Lionsgate Sees $1.75 Billion Loss After Starz Restructuring, But Beats Wall Street Projections

Amid growing intrigue surrounding its spinoff strategy, Lionsgate reported growth for its streaming service Starz, even as the company suffered another quarterly loss amidst restructuring of its overseas streaming strategy.

Lionsgate reported a total streaming subscriber count for Starz of 27.3 million, up by 1 million from the 26.3 million reported in Q2. Operating loss was reported at $1.75 billion or an adjusted net loss of $7.95 cents per share. Without the Starz writedown, the quarterly loss stands at $53.7 million on quarterly revenue of $875.2 million and an adjusted net loss to shareholders of 15 cents per share, beating Wall Street projections of 18 cents per share and $851 million in revenue.

Lionsgate attributed the vast majority of its operating loss to its decision to pull its international streaming service Starzplay, which just rebranded as Lionsgate+, from France, Germany, Italy, Spain, Benelux, the Nordics and Japan. The company also reported a $1.48 billion non-cash impairment charge related to goodwill from its acquisition of Starz in 2016.

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In September, Lionsgate surprised some Wall Street analysts when it announced that it would be spinning off its production company instead of Starz as had been commonly predicted. Lionsgate would continue to operate both sides independently while allowing investors to value each asset separately.

Both Starz and Lionsgate’s studio have been seen for years as potential acquisition targets as Hollywood’s consolidation wave continues. Lionsgate could sell off Starz to lighten the $2 billion debt load that it incurred from acquiring the streaming service. But Lionsgate’s production company, which comes with a library that includes “The Hunger Games,” “John Wick,” and “Mad Men,” could also be sold to a larger studio in much the same way that Amazon acquired MGM earlier this year.

As TheWrap reported last month, another option could be to sell a minority stake in the studio, allowing it to relieve debt while still maintaining control over one of the few remaining independent studios in Hollywood. This may be a more likely path than a total sale, considering that Lionsgate has extended the contracts of CEO Jon Feltheimer, TV group chair Kevin Beggs and motion picture group chair Joe Drake.