Never one to shrink from a proxy battle, Carl Icahn on Wednesday broke off talks with Lions Gate Entertainment Corp. after the company's board of directors refused to give his designees seats on the board. Icahn's action appears to set the stage for him to ally with sympathetic board members (he is a close friend of Mark Rachesky, head of MHR Fund Management, Lions Gate's biggest stockholder) in a fight to take control of the company that is best known as the producers of the Saw horror films, the Tyler Perry flicks, and the cable-TV shows Mad Men and Weeds . But its problems may have less to do with its productions than with ancillary sales. As the London Financial Times observed today (Thursday), Icahn "is stalking Lions Gate during a period in which the company is struggling to adapt to the fast-declining DVD market, which is a bedrock of its business." Like other media companies, Lions Gate Entertainment, whose subsidiaries use the name Lionsgate and which operates out of Vancouver, Toronto and Santa Monica, has seen a severe drop in its share price in recent months. Its stock is down nearly 10 percent since the beginning of the year.