Lionsgate in ‘Robust’ Talks to Spin Off Starz by March, Says CEO

Lionsgate is engaged in a “robust and productive process” with its bankers and “a number of potential strategic and financial partners” to spin off Starz as a stand-alone company, said CEO Jon Feltheimer on an earnings call Thursday for its fiscal Q4 ended March 31. “We're targeting an announcement of our plan by the end of the summer and expect a transaction could close as early as our fiscal fourth quarter,” he said.

The company's “main impetus” for the "separation" stems from its belief that Wall Street isn’t “giving us the value for the sum of the parts,” said Feltheimer. “I feel like with the companies separated, they can both concentrate on their core businesses,” he said. “My sense is they will also see some opportunities, perhaps some strategic opportunities, that they might not see with the companies that are combined.”

Starz global subscribers grew by a record 6.3 million in the fiscal 12 months to 35.8 million, said Feltheimer. “We still feel really good” about reaching the target of 50 million to 60 million Starz subscribers by the fiscal year ending March 2025,” he said.

An ad-supported Starz VOD service is “not part of our strategy,” and isn't included in the 50 million to 60 million subscribers goal, said Starz CEO Jeffrey Hirsch. “We continue to believe that being a premium adult non-ad-supported service that is complementary to all these broad-based services is a great place for us to be, just like we were in the linear business for the last couple of years and were super successful there.”

Starz is a “pillar” of Lionsgate’s content creation strategy, building a slate of “valuable” intellectual property “with a bold, premium adult sensibility that can be a valuable complement to the programming of the general entertainment platforms,” said the CEO. Even after spinning off Starz, “we will continue to partner with them in the creation of great IP, building our library and achieving important synergies between Starz and our studio business,” he said.

Though streaming is “not an end in itself,” it’s a “very efficient way” to bring content to consumers worldwide, said Feltheimer. “We built a strong and profitable streaming business at Starz.” A number of Starz international territories “will soon turn run-rate-positive given our early global expansion, and we remain on track for achieving our long-term financial and subscriber projections,” he said.

Lionsgate has positioned Starz “where the streaming world is heading,” said Feltheimer. “As a premium platform with a predominantly wholesale distribution model, we believe in and are rooting for the success of the broad general entertainment platforms because they will become our future distribution partners.” The “premium adult focus” of Starz content “gives us confidence that Starz will be bundled and packaged by a growing number of streaming platforms as the industry continues to evolve,” he said.