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Lionsgate Chief Executive Jon Feltheimer paid tribute to the company's policy of refusing to comment on rumors of mergers and acquisitions during the company's teleconference with Wall Street analysts to discuss the fourth quarter's financial results. quarter.
Nevertheless, Feltheimer and CFO Jimmy Barge emphasized the long-term plan to continue investing in Starz, despite reports of recent discussions with CBS on a possible sale of the premium network.
"We have a plan," said Feltheimer. "We are very confident about this. We execute the plan. We felt that the window of opportunity [for expansion] was now. You can already see the results. "
Largely because of the heavy investments in the international development of Starz Play's streaming offering, Lionsgate has been posting poor results for the quarter, which have still suffered from lingering weakness on the film side.
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Barge said the company plans to make a "convincing" return on its ongoing investments to strengthen the previously US-centric network internationally. He said the spending would generate annual losses of $ 125 to $ 150 million in fiscal year 2020, and that profitability should be reached by the year 2023.
By 2024, the service will have attracted between 15 and 25 million subscribers, said Barge. At present, there are 3 million international subscribers, mainly through StarzPlay Arabia, a company with Bell in Canada and an Amazon Prime Partnership in Europe. (The network is distributed via linear systems only in the United States and Canada.) Starz – which abandons the "game" in the United States – has attracted 4 million national streaming subscribers.
Lionsgate also plans to raise equity against the value of StarzPlay, which is now present in 51 global territories. Highlighting a "significant misalignment between our enthusiasm for international activities and the current perception of investors," Barge said the negative market value was $ 500 million. He promised that future updates would bring more "transparency" to the international growth effort, including more detailed financial specifications and the number of subscribers.
In terms of integration, the company has focused on unifying previously separate production teams from Lionsgate Television and Starz and adapting programming to enhance its global appeal, said Feltheimer. Lionsgate acquired Starz for $ 4.4 billion in 2016.
"There is usually a kind of lean out for buyers. You are waiting for the upcoming programming. With a studio, it's a bit of a "penchant", aggressively seeking talent to sell, "said Feltheimer. "What we did, from a cultural point of view, is to bring them together."
The integrated team, he added, was "super aggressive, after all." One project that has eluded Starz / Lionsgate, he conceded, was: Golden age, a drama of 10 episodes of the creators of Downton Abbey who ended up at HBO. But the lawsuit is launched.
The timing and forum choice for the capital increase remains to be determined, Barge said. The initiative will be "a very important evaluation marker," he promised, helping to unlock the "substantial value" of the Starz library. The company generates a 50% overall cash margin on its television and film library, which generates an annual business turnover of about $ 500 million.
Asked about the contract to release the film with Epix that was soon to expire, Feltheimer said that these titles would be redirected to Starz, which will help offset the expected loss of Sony titles. The premium network will retain a strong selection of rights to Disney movie titles in future releases despite the upcoming launch of Disney +, which will offer first-run rights to the studio's products. The executives declined to specify the amount of business that could have been compensated by Disney in exchange for these rights, which once constituted a key draw for the acquisition of subscribers for Starz.
Joe Drake, who oversaw the turnaround efforts of the film production unit, told analysts of mergers such as those involving Disney and Fox and the broader trend toward making mega-budget tents allowing " many properties to play us "On an annual basis, he added, the box office generates about $ 7 billion in additional revenue compared to the first 10 grossers, he said.
Although its stellar publication last week is outside the fourth fiscal quarter, Feltheimer pointed out John Wick: Chapter 3 – Parabellum as an example of the business that does more with less. This series of actions mobilized $ 110 million worldwide during its first week after a coordinated effort by many Lionsgate departments to maximize the potential of a modestly budgeted film.
"We add one, one, one, one to our business and we usually have five," Feltheimer said.
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