Lionsgate executives were glad to crow about the prospects of films led by La La Land and growth opportunities for Starz in their first quarterly earnings call after buying the premium networks company.
But investors likely will be more interested in Lionsgate’s equally heartfelt vows to keep costs under control while execs cut its $3.46 billion debt.
They didn’t quite confirm, but clearly didn’t deny, recent reports that they’re in talks to sell their 31% stake in Epix to partners Viacom and MGM.
“We’re focused on delevering,” CFO James Barge said in response to a question about the fate of the premium network. Although Lionsgate can still cut debt without a big sale, “we’re obviously going to look at the opportunities to extract value and to monetize non-core assets.”
Meanwhile, with La La Land, “we took a protected approach to the economics, taking on some financial partners and de-risked it on the downside,” CEO Jon Feltheimer said. “And we had the kind of explosive, beta returns that will be very important for our company going forward.”
He adds that the musical has become “a global box office phenomenon,” with a Valentine’s Day release planned for China.
Indeed, the company says that 20% of its total international box office now comes from China and opportunities there “are greater than ever.” Execs also said that they plan to increase international co-productions.
Co-COO Brian Goldsmith noted plans for “a new installment of a local-language version of [dance franchise] Step Up, which we are calling Step Up China, which for us is not just an extension into greater business in China but shows how valuable our intellectual properties can be as we extend … to local-language production and scripted television.”
Feltheimer announced a different kind of TV co-production: Lionsgate will team with Liberty Global to develop a Pilgrim Media-produced series on Formula E race car drivers. John Malone is a major power at Lionsgate and Liberty Global, and his Liberty Media just bought Formula 1.
As for Starz, the company says that it added 700,000 subscribers in the last three months of 2016 for a total of 24.3 million. But the operation’s chief Chris Albrecht says he won’t break out how many of the customers come from digital streaming services.
Feltheimer says he sees Starz continuing to grow, including with investments in original programming. “Together we can produce more efficiently,” he says.
On subscriptions, Albrecht says he saw “a lot of headwind” from AT&T’s acquisition of DirecTV.
“They’re basically shutting down U-verse and trying to move their subs over to DirecTV,” he says. “That has had an impact.”
He adds that digital distribution will be important, in part because “we don’t think Starz is as appreciated or valued” as it should be by traditional pay TV providers. He noted that another “large distributor” recently ended a “longtime promotional program” that affected sub growth.
“Starz is a must-have, must-carry for any sort of bundle,” Albrecht says. Having additional original shows from Lionsgate will “give us a leg up” including from digital streaming services and Starz’s own direct-to-consumer products.