It looks like it might be in Image Entertainment's best interest to merge afterall.

In a story from The Hollywood Reporter, the studio recently told Lionsgate, who it had a tough proxy fight with in October, that they should "renew earlier merger talks."

This news comes after Image "posted a second-quarter loss and outlined plans for a radical restructuring to trim operating costs."

Image won the proxy fight with Lionsgate but that mini-studio has a 19% "stake in the U.S. company and has been pursuing Image for more than a year."

"Lionsgate is still a very interesting possibility for our shareholders. We just have to come to terms," stated Martin Greenwald, Los Angeles-based Image Entertainment president and CEO.

The "second-quarter loss" by Image was "$3.8 million for the three months ending Sept. 30 compared with a loss of $613,000 for the same period a year ago." It is believed that Image's "revenue of $22.8 million was slightly lower than a year ago in part because of the bankruptcy of Tower Records, which sold Image DVDs."