Lionsgate’s Next ‘Power’ Play: A Starz Bidding War
Lionsgate turned heads in its Nov. 4 earnings call by announcing that the board had okayed the exploration of a sale for premium cable and streaming service Starz.
This is something that had been denied in prior earnings calls, most recently in May, with the announcement coming at a time when Starz total subscribers remain around the all-time-high mark.
The news saw Lionsgate stock rise, from $13.87 at close of trading on Nov. 4 to a high of $17.04 when markets opened on Nov. 8, an increase of 22.9%. This is likely driven by the market reacting to the decision coming at a time of record strength for Starz versus a knee-jerk reaction to a down period.
With subscribers at their high mark, this is the strongest opportunity Lionsgate has had to capitalize on the $4.4 billion paid for Starz in 2016. Given Amazon purchased MGM for $8.5 billion earlier this year, which included both Epix as well as libraries for MGM’s TV and film studios, it would be safe to assume that a much more fleshed-out, globally distributed TV and streaming service would fetch a similar price.
To that note, consider how the purchase of Starz would instantly boost the number of U.S.-based streaming consumers by 10 million for a purchaser, which would be of interest to a number of services.
A sale of Starz would entail the transfer of the current movie studio deals it has, which took a notable hit with the decision by Sony Pictures to not renew with Starz and instead move to Netflix in 2022. This leaves Starz with first-window rights only to current corporate sibling Lionsgate (which were previously held by FX and HBO) starting in Q1 2022. Whilst Starz moved to counter the loss of Sony movies with those from Lionsgate and could be key to the decision for the sale, the service will be lacking in big-name premiering movies from an outside studio.
Starz does currently have a post-Pay 1 window deal with Universal beginning in 2022, which will see movies that have first been on Peacock, and then Prime Video, IMDb TV or Netflix, available on the channel. It also has library deals for older films with Walt Disney Pictures, Warner Bros. Entertainment, Universal Pictures, MGM and Paramount Pictures, which may be of interest for a service looking to bolster its movie library.
The choicest asset for anyone looking to acquire Starz is its catalog of originals. Its current slate includes several spinoffs from “Power” and only three shows that have gone beyond one season in “Outlander” (five seasons to date), “The Girlfriend Experience” (three) and “Hightown” (two).
The rest of Starz’s slate are all shows currently in their first season (seven shows in total), with three launching in the last quarter. There are another eight in development alongside one miniseries. The current series lineup lacks a hit in the zeitgeist, and while it would be a great library filler for a streaming service, Starz doesn’t have that “OMG” factor.
Thus a potential acquirer of Starz really should be one looking to bolster its library but shouldn’t be driven by the desire for a huge tentpole hit. Amazon, which is about to acquire MGM and its own premium cable/streaming service Epix, is out of the running, and it would be safe to rule out WarnerMedia/Discovery from making a play. AMC Networks has also ruled itself out of the running for the service.
There are four main competitors for the Starz library: ViacomCBS — which has been long rumored to be interested in merging Starz with Showtime — Comcast, Disney and Apple.
For ViacomCBS, Starz would be a great way to bolster its movie library for Paramount+ and content between Paramount+ and Showtime services. It wouldn’t be hard to imagine ViacomCBS also creating some free ad-supported TV (FAST) channels for Pluto based on older Starz content like “Black Sails” or “Power” to help bolster all of its streaming initiatives.
Comcast’s Peacock service has lacked a real breakout hit and could do with some high-end content to help bolster its library. As VIP+ recently analyzed, Peacock is far from the finished product, and the combination of movie rights, including bringing some back to what is Universal’s sister service, as well as high-end shows, could help the streamer to stand up on its own accord a little better.
Disney may appear to be an outlier of choice, but the combined film/TV library would help make Hulu more competitive. Hulu doesn’t have a deep movie library, and adding some mature TV series would also give the service a more robust offering. It’s also less problematic from an antitrust standpoint for Disney to acquire a media service it doesn’t currently own — premium cable — versus when it had to find a buyer for the Fox Sports RSNs owing to its stake in ESPN.
Apple shouldn’t be discounted as a potential bidder. Starz would offer that service a deeper library for both back content and ongoing releases and would significantly boost its movie depth. Having missed out on MGM, the number of independent services available is dwindling, and this may prod Apple into action to boost Apple TV+.
It’s always possible that another buyer could be found for Starz. Private equity firms have in recent years taken a real interest in the TV business, so a company like Apollo buying the service shouldn’t be dismissed.
Nor should an outlier; no one would have guessed that Roku would be the owners of Quibi's content even after Quibi failed. There's already been a left-field suitor for Starz: rapper and actor 50 Cent took to social media last week to publicly muse about making a bid; he went on the record to express displeasure with the proposed sale of the network, with which he has a deep involvement via the “Power” franchise.