Starz Has a Vision, And Wall Street is (Kind of) Optimistic

After a slick and amicable split, we now have both Starz and Lionsgate Studio operating as standalone and publicly traded entities. While it’s no surprise that Lionsgate itself would carry a ton of optimism with it, given its lengthy and mostly successful Hollywood history, Starz was always more of an outlier as a separate business. However, it seems Wall Street is cautiously optimistic about what could lie ahead for Starz, as our Blake & Wang P.A. entertainment attorney, Brandon Blake, is here to share.

Brandon Blake

Solid Start

Having delivered a mostly positive first set of financial results as an independent company, there’s a firm feeling of a fresh start around the company among analysts at present.

Starz saw its wider North American subscriber base fall by 330,000 to finish in the region of 19.6M. This is mostly due to a linear TV carriage dispute in Canada that saw them removed from a popular local bundle. However, the news was much more positive for the US itself, where the overall subscriber base saw a quarterly gain of 320,000, closing at around 18M. Of that 18M, they have 12.3M streaming subscribers, with a rather impressive growth of 530,000.

That gain in subscriber base domestically is certainly a nice offset for the $177.4M in restructuring fees for their content slate, which were also announced. While the quarterly financials are, for obvious reasons, only partial, they certainly appear to show strong momentum in the US, far beyond initial predictions.

This positive revelation saw Starz shares jump 19% (about $3.12) during the next round of trading after its release.

Looking to the Future

As part of the conference call that accompanied this first quarterly report, Starz CEO and President, Jeffery Hirsch, suggested that the business will now look at reducing content costs, with an aim to rebuild its in-house IP production and beef up its program library, in the hopes of harnessing that subscriber momentum.

Several analysts are quite excited about the focus on their own IP library, rather than remaining dependent on their agreements with Lionsgate Studios, particularly as a new revenue stream. However, debt reduction will also be a key focus in the next few quarters as they try to bring their debt-to-EBITDA ratio down into the 2.5x range.

Starz did, overall, report a small reduction in revenue from the prior year’s $352.3M, landing at $330.6M, but it is minor under the circumstances. Their operating loss, however, opened up considerably, going from $30.8M to $136.3M. The adjusted OIBDA, however, was up to $93.3M from the year-earlier $45.5M.

With the potential for a greatly improved content slate free of any holdovers from the 2023 Hollywood strikes, and with upcoming seasons for several flagship franchises scheduled as well as some promising originals, Starz certainly has the potential to hang onto the subscribers it has cultivated and attract more. While success is never a guarantee in the fickle entertainment landscape, the new standalone entity is showing some strong potential, and it will be interesting to see how it develops over the coming year.