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Lions Gate Sitting on Some Hot Properties

NEW YORK (TheStreet) -- Lions Gate Entertainment (LGF) may be best known as the movie company behind The Hunger Games, Twilight and Divergent.

But investors may be underestimating Lions Gates' holdings in the hot area of online videos. The company owns a stake in or produces content for a number of businesses that have channels on Google's (GOOG - Get Report) YouTube.

Shares of Lions Gate nearly doubled last year, but are down 19% so far this year and trade at 15 times earnings, which is below the average for the S&P 500. The stock was trading recently at $26.01, up 1.5%.

Lions Gate owns a piece of online video producer Defy Media through its stake in Break Media, which merged with Alloy Digital last October to create Defy Media. Lions Gate had purchased its stake in Break Media for $50 million in 2007. In 2012, Lions Gate considered selling its stake in Break Media. At that time, company was believed to have a value of $500 million. With the combination of Break and Alloy, the company is worth much more.

Prior to the deal in October, Break.com reached 70 million monthly users and Alloy counted 95 million monthly users. At the time of the merger, the companies stated they would have combined annual revenue of $100 million and a profitable venture.

In December, Defy Media was hitting 400 million monthly video views. The company's channels on YouTube had 37 million subscribers.

Lions Gate also owns Befit, a fitness channel for YouTube that has almost 1 million subscribers. Lions Gate also co-owns TV Guide Network and Epix, a combination premium channel and video-on-demand service. Lions Gate also owns Fear.net, a horror site that produces original content. Lions Gate is also helping create original content for Netflix (NFLX) and Hulu.

On Monday, Lions Gate announced a content pact with RocketJump, a studio that makes videos for YouTube. The company's popular Video Game High School series is in its third season. Lions Gate will get access to all of RocketJump's digital content.

RocketJump is owned by Collective Digital Studios, a company with more than 600 YouTube channels and 1 billion page views a month. RocketJump has 6.8 million subscribers.

At the time of publication, Katje owned shares in Lions Gate.

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