×
You will be redirected back to your article in seconds

What CBS’ Pursuit of Starz Means for CBS, Lionsgate

CBS’ effort to buy pay TV service Starz from Lionsgate seems on the surface to be a head scratcher.

CBS has told Wall Street for years that it has prospered because it brings only two must-have services to the table in negotiations with MVPDs, allowing the Eye to drive a hard bargain. Why would CBS want to take on a lower-profile rival to Showtime?

Meanwhile, Lionsgate has presented Starz, which it acquired in 2016 for $4.4 billion, as central to its strategy of diversification with a premium TV network that can serve as the launching pad for new programs from its TV studio. Why would Lionsgate want to sell now?

CBS’ pursuit of Starz comes after months of deliberations by the CBS board of directors on the best course for the Eye at a time when it is dwarfed in size and global scope by its longtime rivals, notably the M&A-enlarged conglomerates of Disney, Comcast and AT&T.

It’s no secret that the prospect of CBS reuniting with Viacom remains strong, given the stated preference of controlling CBS and Viacom shareholder Shari Redstone. The news of CBS’ hunt for Starz suggests that the CBS board of directors is actively looking at more than Viacom for M&A and strategic options.

CBS expressed its interest in Starz back in 2015 and 2016 when it was on the block. Lionsgate was long seen as the most likely buyer for Starz given the two companies’ common links to investor John Malone. In the years since, the dawn of the skinny bundle era has validated CBS’ strategy of focusing on fewer powerhouse channels, compared to Viacom’s raft of nearly two dozen basic cablers.

But Starz is a purely subscription business, something that appeals to CBS as it is less vulnerable to cyclical swings. The collection of 17 Starz- and Encore-branded channels has seen its subscriber base grow to about 25.1 million in the U.S., per Lionsgate’s most recent disclosure, in the past year, thanks largely to the company’s push in launching its standalone streaming app. Lionsgate has also been investing in a global rollout of Starz as a streaming option — something CBS is in the midst of ramping up for its CBS All Access service and Showtime.

Moreover, like Lionsgate, CBS sees Starz as another platform for launching original series that can be monetized through international licensing, or as the building blocks of future subscription offerings outside the U.S.

Lionsgate’s stock has been battered as the company suffered through a drought at the box office — which may end this weekend if “John Wick 3” performs as expected. The discussions over Starz began with an incoming call to Lionsgate from CBS, multiple sources said, and those conversations are continuing. That was welcome news for Lionsgate investors, judging by the nearly 15% jump Lionsgate shares took after the news was first reported Friday by the Information. Later in the day, Reuters reported that Lionsgate countered CBS’ $5 billion overture with $5.5 billion, which would mark a respectable premium over its purchase price three years ago.

Reps for CBS and Lionsgate declined comment.

CBS’ board of directors is scheduled to hold a regular board meeting on May 29, the day of the company’s annual meeting in New York. The consideration of M&A options is expected to be on the agenda. The moves on Starz suggest the board is looking hard at unexpected targets in addition to its former sibling under the Redstone empire. CBS already conducted a transaction in March to buy out Lionsgate’s stake in the Pop cabler that the companies have jointly owned since 2013.

If CBS succeeds in wooing Starz, Lionsgate will need to craft a new narrative for investors. Although the sale of Starz might suggest otherwise, the company is said to be prepared to use Starz proceeds to pour more resources into its content production operation amid the growing global demand for high-end series and movies.

(Pictured: Starz drama “Outlander”)

Popular on Variety

More Biz

  • Endeavor co-founder Ari Emanuel

    Endeavor Aims to Raise $620 Million With IPO

    Endeavor disclosed Monday that it expects a price between $30 and $32 per share for its initial public offering in the fall. Endeavor — the parent company of WME, UFC, IMG, Endeavor Content, Professional Bull Riders and other assets — aims to raise as much as $620 million with the sale of 19.4 million shares. [...]

  • Overall View of the Rose Bowl

    One Dead, One Injured in Rose Bowl Parking Lot Shooting

    One person was killed and another was injured Saturday night following a shooting in a Rose Bowl parking lot, the Pasadena police confirmed. According to a statement from the police department, police responded to reports of a physical altercation and shots fired at 11:22 p.m. near the area of Arroyo Boulevard and Seco Street, where [...]

  • Felicity Huffman

    Felicity Huffman Issues Apology After Receiving Prison Sentence: 'There Are No Excuses'

    Felicity Huffman issued a long statement of apology on Friday after receiving a two-week prison sentence for paying to illegally boost her daughter’s SAT score. In the statement, Huffman, in addition to saying  she accepts the court’s decision, acknowledges and apologizes to other parents fighting to get their children into college. Along with the prison [...]

  • Actress Felicity Huffman (C-L) and her

    Felicity Huffman Sentenced to 14 Days in Prison in SAT Cheating Case

    Felicity Huffman was sentenced on Friday to 14 days in prison for the crime of paying $15,000 to boost her daughter’s SAT score. Judge Indira Talwani also ordered her to serve 250 hours of community service and a year of probation, and pay a $30,000 fine. The sentence came as a surprise, as Talwani had [...]

  • NEW YORK, NEW YORK - SEPTEMBER

    Rihanna Sings (Briefly), Pharrell and DJ Khaled Rock the Mic at Star-Studded Diamond Ball

    In just five years, Rihanna’s Diamond Ball has become one of the music industry’s biggest events of its kind, nearly on the level of the Clive Davis Pre-Grammy Gala. While there are several dazzling charity events with equal starpower and often-unique performances, what makes the Diamond Ball different is, obviously enough, Rihanna’s supernova aura and [...]

  • Amber Heard Seeks Info on Johnny

    Amber Heard Seeks Info on Johnny Depp's Arrests and Substance Abuse

    Amber Heard is asking Johnny Depp to turn over records related to his arrests and drug treatment, as her lawyers defend her from a $50 million defamation suit. Depp filed suit in March, accusing his ex-wife of tanking his career by writing a Washington Post op/ed alluding to her domestic violence allegations against him. Heard [...]

More From Our Brands

Access exclusive content