Lionsgate Mulls Starz Spin-Off as Unit Adds 1.3 Million Q2 SVOD Subs, Tops 18 Million Worldwide

Starz, the multiplatform distribution network owned and operated by Lionsgate, Nov. 4 reported an increase of 1.3 million subscribers in the second quarter (ended Sept. 3). The increase brings the global sub count to 18 million across Starz’ multiple branded streaming platforms, including StarzPlay Arabia, a non-consolidated equity method investee. StarzPlay International subs grew 97% year-over-year to 7.5 million across 60 countries.

The sub increases come as Lionsgate announced it would entertain spinning off the SVOD unit as a standalone publicly held company. Starz is currently headed by Jeffrey Hirsch.

“On Nov. 2, the company’s board authorized the management’s team to explore potential capital markets alternatives for its media networks business (Starz) including, but not limited to, a full or partial spin-off, split-off, issuance of a tracking stock or other transactions,” Lionsgate said in a regulatory filing.

Lionsgate acquired Starz in 2016 for $4.4 billion. Since that time, the company has transitioned the brand from pay-TV to over-the-top video, with additional platform launches overseas. At the same time, Lionsgate management feels Starz has not been properly valued by the market.

“The world has certainly changed because you have enormous competition and a lot of streamers around the globe,” Michael Burns, vice chairman of the board, said on the call. “But we think we’re very well positioned in that world.”

Overall, Lionsgate’s media networks unit totaled 30 million subs (including pay-TV), with segment revenue of $384.7 million, par with the previous-year period. Operating profit decreased to $5.5 million, driven by higher programming and content spend and marketing costs.

“Starz drove growth … with the strong premieres of three new series in the quarter,” CEO Jon Feltheimer said in a statement.

The media networks segment includes the domestic distribution of Starz branded premium subscription video services through OTT platforms and distributors and on a direct-to-consumer basis through the Starz App.

It also includes StarzPlay International, which represents revenue primarily from the OTT distribution of the company’s branded subscription video services outside of the United States.

Through March 31, media networks also included other streaming services, which represented primarily formerly owned Spanish language streaming service Pantaya. Lionsgate sold its interest in Pantaya earlier this year.