In an era of consolidation, contraction, and confusion in Hollywood, Lionsgate and Starz are finally standing on their own. After nearly a decade under the same roof, the two companies have completed a long-delayed split, each charting separate paths in an unforgiving media landscape where scale is elusive, profitability is evasive, and the search for suitors and capital is relentless.
What was once seen as a symbiotic merger has ended in a quiet decoupling, with both sides hoping independence will yield more strategic clarity—or at the very least, make them easier to sell.
Starz’s Standalone Strategy: Shrink to Survive
Following its formal separation in May, Starz wasted no time outlining its ambitions as a newly independent entity. Starz’s CEO is now repositioning the network as a digitally focused brand targeting U.S. and Canadian subscribers, particularly women and underrepresented audiences.
While revenue fell to $330.6 million in the most recent quarter, a 6.2% year-over-year decline, the number of streaming subscribers rose to over 13 million, a small bright spot in an otherwise challenging transition. However, the company still lost a total of 330,000 subscribers due to the collapse of a linear carriage deal in Canada.
In response, Starz initiated a $177 million content impairment charge as part of a broader effort to restructure its portfolio and reduce long-term spending. The goal is to reduce annual content costs from $800 million to $650 million, focusing on fewer, more targeted originals and expanding licensed output from Lionsgate and Universal.
With $559 million in net debt and a junk-rated credit profile recently downgraded by Moody’s, Starz faces an uphill battle. However, its CEO insists that the company’s 15% profit margin and 70% digital subscriber base provide a solid foundation.
Starz trades on the Nasdaq under the ticker symbol STRZ, while Lionsgate Studios trades on the NYSE under the ticker LION.
The more sobering truth is that Starz remains tethered to a declining linear business and has limited upside in a domestic-only strategy. Despite the optimism, the company’s modest scale and lack of global reach make it an unlikely buyer and a vulnerable target.
Lionsgate’s Liberation and Its Limits
For Lionsgate, shedding Starz was less about strategic focus and more about eliminating a buyer deterrent. In a media environment where buyers prize libraries, franchises, and scalable IP, the Starz asset had become a financial and narrative drag.
Freed from Starz’s underperformance, Lionsgate is now a pure-play mini-studio with a $2 billion market cap and a vast catalog of 20,000 titles. From “John Wick” and “The Hunger Games” to “Twilight” and “Saw,” Lionsgate owns some of the few film franchises outside the traditional Hollywood major studios. However, there’s a catch: many of these rights are split regionally or held through revenue-sharing structures that complicate long-term valuation.
The studio has also struggled to maintain consistency at the box office. The underperformance of “Ballerina,” a gender-swapped spin-off from the “John Wick” franchise, highlights growing audience fatigue with ideologically driven remakes and cynical repackaging of familiar properties. Far from revitalizing interest, these creative pivots often alienate core viewers and contribute to ongoing declines in theatrical turnout. Even so, Lionsgate remains one of the few independent studios with enough legacy IP and production muscle to be relevant, particularly for buyers seeking content assets without the overhead of running a distribution platform.
Recent talks with Legendary Entertainment suggest a possible merger that could unlock Lionsgate’s full value. Legendary, backed by Apollo Global Management, brings its own pipeline of blockbuster IP. A combined entity could rebalance Lionsgate’s uneven film slate while offering Legendary a robust library and operational scale.
It’s a long shot, but unlike the wild speculation about Apple or Netflix buying Disney or Paramount, this deal actually makes sense.
What STARZ Pays for Films: Uncovering a Decade of Pay-1 Licensing Economics
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Licensing Terms & Included Programs:
The STARZ Pay-1 Film Rate Report takes you inside the Pay Television Licensing Agreement between Sony Pictures and Starz Entertainment, covering Motion Pictures released between January 1, 2013 and December 31, 2021.
- Motion Pictures: Sony Pictures shall designate “A” Pictures, “SPC” Pictures, and “B” Pictures to be licensed by Starz.
- Minimum Requirements: For a Picture to qualify under the agreement, it must have at least a 75-minute runtime with credits that does not exceed an R rating by the MPA, and
- Prints and Advertising (P&A) costs of at least $250,000, and a theatrical release on no less than 20 screens in the Territory, or
- Minimum negative costs of $4,500,000.
AI, IP, and the Future of Lionsgate
Lionsgate has also leaned into artificial intelligence as a potential differentiator. A recent partnership with Runway enables the AI company to train its models on Lionsgate’s film library, potentially unlocking tools for virtual production, previsualization, and automated content creation.
While some in the industry view AI as a threat to jobs and creativity, Lionsgate’s approach is more pragmatic. Rather than replacing actors or writers, the studio appears focused on using AI to reduce pre-production costs and refine greenlighting decisions.
The bet on AI, much like Lionsgate’s long-standing practice of pre-selling international rights to offset production risk, speaks to the company’s adaptability. However, adaptability doesn’t always equate to growth, especially since many of its recent films have failed to break through domestically or internationally.
Still, with no more Starz to weigh it down, and a potential deal with Legendary in the works, Lionsgate has cleared the first hurdle in what will likely be its last and most important transformation.
A Tale of Two Tiers
The broader takeaway from the Lionsgate-Starz split is that the entertainment industry is increasingly bifurcated between mega-conglomerates and subscale survivors. In the absence of mid-tier buyers, studios like Lionsgate either need to consolidate horizontally or sell vertically into larger entities that need content libraries, not more infrastructure.
Starz, for its part, is betting that a targeted, modest growth strategy focused on underserved audiences can generate steady returns without burning cash. But with a narrow geographic scope and few breakout hits, it’s hard to imagine a scenario where Starz thrives on its own without eventually becoming someone else’s streaming appendage. Sony, which has opted not to pursue a standalone streaming service, would be a potential suitor.
The STARZ Pay-1 Film Rate Report offers rare insight into how one of the most consequential licensing arrangements in premium television was structured [More].
Lionsgate, meanwhile, is trying to make itself look attractive to buyers. The studio’s modest valuation, combined with its legacy IP, makes it a tempting target for private equity firms, larger studios, or global media companies seeking to establish a film business without the constraints of a broadcast network or cable operation.
But execution remains everything. The company will need to prove it can still produce hits, negotiate profitable licensing deals, and contain costs in a marketplace where even behemoths like Disney are struggling to make streaming pay.
FilmTake Away: Unwinding Starz to Sell the Lionsgate
The Lionsgate-Starz separation marks the end of a mismatched union and the beginning of two uncertain journeys. Starz is a niche streamer in a world of scale. Lionsgate is a mid-sized studio in a world of giants. Both will need to prove they can thrive in their new forms before anyone takes the next big step.
In an industry littered with failed mergers, missed earnings, and shareholder impatience, independence is a temporary condition. The real question is whether either company will be more valuable alone, or simply more palatable for someone else to absorb.