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Lionsgate on Thursday reported a second-quarter profit on sharply higher overall revenues after the studio merged with Starz, which beat expectations.
Lionsgate, led by CEO Jon Feltheimer, recorded net income of $15.5 million, compared to a year-earlier loss of $17.4 million for the three months ending Sept. 30. The earnings of 7 cents a share, compared to a loss of 12 cents a share in the second quarter of fiscal 2017, beat by 20 cents an analyst forecast of Lionsgate losing 13 cents a share during the latest quarter.
Overall revenues came to $941 million against a year-earlier $639.5 million, as media networks revenue of $393.4 million, which includes the Starz Networks, helped offset falls in the motion pictures and TV production segments.
Starz added around 400,000 overall subscribers during the latest quarter, with their direct-to-consumer offering driving growth. And Starz’s Power, Outlander and The Girlfriend Experience series had record viewership with their latest seasons during the second quarter.
Lionsgate also announced Thursday that Starz will launch on Hulu as the premium cable channel continues its diversification online. Starz CEO Chris Albrecht during an analyst call declined to offer details on the timing of the Hulu launch, or its pricing and packaging.
Hulu earlier this year acquired the streaming rights to the Starz‘ Power series from creator and showrunner Courtney A. Kemp and Curtis “50 Cent” Jackson. Albrecht was also coy when asked about how Starz may expand its video streaming service internationally.
He said possible expansion models could be Starz Play Arabia in the Middle East and North Africa, which continues to grow its subscriber base and is expected to be profitable in two years. Another model is turning to Amazon and doing a “plug and play” of Starz on that platform.
“We’re looking at different territories, targetting which model might work best, seeking out the best partners and trying to do the best plan we can with investments,” Albrecht told analysts.
The race for talent among streaming giants, especially Netflix and Amazon, is impacting the studio, but also offers an opportunity, Lionsgate CEO Jon Feltheimer told analysts. “There’s no question that some of the big talent is going direct to platforms. But there’s always been a lot of competition,” Feltheimer said.
But he added talent wants “optionality,” where they can create content for a range of platforms. Feltheimer pointed to Lin-Manuel Miranda’s The Kingkiller Chronicle franchise from Lionsgate that comprises a TV series adaption, a theatrical movie written by Lindsey Beer and interactive games.
Joe Drake, co-chair of Lionsgate’s Motion Picture Group, and doing his first analyst call since recently returning to the studio, touted the upcoming wide release of Wonder on Nov. 17, opposite Warner Bros.’ ensemble flick Justice League. “We’re very happy with the tracking. We’ve done over 500 screenings that have tested incredibly well. And our pre-sales have been really strong. So we think we have a movie that will open well and play through the season,” he said.
Wonder, Stephen Chbosky’s adaptation of the R.J. Palacio novel, is led by Julia Roberts and Room breakout Jacob Tremblay. Though initially scheduled to open on April 7, Wonder‘s release date was shifted after it performed well at test screenings. The new November release date sets the drama’s debut just before Thanksgiving weekend, a popular time for family moviegoing.
As part of its latest results, Lionsgate’s motion picture group revenues were $385.7 million, against a year-earlier $464.4 million, as Lionsgate had fewer wide releases during the latest quarter (which included The Hitman’s Bodyguard and The Big Sick, released in partnership with Amazon Studios) compared to seven wide releases during the year-ago period.
Reduced P&A costs helped the motion pictures segment swing to an $8.9 million profit, against a year-earlier loss of $5.9 million. On the TV production side, segment revenues fell 4.7 percent to $168.7 million, due to the timing of episodic deliveries for Orange Is the New Black.
“Our strong performance in the quarter keeps us on track for our fiscal year expectations, and our robust free cash flow is enabling us to continue our consistent deleveraging ahead of schedule,” Feltheimer earlier said in a statement that accompanied the release of Lionsgate’s latest financial results.
He added: “Starz continued to report strong overall subscriber gains, with its direct-to-consumer offering leading the way. Our ability to leverage our strengths, mitigate risk and focus on segments where we can continue to win puts us on a strong, profitable growth path.”
Nov. 9, 6:15 p.m. Updated with comments by senior Lionsgate executives made during an analyst call.
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