A few breakout television hits lifted quarterly revenues at Lionsgate, but production delays related to COVID-19 and sluggish subscriber growth at the company’s Starz pay television and streaming arm resulted in losses.
Sales at the film and television company climbed 5.8% to $885.4 million, while the net loss attributable to Lionsgate shareholders topped out at $45.6 million or 20 cents per share. That was a steeper drop than the $13.9 million in losses that Lionsgate logged in the year-ago period. Starz’s net global streaming subscribers increased by 1.7 million in the sequential quarter, with its streaming subscriber base for Starz, Starzplay Arabia and Pantaya topping out at 19.7 million.
The company’s results missed Wall Street’s projections. Lionsgate was expected to post quarterly earnings of 22 cents per share on revenues of $993.8 million.
Last quarter, Lionsgate announced that its board of directors has given the greenlight to its management team to explore spinning off or selling its Starz division. The company Lionsgate spent $4.4 billion to buy Starz in 2016, a move that expanded its television operations, but one that also added to its debt load.
Lionsgate is also reportedly exploring a possible acquisition of STX, the studio behind “Bad Moms” and “Ugly Dolls.” It’s unclear where those talks stand. Lionsgate itself is seen as a potential acquisition target. There’s been a wave of mergers and acquisitions activity in recent months as the likes of WarnerMedia and Discovery have unveiled plans to join forces and MGM announced a deal to sell itself to Amazon. At the same time, companies such as Legendary and Will Smith and Jada Pinkett Smith’s Westbrook have sold equity stakes to various investment firms.
The television business, led by Lionsgate’s breakout sitcom hit “Ghosts,” was a source of strength. The segment had one of its strongest quarters with six new shows picked up to series and seven current series renewed for new seasons. That included two new seasons of “Mythic Quest” as well as orders for “The First Lady,” which will star Viola Davis and Michelle Pfeiffer, and “Manhunt,” a look at the search for Abraham Lincoln’s killer. Segment revenue climbed nearly 93% to $438.6 million, but profits declined 34.6% to $19.3 million. That was due in part to tough comparisons to the prior-year quarter which saw a surge in licensing revenue tied to “Mad Men.”
Lionsgate had a relatively quiet quarter when it came to releasing new movies, with the faith-based sports drama “American Underdog” the most high-profile of its films. But the company said it had several promising upcoming films in the works including “John Wick: Chapter 4” and “Borderlands,” an adaptation of the popular video game series. Motion picture segment revenue jumped 10% to $275.3 million, while segment profit increased 35 to $67.5 million. That was driven by the monetization of the company’s library as well as the results of several smaller films such as “Dangerous” and “The Gardener” that Lionsgate released simultaneously on home entertainment.
But it was Lionsgate’s media networks division, comprised primarily of Starz, that proved to be the biggest drag on the balance sheet. Revenues dropped 4.3% to $388.9 million, while segment profit decreased more than 65% to $28.5 million, the result of higher programming and marketing costs. The company also was bruised by production delays due to the pandemic with shooting on its cult hit “Outlander” pushed back by 11 months.
During the quarter, Lionsgate opened a production hub in Yonkers, New York which it said would give it dedicated production sound stages and facilities that would ensure it didn’t suffer more production delays.
“While everyone is operating in an intensely competitive, disruptive and unpredictable environment, each of us is dealing with it differently,” Lionsgate CEO Jon Feltheimer said in remarks to analysts shortly after the company released its earnings. “Our strategy is simple: continuing to execute a focused content approach at Starz, supplying profitable premium television series to an expanding universe of buyers, leaning into our portfolio of movie brands and franchises, and benefiting from an entrepreneurial culture and a business model built around optionality.”
More to come…