Starz Bets Big That It Can Be an IP and Production Powerhouse. Wall Street Is Cautiously Optimistic

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On Thursday, the initial fiscal report from Starz, now operating independently, showcased a sense of new beginnings following its separation from Lionsgate, hinting at a new chapter in its journey as a premium cable and streaming service.

Analysts were focusing on the growth of Starz subscribers in the U.S., despite a $177.4 million restructuring charge for the company’s content, as they assessed the preliminary results for the first quarter. Notably, the data indicated stronger-than-anticipated growth in U.S. Over-the-top (OTT) subscribers with an addition of approximately 530,000, primarily due to the successful premiere of season 4 of the original series “Power: Raising Kanan” towards the end of the quarter, according to Seaport Research Partners analyst David Joyce in a May 30 investment note.

On Friday morning, Starz’s individual stocks experienced a surge of $3.12, equivalent to 19%, reaching $19.63, following the release of their initial financial report for the quarter. By the end of the quarter, Starz boasted 12.3 million U.S. streaming subscribers, an increase of 530,000 from the previous quarter. Furthermore, the total number of U.S. subscribers rose to 18 million, marking a gain of 320,000 customers compared to the preceding period, largely due to the highly-anticipated late-quarter premiere of Power Book III: Raising Kanan.

The number of North American subscribers dropped by about 330,000 to 19.6 million during the previous quarter, primarily due to a disagreement over television broadcast rights in Canada that resulted in Starz being removed from a package. Starz concluded its separation from Lionsgate’s film and TV production company in early May.

Jeffrey Hirsch, president and CEO of Starz, informed analysts during a call last Thursday that as an independent company, they plan to cut down on content expenses and revitalize their IP production and program collection to keep up with subscriber growth. He stated, “Being a separate entity allows us to ease the strain on content costs and reactivate our IP creation facility. This will enable us to generate our own library and have more control over the business costs.

Prior to that move, Starz incurred a restructuring expense of approximately $177.4 million, primarily as a result of a “strategic review” of their content offerings. In the same timeframe of 2024, Starz recorded a one-off charge of $29.4 million to reorganize their international operations.

According to TD Cowen analyst Doug Creutz, as stated in his investment note dated May 30th, Starz’s decision to create its own intellectual property library instead of relying on Lionsgate Studios could yield benefits. This move, Creutz explains, will allow Starz to profit from the success of their projects while still delegating financing and film production tasks to external studios like Lionsgate.

Starz is making a concerted effort to lower their debt. In particular, they aim to reduce their debt-to-earnings ratio (also known as debt-to-EBITDA) to 2.5 times. As Hirsch explained during the analyst meeting, this is their main objective at the moment.

In the quarter ending March 31, 2025, Starz announced total revenue of $330.6 million, a decrease compared to the same period last year which reported $352.4 million. Additionally, the operating loss for this year increased significantly, standing at $136.3 million compared to a loss of $30.8 million in the same quarter of 2024. However, the adjusted OIBDA improved, reaching $93.3 million, up from $45.5 million in the previous year.

Creutz stated, “We anticipate that Starz’s enhanced lineup in 2025 (following a year impacted by the 2023 Hollywood strikes), which includes new seasons of our flagship series and exciting original content, might help solidify our subscriber base. However, this is still a ‘proof is in the pudding’ scenario until we see consistent quarterly results.

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2025-05-30 19:54