STRZ 10-K & 10-Q changes, risk factors and insider trading
Starz Entertainment Corp. · Nasdaq · Services-Motion Picture & Video Tape Production · CIK 929351 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “Starz is a smaller, less diversified company than its predecessor Old Lionsgate was, with a different financial profile.”
New heading “Starz could experience temporary interruptions in business operations and incur additional costs as it builds its information technology infrastructure and transitions its data to its own systems.”
New heading “The accounting and other management systems and resources of Starz may not be adequately prepared to meet the financial reporting and other requirements to which Starz is subject as a public company.”
New heading “Starz faces risks related to the restructuring of its business, which have affected and may continue to affect the value of its assets.”
New heading “Starz’s business depends on viewer preferences, which are difficult to predict.”
New heading “Starz’s success depends upon the availability of quality programming in a highly competitive marketplace, and it may be unable to secure or maintain such programming.”
New heading “Starz depends on distributors that carry its programming, and no assurance can be given that Starz will be able to maintain and renew these affiliation agreements on favorable terms or at all.”
New heading “Starz relies on a few major distributors and the loss of any of those could reduce its revenue and operating results.”
New heading “Starz depends, in part, on distributors to market and present its services, the lack of which may result in reduced customer demand.”
New heading “Changes in consumer behavior, as well as evolving technologies and distribution models, may negatively affect Starz’s business, financial condition, results of operations or cash flows.”
New heading “Business interruptions could adversely affect Starz’s business, financial condition, results of operations and cash flows.”
New heading “Starz may fail to adequately protect its intellectual property rights or may be accused of infringing intellectual property rights of third parties.”
New heading “Inflation or economic instability in the markets in which Starz operates could adversely affect Starz’s business, financial condition, results of operations and cash flows.”
New heading “If the technology Starz uses in operating its business fails, is unavailable, or does not operate to expectations, its business, financial condition, results of operations and cash flows could be adversely affected.”
New heading “Protection of electronically stored data is costly and if Starz’s data is compromised in spite of this protection, it may incur additional costs, lost opportunities and damage to its reputation.”
New heading “Starz’s activities are subject to a variety of stringent and changing regulatory obligations, which may adversely impact its business, financial condition, results of operations and cash flows.”
New heading “The loss of any of Starz’s key personnel and artistic talent could adversely affect its business, financial condition, results of operations and cash flows.”
New heading “Starz’s business could be adversely affected by labor disputes or other union actions.”
New heading “Starz will be subject to risks associated with possible acquisitions, dispositions, business combinations, or joint ventures.”
New heading “Purported noteholders have instituted suit against Starz claiming that it breached the indenture governing certain 5.5% senior notes due 2029 by virtue of an amendment executed in connection with an exchange by certain noteholders for new notes.”
New heading “Starz may incur debt obligations that could adversely affect its business and profitability and its ability to meet other obligations.”
Removed heading “We face substantial capital requirements and financial risks.”
Removed heading “We may incur significant write-offs if our projects do not perform well enough to recoup costs.”
Removed heading “Changes in our business strategy including consummation of the separation of the Studio Business and the STARZ business of Lionsgate, plans for growth or restructuring may increase our costs or otherwise affect our profitability.”
Removed heading “Our revenues and results of operations may fluctuate significantly.”
Removed heading “Our content licensing arrangements, primarily those relating to the distribution of films in foreign territories, may include minimum guarantee arrangements which, absent such arrangements, could adversely affect our results of operations.”
Removed heading “We do not have long-term arrangements with many of our production or co-financing partners.”
Removed heading “We rely on a few major retailers and distributors and the loss of any of those could reduce our revenues and operating results.”
Removed heading “A significant portion of our library revenues comes from a small number of titles.”
Removed heading “Changes in consumer behavior, as well as evolving technologies and distribution models, may negatively affect our business, financial condition or results of operations.”
Removed heading “Our business depends on the appeal of our programming, which is difficult to predict.”
Removed heading “Our network’s success depends upon the availability of quality programming in a highly competitive marketplace, and we may be unable to secure or maintain such programming.”
Removed heading “We depend on distributors that carry our STARZ programming, and no assurance can be given that we will be able to maintain and renew these affiliation agreements on as favorable terms or at all.”
Removed heading “We depend in part on our distributors to market and present our services, the lack of which may result in reduced customer demand.”
