Q3 2022 Lions Gate Entertainment Corp Earnings Call
Strongest pipelines, a big branded IP in company's history.
Next week, we will announce a very special high profile addition to this slate.
And finally, we're pleased to report that our library continued its robust performance with $771 million in trailing 12 month high margin revenue.
Drilling down on each of our businesses, we have significantly ramped our investment in starz programming coming into the year with our best slate ever however.
However, COVID-19 driven and other production delays on multiple series, including an 11 month delay on fan favorite Outlander have pushed back the full benefit of that investment.
This resulted in diminished subscriber growth in the first half of the year relative to our expectations and we're seeing that pressure coming through in our revenue and segment profit in our current quarter.
Starz programming schedule is back on track and positioned to translate into strong subscriber growth in the quarter. The second season launch of power book II Ghost in the first season finale of the crime family drama BMS combined for record single day viewership on the Starz App with goes to actually beating the.
Season, one launch.
Ghost and BMS have both firmly established themselves as Tentpoles with 10 million multiplatform views a piece a number that compares favorably with many of the high profile streaming series, which have garnered much recent attention. In fact Starz has four series that have global multiplatform season average views.
Over $9 million.
Looking ahead Starz will launch seven series in the next two quarters.
This weekend the power universe continues to expand with the launch of one of its most iconic characters Tommy Egan and power book for force, which premieres on the heels of the power book II Ghost series finale, followed in March by the debut of the Courteney Cox starring horror comedy Shining Vale and the return of Outlander.
For its sixth season.
The provocative hit drama P Valley returns in the following quarter, along with the period drama, becoming Elizabeth and the debut of the eagerly anticipated Gaslit, starring Julia Roberts and Sean Penn.
While we've significantly ramped up our spending on premium content for Starz this year.
As you can see in our numbers. We're following the playbook, we laid out previously airing a new episode every week to create buzz launching at least one new series every month to engage both our African American and women core demos throughout the year and complementing our original series with a robust slate of first run studio movies.
These will be the key elements and continuing to lower our acquisition costs improve retention and grow our subscriber base.
Its content strategy has enabled us to transform starz from our legacy linear bundled business into a stronger streaming driven platform with over 80% of its subscribers digital and Ala Carte all without the benefit of a major bundled deal.
As part of the next frontier in our domestic growth are strong and focused content and loyal core demos make us a compelling value proposition for bundling opportunities as the broader platform start to compete with each other's offerings.
Internationally, we're concentrating our investment in the U K, Canada, Mexico, Brazil, and Spain, using bundled deals elsewhere to create beachheads in new markets and rolling out our original local language slate.
We launched this late last month with the Spanish language action thriller Express debut in well in Spain, Mexico and Brazil.
The beauty Queen saga scenery to 89 debuts this month with two more local language series slated in the following quarter and three shows heading into production.
Building off the success of our premium strategy domestically, we're relying on a combination of hyper focused programming early mover advantage and our ability to complement as well as compete with other platforms.
Despite intense competition, we've nearly doubled our international subscribers in the past 12 months and together with our domestic business remains solidly on track to reach our target of 50 to 60 million global subscribers by 2025.
Turning to TV demand for content across Avon S. Mod broadcast and premium is at an all time high making it a great time to be the premier independent content supplier at scale.
This quarter puts a major exclamation mark on that with six new Lionsgate television shows picked up to series and seven series renewed for new seasons.
Our ability to deliver high end premium hit series continues to generate repeat business. We have five series at HBO Max New series at ABC and Fox. The recent pickup of the Lincoln assassination series Manhattan. Following the two season renewal of mythic quest at Apple plus.
In a series order for swimming with Sharks that roku after a successful airing of Zoe is extraordinary Christmas.
Looking ahead, we expect our strong performance to continue with new series such as the first Lady at Showtime, starring Viola Davis, Michelle Pfeiffer and Gillian Anderson Minx for HBO, Max and the John Wick spinoff the continental for Starz to name a few with yet another strong slate in the pipeline.
To support all this production we opened the state of the Art Lions Gate Studios in Yonkers, New York last month.
Not only does it give us an east coast production hub, but it creates greater predictability in our supply chain by securing dedicated production sound stages and facilities, giving us an insurance policy in terms of delivering our starz series on time.
I'd like to mention our collaboration with three arts with whom we joined forces four years ago in order to create an anchor for our talent strategy.
