In what could be a major blow for Lionsgate and its Starz business unit, Comcast has reportedly told the service that it plans to drop the multilevel video distributor at the end of the year.
Should Comcast sever ties with Starz and Starz Encore, the loss of subscribers to Starz would be significant — about 33% of the service’s domestic members.
More importantly, with Starz accounting for about 70% of Lionsgate’s profit, the sub loss could undermine Lionsgate fiscal fortunes, according to The Information, which broke the news citing sources familiar with the situation.
A Lionsgate representative was not immediately available for comment.
Indeed, news of the potential split sent Lionsgate shares freefalling before rebounding to close Aug. 30 down about 5%.
The stock rebound was in part due to Starz separately inking a carriage agreement with AT&T, including AT&T Now, DirecTV and U-verse.
While the scuttlebutt could be nothing more than Comcast attempting to negotiate a better fee agreement in the media, the nation’s No. 1 cable operator is reportedly interested in MGM Holdings — owned Epix filling the void.
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The moves come as Comcast navigates a rapidly changing home entertainment world with consumers increasingly switching to loss-leading subscription video-on-demand and online TV platforms instead of the traditional cable bundle.
With premium pay-tv services such as HBO, Showtime and Starz bowing standalone services, pay-tv operators such as Comcast, Dish Network and others are reconsidering their distribution agreements with the channels.
Regardless, the situation comes at a delicate time for Lionsgate, which is increasingly relying on Starz to buttress an uneven studio business and television production bottom line.
Earlier this year, Lionsgate reportedly rebuffed a $5 billion offer for Starz from CBS — the latter looking to acquire subscriber growth for its CBS All Access and Showtime OTT ventures.
Lionsgate has licensed Starz to Apple’s pending Apple TV+ launch, in addition to marketing the service via Amazon Prime Channels and expanding globally into 48 countries through Starz Play.
Meanwhile, MGM has been looking for a fiscal partner for Epix to help expand the platform’s reach internationally — a goal Comcast and its Sky subsidiary could help fulfill.