and broadband were $600 million in the first half of calendar '08, up 33% from last year. We expect digital to exceed $1.5 billion for the full year and anticipate that this segment will grow to over $3.5 billion and nearly 15% of the total home entertainment pie by 2013. These are the metrics of a healthy home entertainment industry. Packaged media is poised to grow even further as BluRay continues to expand. Couple that with strong and accretive digital revenue and home entertainment overall is well positioned to continue to grow and demonstrate its resilience. Lions Gate's Home Entertainment business is off to one of its best starts ever this year. Revenues for our first quarter were up 51% from last year. Library revenues achieved their best first quarter ever, and nearly their best quarter overall. We actually saw growth in our deep library titles all at steady margins. Given that Fiscal Q3 is generally our best quarter for catalog, we project it will beat our earlier projection for full year library revenue. We think that library revenues could hit as high as $300 million this year.

For the first half of the calendar year we had a DVD market share of 7.7%, the highest we've ever recorded. We began distributing hit entertainment titles on May 1. Combining brands such as hits Thomas the Tank Engine, Bob the Builder and Barney with our Bratz and Marvel franchises we are now one of the top three distributors in the family, non-theatrical home entertainment space with market share of approximately 15%. We also continue to grow our television to DVD business. Our recent release of Weeds season 3 digitally and on DVD underscored our ability to grow digital and packaged media revenues at the same time. The third season of Weeds significantly outperformed the second season in both packaged media sales and digital downloads, showing that rapid growth in digital doesn't cannibalize DVD sales.

We also recently closed deals with ABC for the DVD distribution of several shows such as according to Jim, Hope and Faith and Eight Simple Rules as well as with Comcast for the DVD distribution of television programming from E, Style, and G4. Our theatrical titles continue to convert Box Office to DVD revenues at the highest rate in the industry. Margins are not only steady but the growth of BluRay for new releases as well as library has actually allowed us to increase average wholesale prices in certain areas of our product line. Increasing our margins going forward as a result. As I said before, and in light of at least one recent analyst report asking about digital, we have seen no evidence that digital cannibalizes any of our packaged media businesses. In fact, in some cases, it may actually stimulate the appetite for them, and if there is any shift of DVD rental to digital rental, that's actually the good news. The studios portion of the consumer dollar is going to continue to grow dramatically. On DVD rentals the studio gets 30 to 35% of the consumers dollars. In digital rentals the studio gets 60% of that same consumer dollar and all of this is at significantly higher operating margins.

Looking ahead, all the news in home entertainment is good. We expect consumer spending on home entertainment in all formats to grow each year between now and 2013. With margin growth on top of that. Technology is working for us. In BluRay, and in digital. Not only giving us greater margins but in creating unlimited virtual shelf space that will allow us to monetize an even greater portion of our 12,000 title library. Joe?

Thank you, Steve. On the last conference call, I said that the driving factor behind every programming decision we make is a committment to unlock the full potential that every distribution slot represents. With that as our guiding principal we have put together a slate that we believe will deliver the highest ultimate profitability in the history of the Company. We've always said that we want to be in a position to take advantage of opportunities when we identify them and we have done just that. We've also remained disciplined in our approach to distribution and decided not to compete in the overcrowded summer blockbuster period. The result is that Lions Gate will release a record number of pictures in the second half of fiscal 2009. Although our P&A spend for the year will be level with last year which is our goal, our P&A spend for the second half of the year is up approximately $70 million. Let's look at our slate.

Starting at the end of August, we have four wide releases, four weeks in a row. On August 29, we opened Disaster Movie, a spoof on the disaster genre created by the team who delivered such spoof hits as Meet the Spartans, Epic Movie and Date Movie. Disaster Movie came on tracking last Thursday with very strong indicative numbers. The very next week on September 5, we open a muscular action picture called Bangkok Danger starring Nicolas Cage followed on September 12, with Tyler Perry's The Family That Prays Together and one week later on September 19, we open My Best Friends Girl, a hysterically broad, warm, romantic comedy starring Kate Hudson. Other highlights on our fall schedule include W, a provocative look at George W. Bush through the eyes of Oliver Stone. We released a teaser trailer two weeks ago in theatres and on the Internet and reaction has been explosive. We may have lightning in a bottle with this one. And obviously we're very excited about Saw 5, and Halloween, The Punisher opening on December 5, and The Spirit opening on Christmas Day.