This partnership has exceeded even our greatest expectations.
They've become a valued studio partner filling our pipeline with shows such as mythic quest manheim, the upcoming certain Queen for stars and Julia for HBO Max.
And as they continue to grow and expand their business. They just turned in their best quarter ever.
As I mentioned at the outset of my remarks, the motion picture group had a great quarter in terms of filling out one of the best pipelines of intellectual property in our company's history Green lighting, new movies, moving films through production and getting our upcoming releases ready to go.
Tomorrow, we open Roland Emmerich SIFI action Epic Moonball, starring Halle Berry, followed by the Nicholas Cage, starring unbearable weight of massive talent.
White bird the follow up to the breakout hit Wonder are you there God. It's me Margaret the adaptation of the Judy Blume Classic directed by Kelly Fremont, Craig and produced by Academy Award winner James L. Brooks and expandable for the next installment of an action franchise that is gross nearly $1 billion worldwide.
In the quarter. We also completed principal photography on two of our biggest titles John Wick chapter four and borderlands for wide released in theaters next year.
In the coming months, we will begin production on the ballad of songbirds and snakes, the brilliant prequel to our hunger games Mega franchise, Dirty dancing, starring Jennifer Grey and the John Wick spinoff ballerina starring Anna Drs.
Behind these tent Poles, we have the third installment of now you see me.
Highlander and Nara to franchise properties that continue to grow a massive portfolio of intellectual property that allows us to compete at every level and delivered a stars are reliable slate of blockbuster first run movies.
At the same time, we've shown that we can make profitable films that live comfortably in both the theatrical and Epsilon world.
Some day and date multi platform releases with a 92% profitability rate to larger movies that will benefit from hybrid releases as.
As a studio whose signature has always been diversified fleet, allowing us to play in every space.
Our ability to tackle the challenges of a shifting and uncertain box office is more of a natural evolution than a pivot.
In closing while everyone is operating in an intensely competitive disruptive and unpredictable environment. Each of us is dealing with it differently. Our strategy is simple continuing to execute a focused content approach at starz supplying profitable premium TV series.
To an expanding universe of buyers.
Cleaning into our portfolio of movie brands and franchises and benefiting from an entrepreneurial culture and our business model built around optionality.
Now I'd like to turn things over to Jimmy.
Thanks, John and good afternoon, everyone I'll briefly discuss our third quarter financial results and update you on our balance sheet.
Third quarter adjusted OIBDA was $92 million in total revenue was $885 million.
Revenue growth was driven by deliveries of new and returning television series as well as library strength within motion picture.
Reported fully diluted earnings per share was a loss of <unk> 20, a share and fully diluted adjusted earnings per share came in at a positive too.
Adjusted the use of free cash flow for the quarter was $23 million.
Now, let me briefly discuss the fiscal third quarter performance of the underlying segments compared to the previous year quarter.
Media Networks' quarterly revenue was $389 million and segment profit was $29 million.
Excluding <unk> in last year's third quarter revenue was down 1%.
While domestic revenue grew sequentially year over year domestic revenue declined three 4% as positive OTT revenue growth was offset by a decline in linear revenue.
Segment profit was down year over year, primarily on higher content and marketing spend associated with Starz originals.
We ended the quarter with over 31 million total global subscribers, including Starz play Arabia.
Total global media networks, OTT subscribers grew $1 7 million sequentially to $19 $7 million.
This represents year over year global OTT subscriber growth of 44%.
Turning to motion Pictures revenue was up 10% to $275 million, while segment profit of $68 million was up 35%.
This reflects continued strength in our library as well as strong results from alternative multi platform releases, partially offset by the timing of P&A spend on Christmas day release of American underdog.
And finally, TV revenue was up over 92% to $439 million driven by new and returning series deliveries, including Ghost Force Love Life home economics, and swimming with Sharks.
Segment profit came in at $19 million down year over year due to the timing of series amortization in the prior year quarters tough comp against second run Mad men licensing revenue.
Our total library revenue across our motion picture and television businesses was $771 million on a trailing 12 month basis up slightly over the $765 million of trailing 12 month Library revenue reported in the third quarter last year.
As noted last year as trailing 12 month library revenue number included significant contribution from the licensing of Mad men.
On the balance sheet, we ended the quarter with leverage at five five times or three nine times, excluding our investment in Starz play international reflecting the impact of trailing 12 month adjusted OIBDA.
