Thank Your Lucky “Starz”

A few weeks ago, Lionsgate reported earnings for its third quarter that ended 12/31/2018.  While the studio reported stronger than expected earnings, revenues were down 18 percent primarily because of weakness at the box office.  The bright spot in revenue for Lionsgate was Starz, the premium cable channel acquired in 2016.  Starz reported more than 25 million subscribers and strong over-the-top (OTT) growth as it expanded its retail (direct-to-consumer at $8.99/month) and wholesale (through Amazon, Hulu, and YouTube) distribution channels.  According to Parks’ Associates, Starz is the 5^th largest OTT service, behind Netflix, Amazon Prime, Hulu, and HBO Now. Going forward, the concern is if Starz and the other incumbents can hold onto their market positions in an increasingly fragmented industry with new entry (from the likes of Disney and Warner Media) and a churn rate that averages close to 30 percent.