During Lionsgate quarterly investors call, it was revealed that its board of directors has given the greenlight to its management team to explore spinning off or selling its Starz streaming service.
Lionsgate purchased Starz in 2016 for $4.4 billion, but has struggled to find enough subscribers. Especially with most of the studios now having their own streaming services and aren’t licensing out their movies to companies like Starz.
In the United States, Starz has multiple Disney owned movies, including lots of 20th Century Studios titles. Due to a new agreement made before Disney+ launched, some movies are shared between Disney+ and Starz. But for most 20th Century Studios titles, they’ve been hopping on and off of Disney+ for years because of long term contracts.
When Lionsgate purchased Starz in 2016, Disney+ didn’t exist and 20th Century Fox wasn’t owned by Disney, so existing deals might have been easier to keep in place, but should Starz be sold off, this could allow for titles to stop leaving Disney+. The new contracts might not be able to be transferred to a new owner, so revert back to the original owner. The selling of Starz could give Disney an opportunity to renegotiate with the current owners before its sold, or renegotiate a buyout of the existing contract with the new owners, or even perhaps Disney could purchase Starz to gain additional content for its streaming services. There are multiple ways Disney could benefit from a new owner of Starz, or it could still cause a problem if Netflix, Apple, Amazon or Comcast picked up Starz.
Starz has about 30 million subscribers overall and added just over 1.5 million subscribers in the last quarter. It brought in a revenue of $385 million in the quarter and has a profit of $5.5 million.
During the quarterly call, Lionsgate vice-chair Michael Burns said
“While we continue to realize substantial synergies from being Lionsgate and Starz together, we also see the opportunity to potentially unlock significant shareholder value under a scenario where investors have the ability to value our studio assets and Starz separately. Recent transaction multiples in the media space give us confidence that exploring alternate paths is prudent. Additionally, we believe that a number of the structures we’re considering would allow Lionsgate and Starz to preserve many of the operational benefits we’re currently achieving within a single corporate structure”
Lionsgate CEO Jon Feltheimer also thinks Lionsgate is way undervalued and is even getting “negative value” for its Starz international assets.
Recently, Disney and Starz had a heated legal dispute in Latin America over the name, as Disney was trying to launch Star+ in the region, resulting in a settlement being paid to Starz so that Disney’s general entertainment and sports streaming service could launch.
It has been well documented over the past few years that we will see some consolidation within the streaming marketplace because there are, frankly, too many streaming services, and we are going to see more merging together. Amazon is purchasing MGM, Disney purchased Fox, with HBO Max and Discovery+ expected to merge when the WarnerMedia buyout of Discovery is complete. Many are also hoping Hulu and Disney+ merge together when Comcast’s stake in Hulu is sold.
It’s going to be interesting to see what happens in the coming months with Starz, because now a big “For Sale” sign has been put on the streaming service. Nothing is guaranteed.
What do you think could happen with Starz?
Roger has been a Disney fan since he was a kid and this interest has grown over the years. He has visited Disney Parks around the globe and has a vast collection of Disney movies and collectibles. He is the owner of What's On Disney Plus & DisKingdom.