We continue to retain significant liquidity with $314 million of cash on hand, and 1.25 billion of an undrawn revolver.
We remain committed to strengthening our balance sheet and paying down debt, while continuing to fund our increased investment in content and marketing from adjusted free cash flow as we refresh our library and drive value through content creation and subscriber growth.
Now I'd like to turn the call over to <unk> for Q&A.
Thanks, Jami operator can we open the call up for Q&A.
Thank you we will now begin our question and answer session to ask a question you May Press Star then one on your telephone keypad, if youre using a speakerphone. Please pick up your handset before pressing the keys.
To withdraw your question. Please press Star then two at.
At this time, we will pause momentarily to assemble our roster.
And the first question will come from Alexia <unk> from Jpmorgan. Please go ahead.
Hi, this is analyst or Alexia. Thank you so much for the question.
First I was wondering if you could elaborate on what drove the lower margins on newer shows that TV production, just given the heightened demand for content.
Secondly, I was wondering if you can also provide an update on the potential starts now thank you.
For your question I'll take the TV margins and just comment that.
This is primarily because of a high mix the lower margin that is primarily because of the higher mix of freshmen and sophomore series, which have lower margins early on and then build later in their life and over maturity, but.
Can expect to see increasing margins.
Moving into Q4 and into fiscal 'twenty, three as well and TV TV is just doing great. We got a great lineup and a whole lot in and expect really good things.
Michael.
Sure.
Congratulations to <unk> by the way on a new job.
You asked a question about a sale I just want to say it just sort of straighten that out of all of that we are working on with a terrific team of advisors with complementary strengths and expertise.
As we continue the process of unlocking unlocking shareholder value within our two core businesses.
So it's important to note that.
We will be.
<unk> additional updates on our progress at the appropriate time.
Great. Thank you so much.
And our next question will be from Matt Thornton with Suntrust. Please go ahead.
Hey, good afternoon guys.
I guess to maybe.
You've talked about trying to increase the subscriber net adds this year versus last year I think last year. It did something in the ballpark of $5 6 million just kind of curious if thats, how youre still thinking for fiscal 'twenty two.
And then similarly free cash flow for the year I think Jimmy last quarter, you talked about being I can't remember if it was a breakeven or better but I guess any any any update there would be helpful. As well thanks guys.
Yeah, Hi, it's Jeff Thanks for the question, Matt as we said.
Reiterate today, we do believe that fiscal 'twenty, two we will have on a global basis higher gross adds than we had in 'twenty one.
Obviously, if you look at the quarters next quarter will be a big quarter on a global basis.
<unk>.
Really strong growth in terms of our programming slate coming into the fourth quarter and so we feel very good about that that guide.
Yes, Thanks, Matt.
We have a small use of cash in the current quarter as you know in the content business in particular that that moves up and down particularly quarter to quarter, but absolutely. We expect generally to continue to fund all of our businesses our investment Starz play international content marketing from our free cash flow.
And to produce positive free cash flow and I would just comment that we'll have in fiscal 'twenty two funded over $3 billion of content and marketing spend.
That's helpful. Maybe I could slip one more in guys.
Last quarter, you talked about some of the data privacy headwinds and you'll kind of upward pressure on subscriber acquisition cost I'm, just kind of curious any any status there, whether that's abating or improving thanks again.
Yes, we have.
Have seen those privacy changes affecting us this past year.
Affected the rest of the industry, we've been working with our partners on mitigation strategies and we've seen those costs start to come down.
On top of that we've seen costs come down based on the strength of our content.
So as we commented last quarter, we felt the worst is behind us and we've seen those costs come down and we think they'll continue to improve as we go forward.
And thank you. The next question will come from Steven Quay Hall with Wells Fargo. Please go ahead.
Steven Your line is open perhaps you're muted on your end.
Yes, Thank you and a figure that button out one of these days maybe Michael first expand on the answer you. Just gave I was wondering if you could speak to maybe the progress that you've made thus far on the strategic alternatives anything that you've been able to uncover that you might not have expected and kind of drilling down on that a bit do you think that stock.
<unk> can be a standalone public company and if so is there a potential for recapitalization there.
Since it probably handle the debt a little bit better and then on the storage side of things I think there was a little bit heavier decline in linear subs I was just wondering if there was anything notable on the MVP universe or was that just cord cutting more more broadly and related to that international subs were kind of stronger than we expected so anything you'd call out.
