Lionsgate execs declined to offer any update on the status of Starz after announcing last fall that the company is exploring strategic options. Nor did STX Entertainment come up on its call Thursday to discuss third-quarter earnings with analysts.
But Wall Street was buzzy about Starz. In response to a question, vice chairman Michael Burns said Lionsgate is “working with a terrific team of advisors with complementary strengths and expertise as we continue the process of unlocking shareholder value in our two core businesses. We will be providing updates on our progress at the appropriate time.”
Pressed again on whether he thought Starz could be successful as a stand-alone public company, he repeated. “As things progress, you guys will certainly hear where we are.”
Both Starz and Lionsgate are in play in a time of rapid media consolidation with premium content in demand. Executives have noted high multiples offered in recent transactions — starting with Amazon’s agreement last spring to buy MGM for $8.45 billion — which indicate a good time to deal. They also don’t think Lionsgate’s stock reflects it asset value, which could be unlocked in some kind of transaction.
The studio behind John Wick and The Hunger Games franchises is also a potential buyer as it eyes a purchase of STX Entertainment. STX is on the market for a little longer after splitting with Eros and agreeing to be acquired by The Najafi Companies for $173M. The agreement announced December 7 has 45-day “go-shop” period to consider other offers.
Lionsgate execs haven’t confirmed interest in STX. But asked about smaller, non-Starz “tack-on” acquisitions in the library space – which could apply to STX — CEO Jon Feltheimer said today that “at the right price, as entrepreneurs, we have to look at every opportunity.”
“I think you know we have been very successful in making those kids of deals. We think nobody sells library and packages library better than our team,” he said. “We don’t overpay, but we think nobody is better equipped to actually do that. If there is the the right ROI [return on investment] for that acquisition, we will certainly look at it.”
Lionsgate earlier reported numbers for its fiscal third quarter ended in December that were squeezed by pandemic-related costs and production delays — including an 11-month delay on fan favorite Outlander. That pushed back the full benefit of Lionsgate’s hefty investment in content and “resulted in diminished subscriber growth in the first half of the year relative to our expectations, and we’re seeing that pressure coming through in our revenue and segment profit in our current quarter,” Feltheimer said on the call after.
But he insisted Starz’s programming schedule is back on track, noting that he second-season launch of Power Book II: Ghost and the first-season finale of the crime family drama BMF combined for record single-day viewership on the Starz app. Starz will launch seven series in the next two quarters.
Starz shares, which turned down briefly after the numbers, reversed course and were up close to 4% in after-market trading.
Starz CEO Jeffrey Hirsch was asked about the role of movies versus series on Starz (after a recent report seemed to show films flaring up and out quickly). Hirsch agreed that big series drive retention. “Ours is a retention game, not an acquisition game,” he said. “Lining up content week to week, 52 weeks a year. Seeking to move our core audience from one show to the next.”
He said viewers gravitate towards the app more for original series, But “on the linear side, people are scrolling the channels and there are a lot more movies than original series.” A big film like Spider-Man: No Way Home, which will hit Starz sometime over the next six months, is a tremendous boost providing “you put the right shows and content around it so you can move customers that watch Spider-Man into one of your originals.”