Additionally, on our last call, we mentioned the opportunistic acquisition of Transporter 3 which we acquired t the Cannes Film Festival this year. The film now scheduled for theatrical release on November 26, is one of the additions contributing to our heavily back loaded year, however the ultimate profitability of the picture will make it one of the big contributors to our record rollover in 2010. We made a similar decision when we dated Chilled in Miami, starring Renee Zellweger for release on January 30, of next year. Although we will absorb significant P&A late in the fiscal year, our underlying economics on the title should make it a big 2010 contributor as well.

Technology is also working to our advantage as we grow our business as a next generation major studio. Our analysis of early data indicates that Digital 3D Cinema is delivering significantly higher per screen average than traditional screens and has the potential to grow overall ultimate per picture box office. As an example when you dissect the recent Warner Brothers release of Journey to the Center of the Earth, the opening weekend 3D screens averaged nearly three times more than the opening weekend 2D screens. The result was an overall weekend box office gross and ultimate box office gross that exceeded even the most optimistic expectation. In keeping with our committment to stay in the leading edge of technology where it enhances our business Lions Gate will release My Bloody Valentine on January 16, next year, the first horror film ever to be presented in stunningly real cutting edge 3D. Just this week we also made a decision to complete our animated film Alpha and Omega in 3D. We will release Alpha and Omega in the Spring of 2010.

On the Mandate front, the Company continues to strengthen its reputation in the marketplace as a dynamic leader in the development and production of original distinct voices. Mandate continues to show its ability to attract great talent and deliver winners. Next up on October 3, Mandate will release Nick and Nora's Infinite Playlist starring Michael Sarah and Kat Denings through Columbia Pictures. This film tested through the roof and is expected to form extremely well in release. Mandates economic partnership with Columbia Pictures should yield a significant return in modest success and in great success has the potential to deliver our best margins ever for single picture.

Sam Raimi's busy finishing up his cutter Drag Me to Hell. Universal Pictures so so excited about what they've seen they've scheduled release on May 29, next year as one of the big summer tent poles. At the end of last week we started shopping Whip It starring Ellen Page and Drew Barrymore to major studios. Based on early indications the movie has extraordinary demand and looks to be another Mandate locomotive. And since the last conference call, Mandate announced Jay and Seth Versus the Apocalypse, a collaboration with Seth Rogan and Evan Goldberg, the creators of Superbad. This film follows the absurdity that ensues between two friends who are couped up together as the end of the world unfolds. Given Seth and Evans pedigree and Seth's continued Box Office success this weekend with Pineapple Express, studio demand for the material has reached a fever pitch. Together, both the Lions Gate and Mandate Motion Picture Groups are positioned for record years. Now I'd like to turn the call over to Michael Burns. Michael?

Thank you, Joe. Our current financial position underscores the importance of a solid business plan, well executed regardless of the volatility in the broader market environment. As John mentioned we just closed our new revolving credit facility with a blew chip syndicate of banks on terms of LIBOR plus 2.25 significantly better than LIBOR plus 2.75 rate of our previous facility. Our transaction was over subscribed despite the current overall credit environment. Our filmed entertainment backlog reached a record $441 million in the first quarter. Our cash position of $231 million of cash and cash equivalents should grow to more than $400 million by fiscal year end, depending on our M&A activity and additional stock buybacks. You've seen from our latest 10-Q that we continue to buy our stock when deemed appropriate.

Our strong growth continued in every one of our core businesses. We expect revenues in the second quarter to approach $400 million, and we expect our top line to grow to the $1.6 billion range this year. Additionally, we expect continued top line growth in fiscal 2010. As we have been discussing, we see our EBITDA and free cash flow lines beginning to converge this year. We are taking an even more disciplined approach to our theatrical P&A and expect our P&A spend to level off at approximately $300 million. Coupling this with $115 million contribution rolling over from our strong fiscal '08 slate, we expect EBITDA this year to be close to breakeven. Obviously subject to the performance and scheduling of our feature films. We believe that our fiscal 2009 slate will be our strongest yet in terms of ultimate profitability. With an even larger rollover in fiscal 2010, than 2009, we believe we can achieve in excess of $50 million in EBITDA in fiscal 2010.

Although our theatrical P&A will remain level with last year, it is important to note that our P&A spend this year as Joe mentioned is more heavily back loaded than usual, with the Spirit, Punisher 2, Madea Goes to Jail and other big pictures all slated for Q3 and Q4 release, we expect to expense $180 million in theatrical P&A in the second half of this year compared to $107 million in the second half of last year. With the ebbs and flows of our five pictures fund coupled with a heavily back loaded year affecting free cash flow and EBITDA we are not anticipating free cash flow to grow this fiscal year. We're continuing to target $100 million in free cash flow as we've done the last three years but because of our late fiscal year releases and the recent additions of Kills in Miami and Transporter 3, this years target is certainly not a lay-up. The strength of this years slate does, however, allow us to reemphasize a very positive outlook for fiscal 2010 EBITDA. With a strong balance sheet, solid cash generation and all of our GAAP metrics starting to fall into place, we remain poised for opportunistic and entrepreneurial growth within our current core businesses with an eye towards expansion and to complementary enterprises where we can leverage our existing infrastructure. Jon?

