Lionsgate chief executive Jon Feltheimer predicted the comany will have 13-15 million paid OTT subscribers by the end of its fiscal year led by Starz, which he called “a great subscription platform that is profitable, growing and a major contributor to earnings.”
Viewership for the Starzplay international platform is up 20% since the pandemic began, driving international subs — including StarzPlay Arabia pand Canada — past the 5 million mark. Pantaya, a Spanish-language premium streaming service for LatinX audience, more than doubled its subscriber base from 315,000 to nearly 700,000 paid subs for Lionsgate’s fiscal year ended in March.
“The goal of combining Lionsgate and Starz was to build a premium global subscription platform backed by the full resources of our companies. Today that effort is achieving results. Our global streaming business reached more than 10 million worldwide OTT subs at the end of the quarter and will continue to grow to between 13 and 15 million paid subs by the end of the fiscal year,” Feltheimer told investors on a conference call to discuss quarterly earnings. “We are increasingly able to control our destiny through the continued rapid growth of the direct-to-consumer Starz app, which is now our third largest distribution platform in the U.S.,” he added.
Starz has transitioned from out of the cable bundle to an a la carte model in a deal with the nation’s largest video provider Comcast. It moved from Comcast’s Xfinity to broadband-only service Flex after the finale of Power in February. Feltheimer said 6.2 million subscribers pivoted off the bundle and that it’s recaptured 1 million of them in the first six weeks of the new arragement.
He said the Starz app has two million subscribers. The transition from traditional video to digital is improving ARPU (average revenue per user), helping retention and reducing churn. Lionsgate can make better marketing and content decisions on insights from viewer data it gleans, he said — ticking off the well-known boons of DTC.
The studio behind Outlander, The Girlfriend Experience and The Spanish Princess and Feltheimer has some “sexy and spirited comedy series” coming, Feltheimer said, touting Run The World from Dear White People’s Yvette Lee Bowser and Leigh Davenport; family drama Heels, set in the world of small town wrestling; and the next two series in the Power franchise, Ghost & Raising Kanan. Romantic comedy Love Life, starring Anna Kendrick, is debuting on HBO Max next week and will be a centerpiece of the the streamers first Emmy campaign.
Felthiemer said Lionsgate has 11 virtual writing rooms currently activated and more than 20 series in development, production or post production. “We have full film and television pipelines poised to resume production and a slate of movies ready to distribute when theatres re-open.”
Exexs also underscored Lionsgate’s financial flexibility and liquidity, which are key in the current low-visibility, pandemic world. It had over $300 million in available cash at the end of the quarter and an undrawn revolver of $1.5 billion. But it’s highly levered and the stock low so executives said they continue to consider strategic partners or other ways to creat value although nothing is urgent and in any case dealmaking has slowed for now due to the pandemic.
In theatrical, Feltheimer said that when theatres re-open, “we will be ready” with a slate of big brands and properties like Spiral, the Saw-reimagining, The Hitman’s Bodyguard 2, starring Ryan Reynolds, Samuel L. Jackson and Salma Hayek, and John Wick 4. Comedies include The Unbearable Weight of Massive Talent, starring Nicolas Cage, and Barb & Star Go To Vista del Mar, starring Kristen Wiig. Other pics range from horror thriller Antebellum, starring Janelle Monae, the Dean Taylor-directed Hilary Swank thriller Fatale, the Neil Burger-directed sci-fi feature Voyagers and the Erwin Brothers’ American Underdog: The Kurt Warner Story.
During the quarter, Lionsgate landed the movie rights to Judy Blume’s iconic bestseller Are You There, God? It’s Me, Margaret, the first time one of her books has been brought to the screen, added Cate Blanchett to the cast of Borderlands, and won an auction for 16 States, the zombie thriller to be directed by Evil Dead’s Fede Alvarez. It also announced the big screen adaptation of Suzanne Collins’ Hunger Games prequel, The Ballad of Songbirds & Snakes, to be directed by Francis Lawrence. It said the new book is driving triple-digit sales growth of the Hunger Games titles in its catalog.
Lionsgate executives said COVID-19 will elevate production costs but “not by anywhere near” a 20% spike referenced by an anaalyst on the call. They didn’t give their own estimate. And they said insurace will cover costs in a meaningful way (including some of the $50 million hit last quarter) for productions that shut down, and will need to restart. “We do have production bonds and we plan on finishing our productions and that is not a factor,” said CFO Jimmy Barge, referring to insurance.
It was’t clear if he meant that insurance will also COVID-19 for new productions, not just ones that were halted. By most accounts, it will not and that’s a big issue being hashed out by the industry.