Lionsgate's Curt Marvis, Interview Part 1

When it comes to digital media in Hollywood, Curt Marvis is one of the most senior veterans around. The co-founder of online movie retailer CinemaNow all the way back in 1999, he saw the dot-com economy boom and bust in Hollywood and lived to tell about it. For nearly a decade, he served as CEO and kept his company alive in a battle against the studio-backed Movielink, waiting for the day when broadband would spread and business models would relax in order to make the Internet the distribution mode of choice for home entertainment. (CinemaNow was acquired by Sonic Solutions in November for $3 million)

That day still isn’t quite here, but Marvis is continuing to bring it closer, now on the studio side. Last April he joined Lionsgate, a major investor in CinemaNow, as its first president of digital media, overseeing all of the mid-sized studio’s efforts on new digital platforms.

Last week, Marvis spoke to Technotainment editor Ben Fritz about his role at Lionsgate, his experience at CinemaNow, and where he sees sees the digital economy going for Hollywood in the future.

In this first of three parts, Marvis explains how he has come to define his position, the importance of online sales and rentals in the overall revenue for some Lionsgate movies, and his surprise at where digital distribution stands now compared to 10 years ago.

Ben Fritz: Tell me about your job. Is it overseeing anything and everything that Liongsate does digitally?

Curt Marvis: Basically I got this job with a piece of paper and I drew “digital media” in the middle in a circle and drew arrows out to theatrical, television, home entertainment, even music – we have a music group, which a lot of people don’t realize – corporate development, business development, channel business and then investor/financial community. And I listed in each of those all the different things that I could imagine were happening in those different departments that I knew within Lionsgate didn’t really have a lot of glue or communication between the groups. To use the overused term: Synergies between the various groups.

So I basically came in to Jon Feltheimer, the CEO, and said, “Look, if I came in here, this is what I would” – Because I had been at CinemaNow and I had reached a point where I was… They couldn’t pay me any more money. I could get stock that at that point was looking like it wasn’t necessarily going to be worth a lot of money. I started the company and I didn’t have the fire in my belly to keep going. So as an entrepreneur there was a point at which I said I’ve got to get in something new. So I came here and drew that out for him and said, “Here’s the things I think we need to be looking at in home entertainment, here’s a list of 20 things, etc.” He said, “Exactly, that’s what we want somebody to do” and by the end of the moment it was, “When do you start?”

So effectively what my job is is interfacing with all those groups on a multitude of challenges, problems, opportunities that exist within each one of those departments. What I’m least involved in really is theatrical and that’s because the one thing that I don’t do within the company is deal with the theatrical marketing or the homevideo marketing. I don’t go into the theatrical marketing people and say, “Hey, I think you should do pop-up ads on Yahoo Movies.”

BF: So it’s not the marketing, it’s the distribution?

CM: Basically you could say, if it’s not revenue-generating, I’m probably not involved in it. So in the home entertainment group, for example, I get involved in everything from shifting windows, pricing issues, iTunes stuff, everything moving from the packaged goods business to the digital world. In the television world we just made an announcement today about a format we licensed from Spain called “Instantly Rich” that we’re going to be taking out to the networks. It’s driven by SMS. It’s a show that I brought into the company from our relationship with Zed.

We also are doing things with “Weed” and “Mad Men.” And also we work with the TV Guide Network (which Lionsgate just acquired) and TVGuide.com in terms of cross-platform programming for television.

On the music side, mainly I’m dealing with getting those tracks out with ringtones and other things.

Then on the corporate channel side, because of Epix, which is the movie service we’re launching with Viacom, Paramount, and MGM. We have FearNet which is our all-horror VOD service. We have a large stake in Break.com. All of those businesses have their own management teams. I’m not in charge of those businesses by any means. But I’m an interface in the company.

BF: Different media companies have different ways they organize digital. In some places the TV people run the TV online, the movie people run the movies online… Are they running things and you’re a resource for them or is anything online overseen by you?

CM: A bit of it is based upon the corporate culture of Lionsgate which is, if you can hire one person to do the job of 10 people, let’s do it. I could spend all my day on just home entertainment. Obviously the shift from packaged to digital is both a huge opportunity and a huge problem for the industry. So that’s where I could spend all my time.

Because we don’t have the luxury of that on a manpower basis, I go to the home entertainment meetings and deal with their issues, to the TV group, etc. I’m spread around all of that. I think you could describe my role in many ways as both business development and also as an implementer once we have a project we can wrap our arms around. So a lot of it is really identifying the issues we’ve got to take care of in each of the divisions of the company and we add resources as we need to.

We’re a very very small team because we don’t want to, especially in today’s world – this is a pre-market conditions situation – but in today’s world, everybody here has to roll up their sleeves and do things. Really, that’s a bit of what Lionsgate’s about as a company.

BF: There’s always a question of how much of a real business is online and how much of a nascent business, especially for stuff like films. Do you see your job right now as running a division that needs to have an operating profit? Or to a certain extent is your job still figuring out these markets, finding alternatives to piracy… Is this as much a business as if you were selling DVDs or distributing TV shows?

CM: I think it’s an interesting question. While it’s still a small percentage of the overall home entertainment pie, the numbers that we’ve recently been hitting in terms of unit sales of certain titles digitally brought up the question in a meeting just yesterday that we really need to bake these into the overall home entertainment pie in a more organic fashion than currently exists.

We kind of sit out in our own department now and fold into [home entertainment]. The unit numbers we’re starting to sell digitally are significant enough that they really need to be folded into the ultimate projections and everything else on titles because in some cases the sales that we experience off of iTunes might, for that specific title, be the number two, three or four largest retailer. That’s not for everything across the board, that’s some specific titles that hit an audience very effectively. But it’s reached a point where we’re not the red-headed stepchild that sits out to the side anymore. We’re increasingly an integral part of the day-to-day business.

On a growth basis, we’re always projecting 75%-100% growth of our business, though we’re obviously coming from a small number. Whereas obviously if any other division in the company was looking at that kind of growth projection, the stock would be at $50.

This has not been a secret for a long time, everyone has known this is coming. I think the surprise to everyone is that it has taken so much longer than anybody expected. No one back in ’99 when we started CinemaNow would ever – You could have made a lot of bets with people back then and said, “Do you think digital will be ubiquitous in 10 years in 2009?” And you wouldn’t have even had naysayers probably.

BF: The bet would be, “Is it ’02 or ’04?”

CM: Exactly, “Is it ’02 or ’04?” The grumpy curmudgeons would have said, “It’s not going to happen for 10 years!” But you wouldn’t have had anybody saying it was going to be 15 years before it was ubiquitous and we’re probably still looking at that. Because it’s probably going to be another five years before it overtakes and surpasses traditional retail packaged good channels. It’s a huge growth marketplace. There’s a tremendous amount of focus and excitement on it here. And it’s definitely very much a part of the mainstream mentality of what we’re doing as the company now, as opposed to an adjunct piece where it’s, “Let’s see if the digital guys can throw a little more revenue in here.”

Tomorrow: What's working for Lionsgate in digital and what's the studio's approach to online productions?