Amid Big Media M&A, Starz Seeks “Marooned” Linear Brands To Reposition For Digital

Starz reported Q3 revenue of $320.9 million, down year-over-year, and a widened net loss of $52.6 million, with adjusted EBITDA of $21 million falling short of forecasts despite reaffirmed annual guidance. CEO Jeff Hirsch outlined a strategic M&A plan to acquire "marooned linear networks" from larger companies, aiming to digitally reposition them and diversify into AVOD by leveraging Starz's tech stack and digital transition expertise. Post-separation from Lionsgate, the company is also prioritizing increased content ownership, greenlighting new originals, and restructuring international operations, exemplified by its shift to a content licensing model in Canada with Bell, to drive incremental revenue and reduce operational burden.

Analysis

Starz reported a mixed Q3, with revenue dipping to $320.9 million from $346.9 million year-over-year and net losses widening to $52.6 million from $30.6 million. Adjusted EBITDA of $21 million fell below forecasts, though the company reaffirmed its annual guidance of $200 million. U.S. OTT subscribers increased by 110,000 sequentially to 12.3 million, but total U.S. subscribers declined by 130,000 to 17.5 million, aligning with forecasts.

CEO Jeff Hirsch outlined a strategic M&A approach, targeting "marooned linear networks" from larger entities, such as A+E Global Media, to reposition them digitally and diversify into AVOD. Starz aims to leverage its proprietary tech stack and expertise in transitioning from linear to digital to integrate these assets profitably. This strategy seeks to expand beyond pure SVOD given content nature and scale limitations.

Post-Lionsgate separation, Starz is aggressively pursuing increased content ownership, aiming for half its slate, exemplified by greenlighting "Fightland." The company also restructured its Canadian operations from a joint venture to a content licensing model with Bell Canada, designed to generate international licensing revenue without direct operational overhead. These initiatives underscore a focus on long-term value creation and operational efficiency.

Key Decisions for Investors

• Investors should closely monitor the execution and financial impact of Starz's M&A strategy for acquiring linear networks and their subsequent digital repositioning, paying attention to deal valuations and integration success
• Evaluate the effectiveness of the new content ownership strategy and the Canadian licensing model in driving incremental revenue and improving profitability, particularly as the company works towards its reaffirmed annual EBITDA guidance
• Track subscriber trends, differentiating between OTT growth and overall subscriber declines, to assess the efficacy of content investments and churn reduction efforts