Regions or content that drive that growth. Thank you.
Hey, Catherine and so part of maybe what kind of last part first.
Okay.
Hi, this is different and we're very pleased with our performance. This past quarter, we had some pretty strong content come onboard with <unk>.
With <unk> and the great and our very first starts play original let Molly area as well and so that contributed to the growth in multiple territories.
As Steven what I said before.
We are going to report progress.
As it develops at the appropriate time, so we have a great set of advisors and as as things progress you guys will certainly here, where we are.
And Stephen on their entire linear question.
We saw and I think John alluded to this in his prepared remarks as we saw the COVID-19 headwinds in the in the first half of the year.
The premium services are really sold through the call centers or our Mvpds partners and as those call centers were sent home with became increasingly difficult for us.
Continue to drive the subscriber growth that we had pre pandemic it hasnt.
<unk> had some headwinds there. So there is some pressure on the linear business there.
Great. Thank you.
The next question will come from Kotkin morale from RBC capital markets. Please go ahead.
Great. Thank you for taking the questions.
One on Starz net ads and one on Starz domestic networks profitability. Please so first.
Thinking longer term for Starz OTT net adds some of your larger peers have seen decelerating subscriber growth subscriber growth recently, which has raised investor concerns over the spring market overall, whether it's the cam or cost to succeed I know you just reiterated your targets for 50 to 60 million global subscribers by 2025.
But maybe you could provide some color on your conviction and executing against that growth and the path to get there whether it's with further incremental investments in programming or other drivers like continued traction with distribution partnerships and the bundling you called out earlier or something else.
Maybe second on Starz domestic networks profitability I know recent results in this quarter, specifically was pressured by the programming disruption earlier in the fiscal year combined with continued investments in programming and marketing I guess, maybe if we could just look out further beyond this quarter and next quarter are we getting closer to.
Having annual segment profit be stable or perhaps growing year over year or is it too early to tell given the ongoing pivot to OTT and investments.
It's Jeff Thanks for the question.
If we take a step back and as we've talked about historically, if you think about the way the industry is shaping up I think there is.
Heavily competitive set right now and that kind of broad based streaming services, where everybody is really competing to be that first half thought in the home. When you couple that with the fact that we believe that there's going to be four to six aircraft per home. It sets us up to be this really great premium add on tier as a way for those broad based services to compete.
<unk> done I think as we talked also about building a dataset we've used our data to really drive the business over as John said in his prepared remarks over 80% of our subscribers are all la Carte, we've converted the linear business the card as well and so we think theres a lot of opportunity for us to continue to grow as a standalone business.
And again as John said in his prepared remarks, I think the next phase of our growth is becoming that great premium bundling partner with all of these broad based streaming services and as they start to compete it may start to see how difficult. It is adding value to the consumer with bundles is really I think where the business goes it looks a lot like linear.
10 years ago, and so we feel really good about our position is that great premium add on tier our programming continues to work we feel great about the.
Beachhead that we have in the two core demos that we have which we believe are again are really complementary to all these broad based services. So we feel really good about our fundamentals we feel really good about our position in the marketplace and we really feel good about that trajectory to that 50 to 60 million subs.
In terms of your question around margin and profitability. This is a heavy investment year I think part of the Covid related disruption has pushed that investment a bit into 'twenty. Three we continue to invest heavily in international but as we've said.
Previous calls and we continue to believe this based on the trajectory of the business. We think we get to that range of 50 to 60 million subscribers by fiscal 'twenty, five and we think steady state margin get somewhere in the Twenty's long term for the global business.
And I think.
I'm not sure what's your question about us getting to profitability.
Starz domestic business is a very profitable business.
As Jeff said, we ramped programming.
Extensively this year to get to exactly where Jeff.
Has said before nally as said, which is having a new show every month and something pretty much every day for our two core demos.
And so I think that's sort of as we cycle through the heavily.
Increased onboard for this year going into somewhat next year I think you can see our continued profitability free cash flow and then significant growth in all of the out years and that domestic business.
Thank you.
To answer your question.
Yes.
That's incredibly helpful and I think we're all kind of appreciate it whether it be media networks, our motion pictures or even television production.
Current fiscal 2020, or even 'twenty three doesn't necessarily reflect your broader earnings power and I think presumably there's a big inflection as we kind of continue to move forward and I think I'm just trying to get a better sense of Starz domestic segment profit currently probably approaching low three hundreds for this year low to mid three hundreds trying to get at.
