Lionsgate execs talked up Starz, La La Land, and their “risk mitigation strategy” to profit from movies and TV shows as they wrapped up a lengthy Investor Day series of presentations to attract Wall Streeters to the company following its $4.4 billion deal last month to buy the premium networks company.
With Starz, CEO Jon Feltheimer says he sees “low hanging fruit” from opportunities to grow overseas — either by syndicating shows or by expanding the premium service’s reach.
“The key thing is never to take a hard position,” he says. “We’re looking at the [program] rights they do own at Starz, and a couple of them — when you look at the value on them — really, really significant low hanging fruit. If we can create syndication for some of that, internationally or domestically, and be able to use it on our own app and window it” then they should generate a lot of cash.
He also urged investors to consider the potential upside if Starz can “get a four-quadrant hit together, and have the ability in 24 million homes to bring our license fees up just a little bit.”
He noted that “we used to get complaints from AMC every single year saying, ‘We’re losing money on Mad Men. We’re losing money on Mad Men.’ Yeah, they are losing money here — and they made $2-or-3 billion of market value.”
The CEO once again punted on the question of whether Lionsgate will keep its 32% investment in Epix — and distribute its movies there — now that it owns Starz.
“We have some of our output with HBO and some of our output with Epix,” he says. “That’s going to be an ongoing conversation.”
Meanwhile Epix “is very valuable and throwing off cash.” Lionsgate and partners Viacom and MGM will “realize the value which ever way we all decide is best for our companies.”
He later quipped that Lionsgate will “treat Starz just like any other third party customer that we paid $4 billion for.”
Asked about Lionsgate’s four streaming services, Feltheimer says he’d consider bringing on partners — especially if some shows gain traction.
“We will probably price up the equity of this and bring on some partners” and possibly distribute them with Starz.
Indeed, Lionsgate is already “talking to international players like Liberty Global about taking some of these and distributing internationally as great formats.”
But if a service doesn’t perform, then “we’ll shut it down,” he says, reflecting “the same kind of conservative, risk averse investments we’ve made in every area.”
CFO James Barge says that the company is “very happy” with how the “our combined core businesses are tracking.” He added that Lionsgate’s P&A spending might increase this quarter to promote La La Land and “chase this film into great success.”
As for the film business generally, Vice Chairman Michael Burns says that even with Lionsgate’s efforts to control production costs and bring in partners to reduce its risk “we have a tremendous amount of upside” to buy a potential blockbuster.
“We’ll do the right deal at the right price at the right time,” he says.
With The Hunger Games, Feltheimer says, “we had the opportunity to co-finance and everyone thinks, ‘what a no brainer'” with a property that’s “about kids killing kids.”
Now he’s glad he didn’t co-finance — and wishes he hadn’t done so with La La Land.
“I’m not that happy today that we shared a second 25% equity with Black Label and our friend Molly Smith on La La Land,” he says. “But when you ran the math on it, the risk on it was just doing the movie in the first place — $28-$29 million. And, she didn’t share until a pretty high base case in box office. Now looking back on it, in retrospect, I sure wish I hadn’t done that.”
The movie swept the Golden Globes and is seen as the front-runner for a Best Picture Oscar.