Lionsgate Eyes Spinning Off Starz Into Separate Public Company

Jon Feltheimer Getty H 2016
Mike Pont/FilmMagic

The studio is looking to unlock hidden value in the premium cable channel as it expands in the streaming space with popular shows like 'Power' and 'Outlander.'

Lionsgate is weighing whether to spin off Starz, the studio's fast-expanding premium cable channel, The Hollywood Reporter has confirmed.

But it's understood a corporate spinoff is one strategic option under consideration at Lionsgate, although picking the right market conditions is thought to be a key concern.

No decision has yet been taken, sources say, as the studio has in part been reacting to outside calls from Wall Street players looking to unlock hidden value at Starz. 

The Hollywood studio offered no comment on a report in The Wall Street Journal, which first broke the news. 

The possible corporate splitting off into a separately traded company, in part to reduce the studio's overall debt load, follows Jeffrey Hirsch being promoted to president and CEO of Starz. He had served as COO since 2016 and took over as head of the network following Chris Albrecht's departure in March.

Lionsgate spinning off Starz also follows reports the studio was offered $5 billion by CBS for the premium platform. Deal chatter around Starz follows the steady integration of the premium cable channel and Lionsgate TV under studio CEO Jon Feltheimer.

At Starz, Hirsch has rebranded and repositioned the flagship Starz and Starz Encore networks, launched the Starz app and gotten the company into the streaming business with Amazon by bundling the premium cable channel as part of Amazon Prime.

Lionsgate in 2016 acquired Starz for $4.4 billion in cash and stock to create what the studio has called a global content powerhouse. The deal aimed to allow Lionsgate to focus on growing Starz as a pay TV network, including online and internationally, and to diversify the studio and its motion picture group, led by Joe Drake, from the ups and downs of theatrical box office.

Lionsgate is stepping up investment in the global rollout of Starz. During its latest financial quarter, Starz's overall global subscriber base came to 26.5 million, up 2.6 million new customers year-over-year.

But the studio has grown frustrated that investors, who have pummeled the studio's share price in the last year, are not giving Lionsgate credit for its growth strategy at Starz and instead are focused on near-term losses as Starz expands as a premium SVOD platform around the world.

Lionsgate expects Starz within five years to generate between 15 million and 25 million subscribers in around 51 foreign countries. But to get there, Lionsgate has forecast international losses to peak at around $125 million to $150 million in fiscal 2020, before reaching profitability in 2023.