Starz CEO Pitches Wall Street Ahead of Lionsgate Separation, Calls Asset ‘Misunderstood’

As Starz prepares to separate from Lionsgate Studios and become a publicly traded company on the NASDAQ in the coming weeks, CEO Jeff Hirsch pitched why he believes it’s a “misunderstood” asset that is poised to be a good investment.

Hirsch told UBS’ Media and Communications Conference on Tuesday that Starz currently generates about $1.4 billion in revenue — with nearly $1 billion of that coming from digital — and has a 15% profit margin and about $200 million in EBITDA. It also has a total of 20 million subscribers in the U.S. and Canada, with women accounting for two-thirds of its audience, and an opportunity to grow by another 80 to 90 million households.

He further noted that the company has “actually made the transition from linear to digital faster than any other linear network and more successfully,” adding that digital is growing anywhere from 9% to 13% per year on the OTT side.

Hirsch said he expects Starz’s separation from Lionsgate to occur by mid-January 2025. The company will trade on the NASDAQ under the ticker symbol STRZ. Following the separation, the company will have around $600 million of net debt and plans to reduce leverage from three times to 2.5 times.

“As we separate and we start to take more control of the business, you’re going to see a business that really grows revenue 1% to 3% in the out years,” Hirsch continued. “We’ve got a plan to get that margin from 15% to 20% and still will convert about 70% on leverage and cash flow. So you’ve got a really good, investable business.”

Starz sees an opportunity to expand its revenue base by engaging through M&A.

“If you look at the disruption going on in the business today, there’s a lot of linear networks, or ad-supported networks that serve the demos that we serve today, that are part of larger companies that aren’t getting the focus that they deserve. These are great brands that serve women for decades that are just sitting in a bunch of different groups of portfolios, channels that aren’t getting the focus that we could provide them,” the CEO said.

“I do think there’s an opportunity once we separate, once we have our own balance sheet and a currency, to go out and acquire some of those linear assets. I don’t view them as linear assets, but I view them as ad-supported content that sits at our demo, that’s surrounded by linear costs that I already have,” he continued. “So I do think there’s an opportunity to expand the revenue base away from SVOD, to have an AVOD and an SVOD that focuses on the demos that we have through a little bit of an M&A.”

While many have warned of consolidation in Hollywood, Hirsch predicted that there may first be divestitures of smaller assets.

“I do think people will shed assets first before they consolidate. They’ll figure out what their strength is, they’ll shed things that they don’t want to focus on, and then they’ll consolidate around the things that they are focused on,” he said. “This is a hard business. It’s even harder today based on the disruption and it’s very hard to do 100 things well. And so things that you can’t focus on that you made are actually great opportunities for us that we are focused on.”

When asked about Starz’s pricing strategy, Hirsch said that the goal is to always be priced below the major streamers like Netflix and Disney+, touting the service as a complementary offering.

He also noted that the company would “take the year off” with price increases in 2025 after implementing them in 2024 and 2023 and that churn from price increases has been in line with expectations thus far.

“The reason why we’re taking the year off is I want to see what the rest of the industry does,” he explained. “When you do a rate increase, you actually have to think about years three, four and five, not years one and two. Because, as you all know, looking for growth and percentage growth — and so if you get on this cadence of having to do it every year, it makes it really hard to stop the cadence, because you just have to replace that some other way. And so I think it’s good to pulse it in, take a break, pulse it in, take a break. And with this distribution wave that I think is coming, it gives us opportunity not to go back to the rate well, because we can grow subscribers on a more organic basis.”

Hirsch stated that while Starz has a plan to address password sharing this year, it isn’t as big of an upside opportunity for subscriber growth as it is for the major streamers, since most of his service’s users are watching content alone and on their phone.

The executive also said that bundles currently account for less than 1% of Starz’s $1.4 billion in revenue and that he expects that to help grow the business over time.

“As the broad based streamers start to settle their tech stacks and look to start to adjust content, you’ll see bundles becoming bigger. We’ll have an announcement in a couple weeks of a very big bundle coming out,” he shared. “And as bundles become bigger, what it does is it allows you to line up their content cadence with our content cadence, which drives lifetime value, drives churn down, so you grow the top line by having lower churn and higher lifetime value. And we see that coming in the business.”

Hirsch touted the opportunity for Starz to be a part of other platforms’ channel businesses, citing the service being the fastest growing channel on Vizio, which was recently acquired by Walmart. Starz also reached a renewal with YouTube and sees a “huge opportunity” to grow its business there. Hirsch then called Hulu a “great opportunity,” noting that Starz is about 20% penetrated on Hulu’s video on-demand offering, which translates to around 40 million subscribers. He added that Starz has a “small base” at Roku, with 40% of its viewership coming through the platform every night.

“I call it the second wave of distribution on the digital side that will show up in the next 12 to 18 months that will really help reignite subscriber growth in the space,” he said.

In addition, Hirsch revealed that Starz is spending north of $700 million per year on content.

“Right now, because we’re part of the studio, we’re licensing shows back from the studio, and so there’s economics that we put more on the studio side of the business, because they’re trading at an 11-multiple and we’re trading at a three and so it’s more profitable for the business,” Hirsch said. “As we separate and we start to get more ownership of our shows on the air, that allows us to control costs better. It also allows us to offload some of that cost to international markets. And so there’s probably $40 to $60 million savings by getting ownership back on the slate, which you’ll see coming in fiscal ’27.”

When asked about Starz’s strategy of pivoting to spinoffs when an original show becomes too expensive after being renewed for multiple seasons, Hirsch admitted that the move can save anywhere from 20% to 70%. However, he emphasized that shows have to work for the audience.

“If we ran the business just on cost, probably people wouldn’t watch the shows. And so it’s ‘what’s the story’ first,” Hirsch concluded.

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