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Lions Gate not 'distracted' by media M&A as Starz streaming subscriptions grow


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Lions Gate not 'distracted' by media M&A as Starz streaming subscriptions grow

As Lions Gate Entertainment Corp. continues to build its streaming business, the company said it does not want to get swept off course by the current wave of media consolidation.

Lions Gate CEO John Feltheimer on a May 27 earnings call with analysts looked to deflect the notion that the company could be a target amid the current spate of media acquisitions. The CEO said the two deals in as many weeks — Discovery Inc.'s combination with AT&T Inc.'s Warner Media LLC and Inc.'s planned $8.45 billion purchase of MGM Holdings Inc. — are a "resounding affirmation of the value of content, IP and brands."

Feltheimer said that while Lions Gate "will talk to everyone, we listen to everything," the company wants to keep its head down and "not get distracted by this concept of scale because we think our job is actually just to create for our shareholders' outsized value."

To that end, the company is positioning itself as a premium streaming player somewhere between the mass aggregation services proffered by Netflix Inc. and The Walt Disney Co.'s Disney+ and niche products.

Starz's and Starzplay's subscriber base around the world increased 23% to 29.5 million at the close of the March quarter, with streaming customers surging 69% to 16.7 million. That topped internal forecasts of 13 million to 15 million and also means that Starz's direct-to-consumer subscriptions exceeded its 12.8 million linear customers.

In looking at the expectation of 300 million to 400 million subscribers for the top players, Feltheimer believes it is "quite reasonable" that Lions Gate can achieve 20% of their breadth.

The company updated its guidance, pointing to the higher end of its previous projections calling for 50 million to 60 million total subscribers by fiscal 2025. Four-fifths of that total is expected to be streaming subscribers.

"Who knows, 60 million may be a little conservative, but I mean, we're basing that just on the current results that we have and what we're seeing in the marketplace," said Feltheimer.

Revenue in the March quarter retreated 7.2% year over year to $876.4 million from $944.3 million. The media networks segment saw revenue rise 12% to $401.0 million behind domestic and international subscription growth.

Motion picture segment revenue declined to $292.4 million compared to $393.3 million a year ago amid continued theater closings and reduced theater capacity stemming from the pandemic.

The net loss attributable to shareholders in the March quarter was $37.7 million, or 17 cents per share, compared with a $44.9 million loss, or 20 cents per share, in the year-ago period.

Adjusted net income attributable to shareholders was $0.3 million, or 0 cents per share. The S&P Capital IQ consensus estimate for the March quarter was a 29 cent-per-share loss on a GAAP basis and a 5 cent-per-share loss on a normalized basis.