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Lionsgate Revenue Falls As Strike Impact Hits TV Production Unit

Lionsgate has released its third quarter financial results after unveiling plans for a spinoff of its studio business from the premium cable and streaming platform Starz via a Special Purpose Acquisition Company (SPAC) deal.

The studio swung to a third quarter net loss at $107.4 million, compared to a year-earlier profit of $15.2 million, on overall revenue falling to $975.1 million, against $1 billion in the same period of last year during the three months to Dec. 31, 2023.

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Lionsgate posted an adjusted earnings per-share at 27 cents, compared to a year-earlier per-share earnings of 21 cents, which in the latest financial quarter beat an analyst estimate by six cents. Shares in the Hollywood studio rose in after hour trading by 60 cent, or .6 percent, to $10.86.

Lionsgate reported record trailing 12-month library revenue of $784 million in the quarter.

The studio business, made up of the film and TV divisions, saw revenue fall by 23 percent to $691.6 million. TV production revenue fell sharply to $285.4 million, from a year-earlier $605.4 million, a tumble due mainly to the timing of episodic deliveries amid the writers and actors strikes.

Lionsgate reported it had ten films and TV series entering or resuming production in the third quarter after the Hollywood actors strike was settled. And with fewer wide theatrical releases industrywide due to the strikes, Lionsgate CEO Jon Feltheimer told analysts during an after-markets call that he sees an opportunity “to grow our share of the market with a slate of 12 wide theatrical releases and approximately 40 multi-platform and direct-to-streaming titles in F25.”

The disruption to the TV production division was offset at the motion picture segment where revenue rose 53 percent to $443.2 million as the studio earned strong strong box office in particular from The Hunger Games: The Ballad of Songbirds & Snakes and additional library performance of earlier Hunger Games franchise titles.

The proposed SPAC-style transaction to separate the studios and Starz businesses, expected to close this spring, and follows nearly two years of strategic talks by Lionsgate over the future of its studio division and Starz streaming platform.

Feltheimer told analysts that Lionsgate Studios is expected to be launching on NASDAQ under the ticker symbol “LION” in the spring. Studio vice-chairman Michael Burns told analysts that a 13 percent to 15 percent stake in Lionsgate Studios is expected to remain in the hands of public market investors, while the remaining 85 percent to 87 percent stake in the new publicly-traded entity and 100 percent of Starz will be held as part of a Remain Co. vehicle.

“So they’ll be two public companies until, as we’ve said before, the end of 2024 when we’re anticipating the full separation,” Burns added.

The studio business, comprising Lionsgate’s TV production and Motion Picture Group divisions and a 20,000-title film and TV library, will be combined with Screaming Eagle Acquisition Corp., a special-purpose acquisition rights company — often referred to as a blank check company — led by SPAC sponsor Eagle Equity Partners and CEO Eli Baker.

Also during the latest quarter, the media networks division, which is mainly Starz, saw segment revenue grow 10 percent to $417.2 million, compared to a year-earlier 380.3 million.

Starz during the latest quarter added 700,000 streaming subscriber subscribers to get to 13.43 million, and overall net subscribers in North America — where the premium platform will focus growth efforts from 2025 — grew by 340,000 to 22.3 million. The total global subscriber base, excluding Lionsgate + territories exited or to be exited, fell sequentially to 27.43 million during the third quarter, against 27.57 million in the second quarter.

After completing its acquisition of eOne from Hasbro, and raising its equity investment in 3 Arts with the purchase of an additional 25 percent stake that cost around $200 million in cash, Lionsgate’s Feltheimer told analysts that the studio continued to drive forward in an uncertain and fast-changing entertainment industry.

“Against the backdrop of an uncertain economy, geopolitical turmoil, the aftermath of two strikes and continued industry disruption, we continue to navigate the headwinds in our environment by leaning into the diversification of our businesses and the resilience of our culture to move the company forward,” Feltheimer argued.

That uncertainty includes a possible IATSE strike in Hollywood as the major crew union is planning on a potential strike authorization vote if deals on two major labor contracts are not reached around the time they expire on July 31.

Feltheimer told analysts when asked about a possible IATSE labor stoppage: “I’m the CEO of a public company. I worry about everything, every day. I think that nobody really wins in a strike, honestly. And we’re hoping that the IATSE strike won’t happen, because we’ve got to keep growing this business and innovating and everyone deserves a fair shake. And we think that everyone who works below-the-line deserves a fair shake.”

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