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Starz streaming subscribers grow to 19.7M

Lionsgate widened its third-quarter loss on higher overall revenue as the Hollywood studio has kept up its focus on the streaming space with Starz.

On Thursday, the studio saw its global streaming subscriber base for Starz and Starzplay Arabia grow to 19.7 million for the three months ending Dec. 31, 2021, in an increasingly competitive global streaming arena. That’s up another 1.7 million subscribers compared to 18 million at the end of its second quarter of fiscal 2022 and a rise of 44 percent year-over-year.

During an analyst call after the market close, Lionsgate execs remained coy about speculation the studio is exploring a potential acquisition of some or all of STX Entertainment, the independent studio behind Hustlers, or considering a sale or spinoff of Starz.

“We are working with a terrific team of advisers with complementary strengths and expertise as we continue the process of unlocking the shareholder value in our two core businesses. So it’s important to note that we will be providing additional updates on our progress at the appropriate time,” vice chairman Michael Burns told analysts.

Later on during the analyst call, CEO Jon Feltheimer did discuss possible “tack-on acquisitions” for the studio, without mentioning STX and its library or other targets. “We’ve been very successful in making those kinds of deals. We think nobody sells a library and packages a library better than our team. At the right price, as entrepreneurs we have to look at every opportunity. We don’t overpay, but we think nobody’s better equipped to actually do that. If there’s a ROI for that acquisition, we will certainly look at it.”

Lionsgate, as an indie studio, has been a source of M&A chatter in recent months. In November 2021, the company said that it would explore options for its Starz premium channel/streaming service, including a sale or spinoff. If that deal were to happen, Lionsgate would become a pure-play film and TV studio and could benefit from a beefed-up library such as that owned by STX.

Starz is a pay TV channel similar to HBO and Showtime, and also offers a streaming service. Its programming includes the Power franchise, Blindspotting and Hightown. Lionsgate acquired Starz in 2016 for $4.4 billion and has grown its content expenditures for the platform to retain subscribers and ensure a 52-week pipeline of new releases.

Any deal for STX Entertainment, if it comes together, would effectively unwind a sale announced earlier to the private equity firm Najafi Companies, for $173 million. Lionsgate is understood to be among other bidders interested in STX.

Lionsgate’s overall revenue for the quarter came to $885.4 million, up from the previous year third quarter at $836.4 million. But the studio posted a quarterly net loss attributable to shareholders at $45.6 million, bigger than the year-earlier $13.9 million loss, as pandemic-era costs and production delays dented the balance sheet during the latest financial quarter.

The studio saw Starz revenue and segment profit still impacted by a soft first quarter, when COVID-related production delays led to a slowing pace in subscriber signups. “Starz’s programming schedule is back on track and positioned to translate into strong subscriber growth,” Feltheimer told analysts during a conference call.

The studio’s media networks revenue, which accounts mostly for Starz, fell to $388.9 million, against a year-earlier $406.2 million. The total global subscribers for Starz increased to 31.4 million, which includes Starzplay Arabia, and is underpinned by strong international and domestic streaming subscriber growth. Starzplay International subscribers grew 98 percent year-over-year to 8.5 million.

“Despite intense competition, we have nearly doubled our international subscribers in the past 12 months and together with our domestic business remain solidly on track to reach our target of 50 to 60 million global subscribers by 2025,” Feltheimer said.

And motion picture revenue came to $275.3 million, up from $250.3 million in the same period of fiscal 2021, as Lionsgate ordered five films during the latest quarter, continued production or postproduction on 10 others and wrapped three wide-release tentpoles.

Feltheimer argued Lionsgate remains flexible in how it will release movies, whether in theaters or on streaming platforms, as the pandemic continues to impact the industry and release schedules for tentpoles. “We’ve shown that we can make profitable films that live comfortably in both the theatrical and SVOD worlds, from day-and-date multiplatform releases with a 92 percent profitability rate to larger movies that will benefit from hybrid releases. As a studio whose signature has always been diversified slates allowing us to play in every space, our ability to tackle the challenges of a shifting and uncertain box office is more of a natural evolution than a pivot,” he told analysts.

TV production revenue rose sharply to $438.6 million, compared to a year-earlier $228.2 million. The Lionsgate Television Group had six new shows picked up to series, seven current series renewed for new seasons and Ghosts breaking out as a comedy.

Feltheimer told analysts that CBS’ Ghosts had “big syndication potential” and the studio was in deficit early on to realize franchise potential for the comedy over the long term after the series was picked up for a second season. Rose McIver and Utkarsh Ambudkar star in the comedy from CBS Studios, Lionsgate Television and BBC Studios’ Los Angeles production arm.

“We are focused every single day on long-term value creation and you will see that in the growth of our library,” the CEO added about the studio’s strategy overall. The Hollywood Reporter

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