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Lionsgate on Thursday shrunk its fiscal fourth-quarter loss as the Hollywood studio in the streaming space saw its global OTT subscriber base for Starz, Starzplay Arabia and Pantaya grow to 10.6 million, with the domestic OTT paid subscriber base standing at 6.8 million.
Lionsgate reported adjusted earnings of 21 cents per share for the three months ending March 31 against a year-earlier loss of 72 cents, which met a Wall Street estimate for 21 cents in a per-share loss during the latest quarter.
The studio posted a narrowing quarterly loss of $44.9 million against a year-earlier loss of $155.2 million.
Fourth-quarter revenue came to $944 million, compared with a year-earlier $913.7 million, which beat an analyst estimate of $933.5 million in overall revenue.
The studio’s media network revenue, which mostly comprises the Starz premium cable and streaming channel, at $358 million was virtually unchanged from a year-earlier $362 million. “Our StarzPlay international platform is showing strong gains as well, with viewership up 20 percent since the pandemic began, driving international subscribers, including the StarzPlay Arabia platform and Canada, past the 5 million mark at fiscal year-end,” Lionsgate CEO Jon Feltheimer told analysts during a conference call.
Lionsgate had 14 million linear Starz TV subscribers at the end of the fiscal fourth quarter, up from 13.7 million at the end of the third quarter. And the studio, when factoring in OTT customers, had 24.6 million total global subscribers at the end of fiscal 2020, against 22.3 million paid subscribers at the end of the earlier third quarter.
Lionsgate’s motion picture revenue rose 10 percent to $393 million on strong home entertainment sales for Knives Out. Television production revenue was $258 million, down from $272.8 million last year.
Like other Hollywood studios, Lionsgate has been impacted by delayed production of movies and TV shows and its theatrical releases after major cinemas chains shut down amid the coronavirus pandemic.
Feltheimer earlier in a statement that accompanied his latest results said the studio was well-positioned to weather the coronavirus pandemic: “We reported a strong quarter to end a solid fiscal year despite the disruption posed by the COVID-19 global pandemic. Our Lionsgate family has risen to the challenge of these unprecedented times with resilience, dedication and collaboration. Thanks to their efforts, Starz is continuing to deliver great entertainment to our audiences in the current at-home environment, and we’re working closely with all of our content partners to ensure that when production resumes and theaters reopen, we will be ready.”
The studio in its results said it recorded $50.5 million in COVID-19-related charges during the fourth quarter. The one-time items include $46 million in direct operating expenses for movie and TV series impairments and development charges “associated with changes in performance expectations or the feasibility of completing the project,” expenses from delaying productions, including cast and crew costs and charges around bad debt reserves.
The studio quickly shut down nearly 20 TV series and pilots when the pandemic hit in March. Lionsgate also incurred a $4.2 million charge for distribution and marketing expenses from early marketing expenditures for film releases and events subsequently canceled or delayed and another $300,000 in restructuring and other costs from transitioning staff to working remotely in their homes amid the pandemic.
Added the studio: “We expect to incur additional incremental costs in future periods. We are in the process of seeking insurance recovery for some of these costs, which cannot be estimated at this time, and therefore have not been recorded in our consolidated financial statements.”
The COVID-19 impact came near the end of Lionsgate’s fiscal fourth quarter but included the commercial release of I Still Believe going early to VOD after only two days in theaters and other movie titles like John Wick 4, Chaos Walking and the Saw spinoff Spiral see their theatrical runs delayed domestically and internationally.
“Obviously our theatrical production and release schedules are caveated by the uncertainties in the movie business right now, questions about when production will resume, what kind of protocols we will need to put in place, when theatres will re-open and how moviegoer habits will change,” Feltheimer told analysts.
Joe Drake, chair of Lionsgate’s Motion Picture Group, also told analysts audiences appear eager to get out of their homes and into the local multiplex, when they eventually reopen. “We’re bullish on people coming back to theaters, but we’re not naive about the environment we’re entering and that we’re in a fluid situation,” he said.
Drake added cinema chains will play classic movies early on to get people back into the theater-going experience and to ensure safety and social distancing protocols are working. “There’s a lot to do to get this right,” he said.
Feltheimer also addressed the Trolls theatrical window controversy as he looked to an eventual accommodation between a changing theatrical window and an evolving premium VOD platform. “Obviously there’s an at-home audience for movies as well. We still believe entirely in the partnership with exhibition. But above that we do see that these models could potentially change and hopefully we can find a smart way to do that with all of the various constituencies,” he told analysts.
Lionsgate was disrupted elsewhere during the latest financial quarter. “Our partners have also closed several location-based entertainment attractions based on our film and television properties. We may not be able to accurately predict when theaters reopen, production resumes or if and when certain of our content will be released. The full extent of the impact of the COVID-19 global pandemic on our business, operations and financial results will depend on numerous evolving factors that we may not be able to accurately predict,” the studio added in its commentary that accompanied its latest financial results.
Feltheimer also addressed a question about securing a financial or strategic partner for Starz as it expands internationally, or raising equity capital at Lionsgate to fund that streaming strategy — only to run into the COVID-19 crisis and its impact on financial markets.
“Cleary our emphasis is on deleveraging, but also on unlocking value and any transaction that we do should do both of those things and frankly should be with great partners, particularly if they can be strategic partners,” the exec said of priorities as ongoing discussions occur.
“We are having a lot of really interesting conversations. I would say COVID in terms of completing any transaction probably from a timing perspective does push things off to the right. But there’s absolutely no urgency,” Feltheimer added.
May 21, 3 p.m. Updated with comments by Lionsgate executives made during an analyst call.
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