Canadian-bred Lions Gate ( LGF) is embracing the horror.

Already sizzling hot off its Best Picture Oscar win for Crash and its box office triumph Medea's Family Reunion, the indie film studio indicated Wednesday it expects to launch a horror-theme channel by year-end.

Vice Chairman Michael Burns, speaking at a Bank of America conference in New York, said he hopes to have a horror channel in place sometime in 2006. Burns said he is dealing with various cable and satellite entities to launch it. "We're working diligently and are guardedly optimistic that we can launch in 2006," said Burns.

Lions Gate has had success of late playing off a nifty distribution system that puts cheap movies into wide release. The company boasts a clean balance sheet and its films have done remarkably well at the box office. Its extensive library generates some $200 million in revenue each year.

Part of that 5,600-film library includes some 1,700 horror and sci-fi titles that the company hopes to exploit through the new horror channel when launched.

As the largest independent studio, with a market cap of around $1 billion, the film producer has become the envy of large studios that pour countless millions into their blockbusters and see unpredictable returns. By comparison, Crash cost just $6 million to make and has grossed over $120 million between box office and home video.

Similarly, Medea's Family Reunion has been in release for just over a month. It boasted a production budget of $6 million and so far has cleared $62 million domestically.

Lions Gate is still highly exposed to the box-office performance of its latest releases, though. An additional line of business that would garner transmission fees from cable and satellite operators could smooth the ride.

In a new marketing arrangement, the studio will release Akeelah & the Bee, about a national spelling bee contest, with the promotional help of coffee giant Starbucks ( SBUX) in late April.

Shares of Lions Gate were trading down 2 cents to $10.01 on Wednesday.

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