After many rumours that it was seeking to buy an existing Australian distributor, US-based producer-distributor Lionsgate has confirmed that it is establishing its own operation to cover Australia and New Zealand.

' Australia is a key territory and to not be the person selling your own content is crazy,' said the new chair of Lionsgate Australia, Simon Franks, who has temporarily relocated to Sydney from London to set up the new operation.

The first films will go out under the Lionsgate brand in the second half of 2007 and are likely to include Daddy's Little Girls and Pride.

Lionsgate also intends to produce Australian films and its level of activity will depend on the quality of scripts that come to the company

Franks expects to distribute about 25 films per year in Australia, including films produced by Lionsgate and local and other films bought specifically for the territory.

Lionsgate recently acquired Australian distribution rights to the homegrown vampire film Daybreakers, to be shot this year by brothers Michael and Peter Spierig (Undead), and James Mangold's US Western 3:10 To Yuma for Australia. The latter stars Russell Crowe who lives in Australia.

Hoyts Distribution previously handled Lionsgate's cinema releases and Magna Pacific distributed library titles.

Franks says successful distributors require deep pockets because of how long it takes for any profits to flow back. For Australian distributors there is also the added challenge of the terms in place with exhibitors.

'In the US we get 40-50% of the box office but in Australia distributors get 25-30%,' he said.

Franks founded the Redbus Group in the UK and sold the film distribution division to Lionsgate for $42m in October 2005. Lionsgate also has footholds in the culturally similar territories of Canada and Ireland.