Lions Gate Entertainment Corp. is ready to play its library card.

The company has spent the past five years amassing a collection of more than 8,000 independent films through production, acquisitions and a merger. Now Lions Gate, founded by famed director Robert Altman 30 years ago, aims to focus on capitalizing on that film library through distribution, particularly with its pay cable partner Showtime, and the launch of a TV channel.

Lions Gate has become a major player in both film and TV production, and it hopes to build on its recent success. Its film "Crash" was nominated for six Academy Awards last week and the comedy "Weeds" has been one of Showtime's biggest hits ever. Most of Lions Gate's releases are lower-budget, action films that target the horror, African-American and family entertainment niches.

As part of the move to narrow its strategic focus, the company last month sold its two Vancouver studios to Canada's Bosa Development Corp. for $36 million. There are 500,000 square feet of production space and eight sound stages on its 14-acre campus. The sale will close on March 15. Lions Gate's 25 Canada-based employees, including studio head Peter Leitch, will become Bosa employees and stay on with the new operation, which will continue to be home to Lions Gate productions.

Lions Gate spent more than $60 million making TV shows and movies at the studios and on location in Canada in 2005, and its plans call for keeping one foot firmly planted across the border. The executive offices are in Santa Monica, but many of the company directors live in Canada,

"We continue to view Canada as an excellent place to engage in production," spokesman Peter Wilkes said. "It's cost-effective for us and we firmly expect our production to remain strong there."

A primary incentive for the company's commitment to British Columbia is the 30 percent film tax incentive that the Canadian government recently extended by two years.

Analyst Matthew Harrigan of Janco Partners Inc. said the move made sense, given the company's intent to focus on content distribution and monetize its non-core assets.

"It's a very smart move, but it would have been a bigger deal three years ago when they were a $3 stock," said Harrigan. (Shares now trade at about $9.) "They're a very well-run company and they're very entrepreneurial. This was just a common sense thing."

The company's shares declined throughout 2005, especially after Lions Gate warned in December that its profit for the year would be $15 million, far short of the projected $35 million. Lions Gate reported a net loss of $14.1 million and revenues of $213 million in the second quarter, which ended Sept. 30.

Wilkes attributed the decline to general weakness in the media last year, with box office attendance woes dampening the market.

"The stock declined about 20 percent, but that's equivalent with media sector through 2005," Wilkes said. The stock has bounced up since the first of the year.

Content driven
The company's evolution into a distribution force began in 2000, when the current management team, headed by chief executive Jon Feltheimer, took over. That year Lions Gate acquired Trimark Holdings and its library. In 2003, the company merged with Artisan Entertainment, a privately held film and home entertainment company. Artisan's catalog included "Terminator 2: Judgment Day," "Total Recall," "Dirty Dancing," and the "Rambo" series.

Lions Gate was among the suitors that late last year reportedly approached Sony Corp. unit Metro-Goldwyn-Mayer Inc. about acquiring its United Artists film label. The sale, for a reported $500 million or more, was to include the UA name and a portion of its library and Sony would have continued to distribute the content. With its relative position improving, Sony's desire to move UA may have cooled, Harrigan said.

For now, Lions Gate will look to build on DVD and video-on-demand strength through its pact with Showtime, a unit of Viacom Inc. The content agreement, which runs through 2008, was originally a deal with Artisan that transferred to Lions Gate after the merger.

"The Showtime agreement is very valuable to us because this year, we're going to put out 18 feature films, and we plan to maximize the financial upside by retaining rights in all North American media windows," Wilkes said.

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