Removed heading “We are subject to risks associated with possible acquisitions, dispositions, business combinations, or joint ventures.”
Removed heading “If Entertainment One Canada Ltd. loses Canadian status, it could lose licenses, incentives and tax credits.”
Removed heading “We may fail to realize the anticipated benefits of the acquisition of eOne.”
Removed heading “Our success depends on attracting and retaining key personnel and artistic talent.”
Removed heading “Global economic turmoil and economic instability could adversely affect our business.”
Removed heading “We could be adversely affected by labor disputes, strikes or other union job actions.”
Removed heading “Business interruptions from circumstances or events out of our control could adversely affect our operations.”
Removed heading “Our business is dependent on the maintenance and protection of our intellectual property and pursuing and defending against intellectual property claims may have a material adverse effect on our business.”
Removed heading “Piracy of films and television programs could adversely affect our business over time.”
Removed heading “Failure of, or disruptions to, our technology facilities could adversely affect our business.”
Removed heading “Our activities are subject to stringent and evolving obligations which may adversely impact our operations. Our actual or perceived failure to comply with such obligations could lead to regulatory investigations or actions; litigation; fines and penalties; disruptions of our business operations; reputational harm; loss of revenue or profits; loss of customers or sales; and other adverse business consequences.”
Removed heading “Service disruptions or failures of the Company’s or our third-party service providers’ information systems, data and networks may disrupt our businesses, damage our reputation, expose us to regulatory investigations, actions, litigation, fines and penalties or have a negative impact on our results of operations including but not limited to loss of revenue or profit, loss of customers or sales and other adverse consequences.”
Removed heading “We have incurred significant indebtedness that could adversely affect our operations and financial condition.”
Removed heading “Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly.”
Removed heading “An increase in the ownership of our Class A voting common shares by certain shareholders could trigger a change in control under the agreements governing our indebtedness.”
Removed heading “The Internal Revenue Service may not agree that we should be treated as a non-U.S. corporation for U.S. federal tax purposes and may not agree that our U.S. affiliates should not be subject to certain adverse U.S. federal income tax rules.”
Removed heading “Recent and proposed changes to the tax laws could result in Lions Gate being treated as a U.S. corporation for U.S. federal tax purposes or in STARZ and its U.S. affiliates (including the U.S. affiliates historically owned by us) being subject to certain adverse U.S. federal income tax rules on financing and other activities.”
Removed heading “Changes in foreign, state and local tax incentives may increase the cost of original programming content to such an extent that they are no longer feasible.”
Removed heading “Legislative or other governmental action in the U.S. could adversely affect our business.”
Removed heading “Changes in, or interpretations of, tax rules and regulations, and changes in geographic operating results, may adversely affect our effective tax rates.”
Largest changes
“Global economic turmoil or economic instability resulting from, such events as, global pandemics, wars, inflation, rising interest rates, bank failures or a recession, may cause a general tightening in the credit markets, lower levels of liquidity, increases in the rates of default and bankruptcy, levels of intervention from the U.S. federal government and other foreign governments, decreased consumer confidence and spending, overall slower economic activity and extreme volatility in credit, equity and fixed income markets. A decrease in economic activity in the U.S. …”see in full comparison
“Service disruptions or failures of the Company’s or our third-party service providers’ information systems, data and networks may disrupt our businesses, damage our reputation, expose us to regulatory investigations, actions, litigation, fines and penalties or have a negative impact on our results of operations including but not limited to loss of revenue or profit, loss of customers or sales and other adverse consequences.”see in full comparison
“Our activities are subject to stringent and evolving obligations which may adversely impact our operations. Our actual or perceived failure to comply with such obligations could lead to regulatory investigations or actions; litigation; fines and penalties; disruptions of our business operations; reputational harm; loss of revenue or profits; loss of customers or sales; and other adverse business consequences.”see in full comparison
“A small number of retailers and distributors account for a material percentage of the revenues in home entertainment for our Motion Picture segment. We do not have long-term agreements with retailers. In addition, in fiscal 2024, 2023 and 2022, we generated approximately 21%, 20% and 18%, respectively, of our revenue from Amazon.com, Inc. and its subsidiaries. …”see in full comparison
“Privacy. The legal and regulatory environment governing Starz’s collection, generation, use, storage, disclosure and transfer (commonly known as processing) of personal information and other sensitive information is complex and continually evolving. In the ordinary course of its business, Starz collects and uses the personal information of subscribers and potential subscribers through its websites and applications and those of third parties. …”see in full comparison
“We are also bound by contractual obligations related to data privacy and security, and our efforts to comply with such obligations may not be successful. For example, we are contractually subject to industry standards adopted by industry groups, such as the Payment Card Industry Data Security Standard (“PCI DSS”). The PCI DSS requires companies to adopt certain measures to ensure the security of cardholder information, including using and maintaining firewalls, adopting proper password protections for certain devices and software, and restricting data access. …”see in full comparison
Full comparison: every changed paragraph (233)
Starz is a smaller, less diversified company than its predecessor Old Lionsgate was, with a different financial profile.
