Mad Men, Mad Money (Cable/Satellite TV Production)


Lionsgate Entertainment Corporation* (Lionsgate) is the “dark pony” that has taken Hollywood by storm. With a market cap of just $5.8 billion, this small, Canadian studio is the first major studio to gallop over the high barriers to entry of the Hollywood studio oligopoly in 50 years (Littleton, 2015). One of its biggest cable successes has been the critically acclaimed series Mad Men which ran on AMC for seven seasons until May 2015. Today, Lionsgate Television has more than 30 television shows across 20 networks (Lionsgate Company).


Frank Giustra, Founder of Lionsgate

Canadian investment banker, Frank Giustra, founded Lionsgate Entertainment Corporation in 1997. Giustra long harbored a deep passion for film and the desire to create a Canadian production company that could rival a Hollywood one (International Directory of Company Histories (IDCH), 2001). Lionsgate bought North Shore Studios (now Lionsgate Studios), Canada’s largest production studio at the time (IDCH, 2001). In order to capitalize on the tax subsidies for filmmakers in Vancouver, many American TV producers shot their series from The X-Files to Millennium at North Shore Studios (IDCH, 2001). Lionsgate then went on to acquire 45% of Mandalay Television, a Californian made-for-TV movie production company, through which they produced Cupid for ABC and Oh Baby for Lifetime (IDCH, 2001).

Jon Feltheimer, Chief Executive Officer of Lionsgate

In 2000, Jon Feltheimer replaced Giustra as the Chief Executive Officer (CEO) of Lionsgate (Lionsgate Company). Not unlike the enterprising characters of Mad Men, these CEOs know how to make ‘mad money’… Under Feltheimer’s stewardship, Lionsgate TV’s revenue increased from 8 million in 2000 to approximately 500 million in 2016 (Lionsgate Company).


Today, Lionsgate has over 650 employees worldwide, spanning Santa Monica, Vancouver and New York (Lionsgate Company).Using the strategies of vertical integration to achieve economies of scale and diversity to reduce risks, Lionsgate owns a myriad of international television and film corporations along various levels of the supply chain. Its subsidiaries include Debmar-Mercury, Celestial Tiger Entertainment, Defy Media, EPIX, Pantelion Films, Roadside Attractions and POP (Lionsgate Annual Report (LGAR), 2014). Debmar-Mercury distributes first-run syndicated series such as Family Feud and The Wendy Williams Show (Kissell, 2015). Celestial Tiger Entertainment targets Asian markets through its pay television channels (LGAR, 2014). Defy Media is known for its male-targeted YouTube channels (LGAR, 2014). EPIX, a premium television network, is a joint venture with Viacom, Paramount Pictures and MGM (LGAR, 2014). Pantelion Films produces Spanish-language films targeting Hispanic audiences (LGAR, 2014). Roadside Attractions is a theatrical distribution company that specializes in independent films (LGAR, 2014). Recently rebranded cable channel, POP (formerly TVGN), is a joint venture with CBS Corporation and is oriented around fan and pop-culture (LGAR, 2014).


Lionsgate owns the Divergent, Twilight and Hunger Games franchises.

Lionsgate owns the copyrights to the trifecta of young-adult juggernauts: the Twilight, Hunger Games and Divergent franchises. Not one to shy away from copyright infringement law suits, Lionsgate sued online novelty seller, Yagoozon for selling counterfeit “Mockingjay pins” and Between the Lines Productions LLC for its Twilight spoof, Twiharder (Donahue, 2014; Gardner, 2012). Additionally, it owns the trademarks of episodic series such as Mad Men and Orange Is the New Black (LGAR, 2014).


(From left) Mad Men’s Elisabeth Moss, John Hamm and Matt Weiner.

That being said, perhaps its most valuable asset is its talent from the creator and executive producer of Mad Men, Matthew Weiner, to the A-list cast members like John Hamm (Golden Globe winner for his portrayal of Don Draper) and Elisabeth Moss (Cwick, 2016). However, talent doesn’t come cheap. John Hamm is one of television’s highest paid actors with a paycheck of $250, 000 per episode in the last 3 seasons of the drama (Magrath, 2011; Lausier, 2012). This brings us to topic of money… How does Lionsgate TV continue profit while paying its actors so handsomely?

Business Model

Lionsgate TV’s exponential economic growth is partly attributed to its 10+90 business model, pioneered by its subsidiary Debmar-Mercury (Sullivan, 2015). The unique format bypasses ordering a pilot to immediately ordering 10 episodes of a new television series. If these 10 episodes surpass a certain rating, another 90 episodes will be ordered (Littleton, 2013). Aimed primarily at allowing comedies to gain their sea legs, this model yields high cost savings for Lionsgate TV as production schedules are expedited and the show can hit the syndication markets much more rapidly (Littleton, 2013).


On the set of Mad Men

While the production cost for each Mad Men episode is approximately $2.5 million, Lionsgate TV easily recoups this sunk cost from AMC’s licensing fee of $3 million per episode (Guthrie, 2011). Exploiting the digital window of exhibition, Lionsgate also receives 1 million dollars per episode from Netflix (Greenfield 2012). Another revenue stream for AMC is the retransmission fee it receives from cable and satellite operators, priced at approximately 67 cents per cable subscriber (Atkinson 2015). Currently, AMC is renegotiating its retransmission fee with the National Cable Television Cooperative, even though the 2010 contract had already expired at the end of 2015 (Atkinson 2015). Looking to leverage its recent successes like Mad Men and Better Call Saul, AMC is looking to increase its fee by 150% (Lieberman, 2016). Ironically, while the theme of Mad Men is advertising, the show itself does not accrue much ad revenue with just a paltry sum of $1.98 million in 2009 (Steinberg, 2010).

Lionsgate faces stiff competition from the “Big 6” media conglomerates (The Walt Disney Company, Viacom and CBS, Time Warner, SONY, 21st Century Fox and News Corporation, Comcast NBCU) to draw from the same pool of writers, actors, directors and producers.

The Future


Kevin Beggs, Lionsgate TV Group Chairman

In the face of increasing digital disruption and the disappointing box office revenue of the final Hunger Games installment, Lionsgate’s stocks are plummeting (McNary, 2016). Yet, CEO Feltheimer remains optimistic, stating “We believe that the disruption in the marketplace will play to our strengths. Whether there’s a fat bundle, skinny bundle or no bundle at all…we are well positioned to beat this challenge,” (Lang, 2015). Lionsgate is creating more content for streaming and subcription pay distributors and moving away from broadcast distribution (Vlessing, 2015). In fact, Kevin Beggs, Lionsgate TV Group chairman, says that there is an increasing demand for content from new distributers and his team spends most of their time pitching shows to these new buyers (Lang, 2015).

*Both “Lions Gate” and “Lionsgate” have been used interchangeably by the corporation (See 2014 Financial Report). For the purposes of this article and in accordance with the company’s official website, the term “Lionsgate” will be used.


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