Thank you, Michael. As you look at our steadily growing revenues, our consistent film and DVD market share between 5 and 10% and our strength in pay and basic cable television production coupled with our growing channel and digital assets, I believe you can see overwhelming evidence of our growth into the dominant new next generation measure that we have defined as our goal. I'd now like to open the call to your questions.

Thank you. (OPERATOR INSTRUCTIONS) The first question comes from the line of Alan Gould, Natixis. Please go ahead.

Thank you. I've got two questions. First for Jim. Jim, can you give us some idea what you think the film costs are going to be this year and second for Michael, you were giving us some data about the rollover of one year to the next in terms of film profits. This fiscal '08 should at about $115 million? What did fiscal '07 add to fiscal '08 and what should fiscal '08 add to fiscal '09 profits?

Okay, Alan, on your first question, I anticipate this year we're going to actually cash out spend approximately $470 million in our film costs, actual costs out the door, probably about 130 of that on the television side, balance being the motion picture side. I guess let me take some of the rollover questions you just had for Michael. We've been showing that the rollover of the old seven slate into our '08 was about $72 million, and 115 -- $114 million into the '09 and then the next year's rollover should be approximately $180 million from the '09 into the '010 slate.

What was that last number, I'm sorry?

180.

180, okay, thank you very much.

Thank you. Ed next question comes from the line of David Miller, Caris & Company. Please go ahead.

Hi, good morning. Congratulations on the stellar results. Just two questions. First of all on your below the line consolidated interest I guess non-consolidated, the 42% interest in break.com does that make money in EBITDA? And also the 43% interest in roadside, does that make money in either operating income or EBITDA? And then also, it looks like you guys have had a fairly radical change here in some release dates, sort of skewed to Q3 and Q4. Is it just because you got great dates for those pictures or is there something else behind the decision? Thanks very much.

Well, I guess first of all the EBITDA question, we are giving our EBITDA before equity interest, so those are not included as part of our EBITDA number that we're giving.

But David in terms of Break, you should note that Break for the last few months has actually turned profitable.

Okay, and the release dates?

As it relates to the release dates it's a few things. One, we've been very very very fanatical about choosing the right date for our films, in addition as we said earlier in the call there are a few films that we found that were just perfectly situated for a couple of dates in the Fall here and so we've actually added a lot of pictures.

And then finally, on the joint venture with Viacom, is there any update here? Is there any news you guys can give us in terms of what the name of the channel is? How the accounting is going to work. What's launch date is? We just really don't have a lot of information on the new, as yet, unnamed channel.

Okay, launch date is I think I've said before, Dave. It's October '09 so it's about 15 or 16 months from now. As I've said before we're having distribution conversations at the highest levels of all of the MSOs. We have locked up some very interesting content, for example, for the first time ever on pay television, we're going to launch the channel with 17, all 17 films from the James Bond Library, and the main is we've got 15 or 16 months to come up with the perfect name and we're still playing around with that, but obviously, given the content that we've got, we are highly confident that we'll have significant distribution at premium licensees by next Fall.

Okay, thank you.

Thank you. The next question comes from the line of David Bank, RBC Capital Markets. Please go ahead.

Thanks, good morning. A couple of questions. The first one is when you talked about the catalog growth in he $300 million target this year, can you talk about, is that sort of all organic growth from the same properties you had last year mining them better or is there a contribution there from growth and -- from acquisitions? Can you separate them? The second question is if you could give us kind of terms of the YouTube deal, like what does the revenue share look like with YouTube and any other relevant, any other relevant terms that are involved in the deal, thanks.

David, this is Steve. On the catalog question, it's a combination of two things, but we do have as I mentioned, we see organic growth if you will as you call it, our deep catalog revenue is actually growing which is great news and as I mentioned at higher margins given the BluRay and digital, and then of course on an ongoing basis, six months after title has been released and the media drops into the catalogs, there's a little bit of that but primarily it's all continued growth of the catalog product we already had in there.

I'll answer the YouTube question. The split is basically a 50/50 split. They do take a small fee up front basically for administration but it's turned out to be a great way we believe to monetize some of our clips and some of our content and also at the same time drive either electronic sell-through sales or DVDs.