Starz is a smaller, less diversified company than its predecessor Lionsgate was, with a business concentrated on the distribution of premium subscription video services. As a result, Starz is dependent on its ability to develop and distribute programming that resonates with viewers and results in subscribers for its service and may be more vulnerable to changing market conditions, which could have a material adverse effect on Starz’s businesses, financial condition and results of operations. In addition, the diversification of revenue, costs, and cash flows is diminished compared to its predecessor Lionsgate, such that its results of operations, cash flows, working capital and financing requirements may be subject to increased volatility and its ability to fund capital expenditures and investments, pay dividends and service debt may be diminished. Starz may also lose capital allocation efficiency and flexibility, as the Starz Business will no longer be able to use cash flow from the LG Studios Business.
Starz will incur costs and expenses under the Transition Services Agreement entered into as part of the Separation and will incur other costs and expenses associated with being a public company during the twelve-month period following the completion of the Separation and beyond, including costs associated with certain tax and compliance filings.
While Starz believes that it will have sufficient cash and cash equivalents (including cash from operations to fund its operations) for the foreseeable future, Starz may also seek additional funds from third-party sources in the future, including traditional bank financing, other secured or unsecured indebtedness, or the issuance of equity and/or debt securities. However, these alternatives may not be available to Starz on attractive terms, in the amounts needed, or at all. The decision to obtain additional capital will depend on, among other things, Starz’s business plans, operating performance and condition of the capital markets. Rising interest rates or any disruption in the capital markets could make it more difficult and expensive for Starz to raise additional capital or refinance its existing indebtedness. If Starz raises additional funds through the issuance of equity, equity-linked or debt securities, those securities may have rights, preferences or privileges senior to the rights of its common shares, and Starz’s shareholders may experience dilution. Any large equity or equity-linked offering could adversely affect Starz’s share price.
Starz could experience temporary interruptions in business operations and incur additional costs as it builds its information technology infrastructure and transitions its data to its own systems.
Starz is in the process of creating its own, or engaging third parties to provide, information technology infrastructure and systems to support its critical business functions, including accounting and reporting, in order to enhance or replace those systems previously provided to it by Old Lionsgate. The failure to implement these new systems and transition data successfully and cost-effectively could disrupt Starz’s business operations and have a material adverse effect on its profitability. In addition, Starz’s costs for the operation of these systems may be higher than the amounts reflected in the historical combined financial statements of the Starz Business.
The accounting and other management systems and resources of Starz may not be adequately prepared to meet the financial reporting and other requirements to which Starz is subject as a public company.
Compliance with the reporting and other obligations under the Exchange Act, including the requirements of Section 404 of the Sarbanes-Oxley Act, will place significant demands on Starz’s management and administrative and operational resources, including accounting resources, some of which were previously supported by Old Lionsgate’s management. Moreover, to comply with these requirements, it is anticipated that Starz will need to migrate certain of its systems, including information technology and human resources systems, implement additional financial and management controls, reporting systems and procedures and may need to hire additional legal, accounting and finance staff. It is expected that Starz will incur additional annual expenses related to these activities, and those expenses may be significant. Starz is in the process of creating its own, or engaging third parties to provide, accounting, reporting, and other management systems to support its critical business functions in order to enhance or replace those systems provided to it by Old Lionsgate. Any inability to implement the new systems and transition data successfully and cost-effectively could disrupt Starz’s business operations and adversely impact its profitability. If Starz is unable to upgrade its financial and management controls, reporting systems, information technology and procedures in a timely and effective fashion, its ability to comply with its financial reporting requirements and other rules that apply to reporting companies under the Exchange Act could be impaired. Any failure to achieve and maintain effective internal controls could have a material adverse effect on Starz’s business, financial condition, results of operations and cash flow.