A better sense of when we get back to.
300 400 level.
Annual segment profitability is that achievable or is that.
We're just going to have to.
See the dynamics play out between the subscriber growth and the investments that youre, making.
I Shouldnt say its inexorable, but I would say, it's most certainly achievable.
I'll take that thank you.
And thank you. The next question comes from Thomas <unk> from Morgan Stanley . Please go ahead.
And thanks, I had two on the storage side as well maybe one on content cadence I was hoping you could elaborate a little bit on the pipeline delays that were referenced I think the initial plan at the beginning of the year was seven theory has gone to 12. This year that any of those without beyond the fiscal year, and then 12 months to 15 theories annually is.
That's still kind of the right target to think about a more normalized original release schedule.
And then on the <unk> just any help characterizing the level of promotional activity that was happening in the quarter versus prior ones I know it bumps around a bit quarter to quarter, but any color on how that might look into <unk> in the next year that'd be really helpful. Thank you.
Yes, so when we looked at the original planned coming into it.
Robust content slate in the history of the business this year.
Subscriber acquisition months are really key in terms of driving the business. When you look at the original plan versus where we are today. It's about a total of 50 months of subscriber acquisition opportunity that we lost by moving content around John referenced Outlander, which is one of our big tent Poles, which is now and will be into its coming into its 18 months of drought lender, which is a huge fan favored.
But there was about 7 million multiplatform views a week, which is one of the bigger shows on TV, the very passionate fan base and missing a year of that content.
Hertz.
The subscriber growth that you saw that in the first half of the year.
But we are coming into that slate now outlander comes.
Premieres. This weekend on the tail of Ghost, which I believe will be the biggest power franchise, yet bringing back Tommy <unk>, who is one of the biggest characters in the show and he has not been on this show in about 18 months two years in terms of his last humira as the season goes above our original power Outlander comes on shiny available.
Courtney Cox comes on which is tested off the charts and a great genre bending half hour and then gasoline. It comes on in April 24th we just finished shooting.
P Valley season, two today and so we're excited to get that Mega hit back on the network and so as <unk>.
John talked about we have great shows for these two core demo that really sets us apart. We are the destination network for those two core demos what makes it makes us really really valuable and I'll, let al talk about the promotional.
In the quarter.
And we're continuing to promote both on the upper funnel in terms of building awareness and counting excitement or for the content and then in the lower funnel and driving subscription.
So that is going to be.
Ramped up a little bit this quarter as we have three big releases that Jeff.
Jeff mentioned.
But again that will that will also pay off in the business.
We see the subscribers come with it.
Alright, thank you so much.
The next question will be from Jim Goss from Barrington Research. Please go ahead.
Thanks, I think you started to allude to something that was going to ask about maybe you can embellish.
But the notion of being the.
Primary vehicle for the African American women demo.
I was wondering if you could talk about the mix of the programming.
Starz right now.
Coming from Lionsgate and from outsiders, and if as you've been able to establish that those demos.
We're getting a lot more content pushed to you and how that might affect the terms youre able to.
Command, sorry sort of on the opposite side of say when you deal with Netflix earlier on with some of the original things maybe.
<unk> have more of a.
And ability to command the.
The aftermarket those.
Are those new content elements.
Kevin on the other side of that I think the relationship between Lionsgate television stars has only improved everyday that Kevin and I sit in a room and talk about what's interesting for Starz and what we're looking for and I think it has benefited both sides of the business in a big way I would say 12 of the tenant.
The 12 shows that it will have on the air in the next 18 months to 24 months come from Lionsgate television.
And we worked very closely it's been a huge benefit as much as we've pointed to the COVID-19 costs and the headwinds that we had in the first half of the year, having Kevin team part of the company I think has mitigated that as much as we could and allowed us to try to maintain the schedule as much as possible and so it's really been a real big benefit I think having.
The point of view that we have as a network has been able to bring great creators and great talents the network, you'll see obviously.
Our lead in Atlanta.
Just got nominated for a BAFTA for Belfast, and I think she is becoming a huge star or she is a huge star both on TV and movies, you've got Courtney Cox and Greg Kinnear and mirrors Servano on the network for the first time, you've got Julia Roberts, and Sean Penn and Dan Stevens Abetted Gilpin our network for the first time, we just announced Jennifer Garner and party down and so I think the relationship having that point of view.