Okay, thanks, guys.

Thank you. Ed next question comes from the line of Ben Mogil, Thomas Weisel Partners. Please go ahead.

Hi, guys, good morning. A couple questions. Well, following up on David's question about the library growth, I mean, is hits sort of one of the reasons why you're getting better library growth this year?

I think what Steve was trying to say is it really at the end of the day, it's virtually all organic growth because it's not only what we already call deep catalog but as we go on the investment we've made in film and television over previous years starts to drop into that category, so in terms of really I think the point of the question which is are we essentially buying library growth, the answer is, no. This is essentially almost all primarily coming from the investment that we've made in our product.

Okay, thanks. And then second question in terms of the P&A spend you've got it basically being flat which I suspect on a positive side is somewhat surprising to a lot of people here on the call. Are you changing how you're spending? I talked to some other studios, they're spending a lot less on newspapers, obviously going more online. Are you seeing changes like that sort of help your cost side on the P&A front?

There has not been significant shifting of the P&A. The Company's just been, it has always been very very disciplined relative to the other studios and on the last call I think I talked and how a typical studio spending, $35 million, we might spend 26 million or $27 million so we're just much more efficient in the way we spend and just because we're focused on EBITDA and expensing of P&A in a given year has a significant impact on EBITDA we've been very careful to keep that in line.

The other added circumstance would be that not distributing pictures over the Summer, the more you distribute in the Summer against all the blockbusters the more you've got to spend, so the way we discriminate in terms of picking our dates is while we ended up with a pretty severely back loaded year, it enabled us to keep our P&A flat which should definitely benefit us going into next year.

The industry, is still seeing more shifting towards the Internet and for the first time if Keith Richmond from Breaker were on the call, he would tell you for the first time ever Break has now advertising coming from not only Lions Gate but every major studio.

Okay and then last question and I'll cede the floor. In terms of Prides deal, I think it's 23 pictures or so, when do you anticipate approximately the last picture going through the system?

It depends on obviously performance, but we could end up with at least another 13 pictures so it could go through the middle of next year or towards the end of the first quarter of next year.

So the first quarter of 2010?

Yes.

Okay. Great. Thanks guys.

Thank you. The next question comes from the line of Jeff Logsdon, BMO Capital. Please go ahead.

Thank you, great quarter guys. Michael or Jon, can you talk about your liquidity seems to put you in a pretty interesting spot here that where lots of independent film companies are having more and more difficulty accessing capital. Can you talk a little bit about not only the bank agreement but your cash and your film partnerships, how you've really got some advantage in the year or two coming forward?

Michael?

Yes, I think, Jeff, that you're seeing in this environment particularly cash is king, and so we are taking a look at transactions that we believe will be accretive to us and we're looking at valuations frankly, that are more interesting to us than have been in the past, and that could be, it could be film libraries, it could be bolt on acquisitions where I said that we could leverage our infrastructure and we're specifically focusing on television, international, taking a look at music video games and other businesses that continue to sort of broaden or strengthened line extension of our current businesses.

Could you talk a little bit about is there much in the way of video game revenues that comes through? Is it two or three or four films a year? Is it bigger than that?

I'm sorry your question is video game revenue?

Yes. Are you guys beginning to be able to leverage at any level the video game marketplace?

Well, we haven't done a lot of that. We've done some licensing of our existing IP. I think in about 18 months you'll see the first Saw video game that comes out so we're excited about that. We did that deal with a Company called Brash, but we have not exploited a lot of our IP in the video game space all throw we are looking at it diligently to try to figure out exactly where that might fit with us.

Great. Thank you.

Thank you. The next question comes from the line of David Joyce, Miller Tabak & Company.

Thank you. I was wondering in terms of the free cash flow and timing on maybe on production costs, was there an acceleration during the calendar second quarter ahead of the SAG expiration?

The cash flow, net cash out actually in our whatever Q1 if you look at the way as we do it if you take any financing it was $166 million this quarter and it was $156 million in the first quarter of last year so it's pretty much even.

Okay, that's pretty much the same there. Okay, on the, I was wondering about the trends in the fee ranges if there's been anything changing on the films that you distribute, has there been any change in the industry on the fees?

No. I would say, and partly thanks to Joe, we're holding our fees up if anything I think we're probably strengthening them as the value of our slots becomes more and more valuable, again, partly going back to the last question with our resources right now, I think we're in a position to have a number of the smaller independence coming to us to do joint ventures together, distributing their films. I think we're really in a great bargaining position to negotiate for strong distribution fees.