Starz faces risks related to the restructuring of its business, which have affected and may continue to affect the value of its assets.
As a result of changes in the media and entertainment industry and their impact on Starz, Starz has restructured its operations. For example, in the fiscal year ended March 31, 2023, Starz began a plan to restructure its international LIONSGATE+ business, which included the over-the-top distribution of Starz’s LIONSGATE+ branded premium subscription video services outside the U.S. and Canada. In connection with these restructuring activities, Starz performed a strategic review of content performance across all its platforms both in the U.S. and international territories, resulting in certain programming being removed from those platforms and written down to fair value. Starz incurred impairment charges from the inception of the plan through March 31, 2025, amounting to approximately $457.0 million which were reflected in net income (loss) from continuing operations (impairment charges from the inception of the plan through March 31, 2025, included in discontinued operations amounted to approximately $476.4 million).
Changes in macroeconomic conditions, changes in consumer behavior and consumer consumption levels of our content may result in further restructurings and may further impair the value of Starz assets. When these changes or events occur, Starz has historically needed and may in the future need to write down the value of its assets, including further write downs of programming content, net, which has a balance of $1,096.3 million as of March 31, 2025.
As of March 31, 2025, the carrying value of Starz’s definite-lived intangible assets, including customer relationships associated with U.S. MVPDs, including cable operators, satellite television providers and telecommunications companies was $816.0 million. The asset group including amortizable intangible assets is tested for impairment whenever events or changes in circumstances (triggering events) indicate that the carrying amount of the asset may not be recoverable. For the fiscal year ended March 31, 2025, no indicators of impairment were identified. For the fiscal year ended March 31, 2024, due to changes in the industry related to the migration from linear to OTT and direct-to-consumer consumption, we performed an impairment analysis of the amortizable intangible assets due to changes in the industry related to the migration from linear to OTT and direct-to-consumer consumption. Based on Starz’s impairment analysis, the estimated undiscounted cash flows exceeded the carrying amount of the assets and therefore no impairment charge was required. Should a review indicate a write down to fair value is required, any such charge could be material to Starz’s reported net earnings in a given reporting period.
We face substantial capital requirements and financial risks.
The production, acquisition and distribution of motion picture and television content requires substantial capital. A significant amount of time may elapse between expenditure of funds and the receipt of revenues after release or distribution of such content. We cannot assure you that we are able to successfully implement arrangements to reduce the risks of production exposure such as tax credit, government or industry programs. Moreover, we may experience delays and increased costs due to disruptions or events beyond our control and if a production incurs substantial budget overruns, we may have to seek additional financing or fund the overrun itself. We cannot make assurances regarding the availability of such additional financing on terms acceptable to us, or that we will recoup these costs. Increased costs or budget overruns incurred with respect to a particular film may prevent its completion or release, or may result in a delayed release and the postponement to a potentially less favorable date. This could adversely affect box office performance and the overall financial success of such film. Any of the foregoing could have a material adverse effect on our business, financial condition, operating results, liquidity and prospects.
We may incur significant write-offs if our projects do not perform well enough to recoup costs.
We are required to amortize capitalized production costs over the expected revenue streams as we recognize revenue from films or other projects. The amount of production costs that will be amortized each quarter depends on, among other things, how much future revenue we expect to receive from each project. Unamortized production costs are evaluated for impairment each reporting period on a project-by-project basis when events or changes in circumstances indicate that the fair value of a film is less than its unamortized cost. These events and changes in circumstances include, among others, an adverse change in the expected performance of a film prior to its release, actual costs substantially in excess of budgeted cost for the film, delays or changes in release plans and actual performance subsequent to the film’s release being less than previously expected performance estimates. In any given quarter, if we lower our previous forecast with respect to total anticipated revenue from any film or other project or increase our previous forecast of cost of making or distribution of the film, we may be required to accelerate amortization or record impairment charges with respect to the unamortized costs, even if we previously recorded impairment charges for such film or other project. Such impairment charges could adversely impact our business, operating results and financial condition.
Changes in our business strategy including consummation of the separation of the Studio Business and the STARZ business of Lionsgate, plans for growth or restructuring may increase our costs or otherwise affect our profitability.