Know, who we are and what we stand for is brought right Raiders, great directors and great talent to the network, but also being tied to Kevin who has obviously has been chosen other networks gives us.
Better breadth in terms of attracting that talent in those in those in.
That directors and writers.
Yes, absolutely completely concur with what Jeff is saying I mean.
From a studio perspective really great to have.
Certainty around our production flow and the close communication between our grew our creative groups lets us know exactly what Jeff and team are looking for and we can tailor our own production deals and overall deals and projects accordingly, not everything is going to be right.
For Starz.
We learn that quickly when we just talk in an early stage of our projects and then take them to the larger market, which is why we have a fairly diversified slate, but to the Covid point, we went back in production through three months ahead of most of our scripted competitors to help keep the pipeline flowing even though they're obviously was some delays and that kind of optionality and I think.
<unk> focus on our partnership as a positive for both sides in the mix of talent.
Into stars is a great calling card for us when we're pitching writers and producers are not working in stores as well the lineup.
Jeff just rattled off is super impressive and I think it makes everybody.
I'm very interested in learning more and pitching and getting in front of me, Jeff and his team.
Okay, and you are finding other studios coming up with ideas that they think well. This is actually a more appropriate for Starz then for our own.
<unk>.
They might compete for some of those spots that is happening more and more.
Yes, just to finish that thought Jeff, Jeff and the Starz team getting pitched right.
Studios all the time, they're in business with other studios, we co produced with other studios in many instances, but not all of it is it's a wide open market and the best shows when.
Okay and the other question I had the libraries and highlighting the value of the library, which I think is appropriate I'm wondering about the breadth of the value creation. Among the titles in our library is it very concentrated in certain key titles or certain.
Timeframes like some of our recent titles and what is necessary to replenish the library.
So the new content to keep the revenue steady and hopefully growing.
Kevin go ahead, I'm going to take the beginning.
17000 titles and so we got a lot of significant contributors there and some more major franchises, but they pull their weight and a lot of other products with them. So.
There is just such demand for library, where the VA bought asphalt across the board and an increasing buyers almost every window.
In every territory that we.
We're able to break it down and sell it with with great demand I mean, it certainly helps to refresh it but our overall library is very youth library. If you look at it in terms of how it's been created over time, and we will continue to replenish that as well see very good profitability out of this continuing yeah.
Ill add.
Add a little something to that.
Backed off on using the word inexorably before but I'll use it in this case our library.
Revenue and profitability free cash flow will inexorably grow and Thats.
Because very specifically, we continue to invest in the long term not the short term that involves a lot of different facets of our building as you notice we have ownership in the majority of projects in TV that we produce.
Have far less if you will cost plus shows why why are we doing it why are we taking a deficit in the first year or second year of a show and by the way in a sense. The way we account for it we do that and at Starz as well and the reason is because we believe our job is to create long term value in that long term value as evidence.
<unk>.
In a library if you look at all of the headlines.
Today about dose.
Then the headline a variety of doses becomes such a big hit that even CBS extra surprised as I said in my remarks. We think this is a true one of the first true big syndication potential syndication hits.
In a long time in the broadcast business and we are taking a deficit going into these and going into that show.
And so again when you take a deficit. So you can control rights control International rights.
Control downstream rights.
We're making big motion pictures, we don't typically make money in the first year of our slate.
But we are controlling most of our rights, we are less and less.
Optioning off long term.
Long term rights to international or domestic.
Our buyers and so our whole game is to again.
<unk> continue to throw off free cash flow in the short run continue to have profitability in the short run, but we are focused every single day on long term value creation and you will see that in the growth of our library.
Alright, Thank you very much great answers.
The next question will be from Doug <unk> from Cowen. Please go ahead.
Hey, thanks.
If you could just share your current thoughts on the theatrical exhibition window.
It's been open now for about six months in and.
For Marvel film, but it still seems to be a pretty big struggle for a lot of movies have you have you adjusted your plans to invest in feature films over the next couple of years as a result of what you're seeing thanks.
Sure. Thank you Doug.
When you say adjusted our plans, we've adjusted but we continue to lean in because we're seeing extra.
Extraordinary opportunity.
And the way to look at it is you got to kind of break the business found into pieces. If you start clear.
Clearly the big brands the big franchises are working.
