MGM announced this week that it expects a 40% decline in earnings in 2019 as it invests in its Epix Now streaming service.
The company said in February that it would launch Epix Now at $5.99 per month, joining other premium channels that have already rolled out over-the-top services. In order to attract subscribers, Epix is rolling out a slate of original programming to accompany its traditional movie offerings.
MGM co-founded Epix with Viacom and Lionsgate in 2008, and bought out the other two partners in a $1 billion deal in 2017. In an earnings call on Tuesday, MGM executives said Epix is projected to lose $50 million to $70 million this year as MGM invests in content to grow the service.
The delay of “Bond 25” to April 2020 has also put a damper on this year’s projections. The next installment of the Bond franchise was initially set to debut in November 2019, but was pushed back when director Danny Boyle was replaced by Cary Joji Fukunaga. The film is now set to bow on April 8, 2020.
The company reported $330.5 million in adjusted EBITDA for the year ending Dec. 31, 2018, down from $422.9 million in 2017. A 40% drop would put the 2019 figure at $200 million.
MGM CFO Ken Kay advised that the “temporary decline in earnings” would cause an increase in leverage, and that total debt would hit $1.9 billion. Kay said the company would still have $600 million available under an existing credit facility, and would not need to engage in further restructuring.
The company projects that overall EBITDA will return to 2018 levels in 2020, thanks to the release of the Bond film, and that Epix will be restored to profitability in 2021.
Epix is launching two 10-episode TV series this summer: “Pennyworth,” about Bruce Wayne’s butler, and “Perpetual Grace, LTD,” a noir starring Ben Kingsley. “Godfather of Harlem,” a period drama starring Forest Whitaker, is due in the fall; and “Belgravia,” a six-part series from Julian Fellowes, is coming in 2020.