I think that when you see that Warner Independent, Picture House, New Line, these companies have closed down, you see that Paramount vantage is shrinking, the value of distribution slots are going up. We're very focused on that and as I continue to say and you'll start to see this over time, I think there's room to squeeze more out of each slot because of the current market factors.

Yes, thank you.

Yes, it is a very important factor right now.

All right, thank you.

The next question comes from the line of Barton Crockett, JPMorgan. Please go ahead.

Okay, great. Thanks for taking the question. I wanted to, since it's not all fully laid out in the press release and you went over it quickly on the call, just to make sure I understand what your guidance is at this point in terms of free cash flow for this year and for next year and EBITDA for this year and next year and your outlook for the Box Office receipts that your movies would get this year?

Joe can talk certainly about Box Office targets but what we've said on the call is that close to breakeven EBITDA this year, fiscal '09 in excess of $50 million, fiscal 2010 and we've said that our target although not a layup is $100 million of free cash flow for this year. We didn't give free cash flow guidance for 2010, much too early for that but we also said that we've obviously moved a lot of films to the latter half of the year so it is back end loaded.

And would it be reasonable, I'm sorry, I interrupted you. Go ahead.

I was going to say, those metrics are looking at probably a ballpark of about $550 million of Box Office, obviously again subject to timing of deliveries, of both the film and television side.

Okay, that's great and then you've got the $50 million kind of ramp up year-over-year '010 versus '09 in EBITDA roughly. Is it reasonable to assume there would be some correlation of free cash flow, would that also be growing or tend to level out and that's how these two lines converge next year?

I don't think we're right now in a position to talk about free cash for next year. As you know, given the lumpiness of timing of deliveries, we don't give quarterly guidance and right now I would say we're trying to move our overall guidance to what I would call directional guidance, but we think we're going to have a very strong EBITDA year next year given as Jim said just now, rollover of what looks to be around $180 million of the slate into next year.

Okay. And then switching to the DVD line, which is pacing well, I was wondering if you could tell us what you see as kind of key titles driving the second quarter, just reading the Q, I'm not sure that we saw Meet the Browns DVD in the first quarter here or the Weeds or Mad Men and I was just wondering if you could tell us when those hit and what the key drivers are for next quarter?

Barton, in the Q1, we had three significant theatrical titles hit, Rambo, The Eye, and Witness Protection. Now, they all did incredibly well. Rambo obviously overconverted. Witless Protection overconverted out of this world, did very well. Obviously, Weeds having a great, as we mentioned, is outperforming Season Two, but there weren't any, and we had tremendous performance overall with our library and with all of the other titles. So I'd say there weren't any real drivers of that performance but the performance is really pleasant, not a surprise, but great thing about the video industry it's showing tremendous strength across all segments of the business so there's not really one or two things driving that performance. I think it's everything.

Okay, so clearly it's pacing well. I was just wondering where Weeds, Meet the Browns, or Mad Men in the DVD numbers you reported in the first quarter what will they be in the second quarter?

Well, I can answer on what happened, Weeds, Season three, yes, there is Weeds revenue in there probably totaling about 7 million to $8 million of DVD revenue in the first quarter from Weeds.

But Meet the Browns released in Q2.

Okay. And Mad Men 2Q?

Q2 as well.

Okay, that's great. And then the other thing is on the Mandate line, you had some Juno in there. Is there more Juno to come in that line?

Yes, there's a lot more. I don't have the numbers in front of me but we've just started to see the cash flows from that movie. It will hit heavily in the coming quarters.

Okay. And then for the equity interest line, can you give us any sense of how that should be pacing over the balance of this year and into next year, even if you're just talking about the slope of those lines and maybe generally positive or negative what you see there?

Are you, as (inaudible) Break has continued hopefully going to a profitable line. The channel is probably breakeven, so hopefully those are trending up but we will be, and an earlier question, on the new channel we're going to have to incorporate those into it so that could actually, would invest $8.6 million this quarter but in the future maybe as we record on a one quarter lag those equity interests could be a slight drag down, just with some of the overhead costs during the (inaudible).

Okay, so you'll start recording P&L share there, what, next quarter basically?

Yes, on a quarter lag for the new premium channel, yes.

Okay. All right, that's great. Thanks a lot.

Thank you. Ladies and gentlemen, this conference will be available for replay after August 11, 2008, 8:00 Central standard time. You may access the AT&T teleconference replay system any time by dialing 1-800-475-6701, entering the access code 956017. International participants may dial 320-365-3844. That does conclude or conference for today. Thank you for your participation and for using AT&T executive teleconference. You may now disconnect.