And it's been initiative ours to really make sure that we had a cadence of film and a supply that was going to continue to drive that business because thats the ethical business still drives.
The kind of the flywheel of our overall library. So when you look at we've got John Wick and Mccann, we're starting a universe expansion and ballerina that'll start in the fall Borderlands and Mccann hunger games is going to start this summer.
We're really excited about that and John mentioned things like Highlander Dirty Dancing now you see me in our roto. So I'm a big brand side that that part of the pump is really primed to deliver on a cadence that's going to that's going to really work for us.
<unk> got our segment two business, we've talked about it before and we continue to invest more there because it's a low risk high return business, we acquire make and released 30% to 40 films a year, there and that business continues to show growth.
It's a real winner for us on the library side.
The library value and and the monetization opportunities continues to grow and expand with Teva and the like and so then you talk about that I think the area really talking about is what I would kind of call that mid budget.
That mid budget content, where we just see optionality.
When we're when you understand that Lionsgate is uniquely positioned because we license a lot of our films internationally those values have gone up so the way that we.
The way that the economics work with those increased international values with the increased downstream post theatrical values here in the states, but also with the opportunity for other distribution structures, which you've seen us do in the past two years and Youll continue to see us do.
What you actually have there is a model that with that Optionality, we were actually able to.
Have quicker cash flows when we when we shift to an alternative distribution model those.
Those risk offsets or more reliable those international values in life. So you take some of the risk out of the business.
And when we elect to use those alternative distribution platforms. We're also seeing our Rois go up and yet when we see a movie that still deserves in that in that segment of the business a theatrical release.
We're going to continue to lean in there because that's where those next franchises come from so we've adjusted to meet those changes.
But we feel really good about where we sit in the ecosystem.
Great. Thanks.
The next question will be from Matthew Harrigan from benchmark. Please go ahead.
Oh. Thank you two questions. Firstly I guess, it's American Express disclaimer. This is David.
The other stores question, but when you look at the deal market I mean, the library market has been pretty active in inflated for a number of years preparedness reasons and yet you've been really agile.
Accretive deals I know, you're mostly focused on stores, which you still must see things coming in over the transom or is there still some scope for doing some smaller Pac man deals as you've been willing to do in the past and then secondly, when you look at the <unk>.
<unk> directly thus far.
It feels like.
Brands are movies that are having trouble really getting a lot of staying power, even something like red nose people are skeptical it creates that much.
Relative to series do you think there is really and I know, you're taking kind of a bicameral approach.
Theatrical and elsewhere, if your own movies, but do you think theres a real pivot thats eventually going to happen on the asphalt business with just increasingly favorites.
Series, a units are quite expensive series relative to it.
These one off movies, which is kind of seemingly go go poof. Thanks.
Hey, it's Jeff.
We have said.
Quarter to quarter that obviously, the big series drive.
Our acquisition, but they also drive our retention.
Our game is a retention game nine acquisition game and so part of the reason why we've increased our content spend has to kind of line up content up like John said week to week 52 weeks a year. So that we can move our core demo from one show to the next the next.
Seeing that really significantly with the power universe and moving.
From one to the next the next moving to play a bit getting on platform on our App I think it's really more of the original because it's much more of a people go to the app to find define the original to watch it whereas on a linear side, where there is a.
Channel Squirrel people are watching are going in and squarely in the channels and obviously when you have one or two original the week and a lot of movies. There is a lot more movies. There. So movies play a very significant role depending on certain platforms.
Big movies play tremendous Royal Spiderman coming for us exclusively in the next.
Couple of months or six months will be a big acquisition driver and the key obviously is to put stuff, but shows around it in content around it that you can then move customers who want to watch fire I mean, it's one of your original so you can extend that lifetime value and not create a lot of acquisition a lot of viewership and a lot of churn. So you have to be very thoughtful.
How you place those big movies against your original base. So that you can maximize customer lifetime value and maximize your growth.
Yeah, if I understand your first question Matthew are we still open for business. When it comes to attack on acquisitions I think that you know we've been very successful.
And making those kinds of deals we think nobody sells library and packages library better than our team.
At the right price as entrepreneurs, we have to look at every opportunity we don't overpay.
But we think nobody is better equipped to actually do that.
Right ROI for that acquisition, we will certainly look at it.
Great. Thank you.
And again, if you have a question. Please press Star then one.
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Okay.
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