As changes in our business environment occur, we may adjust our business strategies to meet these changes, which may include growing a particular area of business or restructuring a particular business or asset. In addition, external events including changing technology, changing consumer patterns, acceptance of our theatrical and television offerings and changes in macroeconomic conditions may impair the value of our assets. When these occur, we may incur costs to adjust our business strategy and may need to write down the value of assets. We may also invest in existing or new businesses. Some of these investments may have negative or low short-term returns and the ultimate prospects of the businesses may be uncertain or may not develop at a rate that supports our level of investment. In any of these events, our costs may increase, we may have significant charges associated with the write-down of assets, or returns on new investments may be lower than prior to the change in strategy, plans for growth or restructuring. In addition, on May 13, 2024, we consummated the business combination which resulted in the launch of Lionsgate Studios.
Our revenues and results of operations may fluctuate significantly.
Our results of operations depend significantly upon the commercial success of the motion picture, television and other content that we sell, license or distribute, which cannot be predicted with certainty. In particular, if one or more motion pictures underperform at the box office in any given period, our revenue and earnings results for that period (and potentially, subsequent periods) may be less than anticipated. Our results of operations also fluctuate due to the timing, mix, number and availability of our theatrical motion picture and home entertainment releases, as well as license periods for content. Moreover, low ratings for television programming produced by us may lead to the cancellation of a program which may result in significant programming impairments in a given period, and can negatively affect license fees for the cancelled program in future periods. Other than non-renewals or cancellation of television programs or series that may occur from time to time, we are not aware of any current material cancellation of television programming releases or of content that we sell, license or distribute. In addition, the comparability of our results may be affected by changes in accounting guidance or changes in our ownership of certain assets and businesses. As a result of the factors above, our results of operations may fluctuate and differ from period to period, and therefore, may not be indicative of the results for any future periods or directly comparable to prior reporting periods.
Our content licensing arrangements, primarily those relating to the distribution of films in foreign territories, may include minimum guarantee arrangements which, absent such arrangements, could adversely affect our results of operations.
We generate revenue principally from the licensing of content in domestic theatrical exhibition, home entertainment (e.g., digital media and packaged media), television, and international market places. Certain of such content licensing arrangements, primarily those relating to the distribution of films by third parties in foreign territories, may include a minimum guarantee. Revenue from these minimum guarantee arrangements amounted to approximately $151.0 million, $101.3 million and $51.1 million for the years ended March 31, 2024, 2023 and 2022 respectively. To the extent that receipts generated by such foreign distributor from distribution of the film in the territory exceeds a formula-based threshold, the distributor pays us an amount in addition to the minimum guarantee (the “overage”). Absent these arrangements, the revenues derived by us may be determined as a function of a revenue-sharing formulation that calculates the licensee fee payable to us solely based on the actual performance of the film in the territory. In these situations, content that is not favorably received or underperforms may not achieve the level of revenues that we would have received from a minimum guarantee arrangement, which could adversely impact our business, operating results and financial condition.
We do not have long-term arrangements with many of our production or co-financing partners.
We typically do not enter into long-term production contracts with the creative producers of motion picture and television content that we produce, acquire or distribute. Moreover, we generally have certain derivative rights that provide us with distribution rights to, for example, prequels, sequels and remakes of certain content we produce, acquire or distribute. There is no guarantee that we will produce, acquire or distribute future content by any creative producer or co-financing partner, and a failure to do so could adversely affect our business, financial condition, operating results, liquidity and prospects.
We rely on a few major retailers and distributors and the loss of any of those could reduce our revenues and operating results.
A small number of retailers and distributors account for a material percentage of the revenues in home entertainment for our Motion Picture segment. We do not have long-term agreements with retailers. In addition, in fiscal 2024, 2023 and 2022, we generated approximately 21%, 20% and 18%, respectively, of our revenue from Amazon.com, Inc. and its subsidiaries. We cannot assure you that we will maintain favorable relationships with our retailers and distributors or that they will not be adversely affected by economic conditions, including as a result of global pandemics, wars, such as Russia’s invasion of Ukraine (including sanctions therefrom, though we and, to our knowledge, our directors and executive officers have not been, and are not expected to be, subject to any sanctions related to Russia’s invasion of Ukraine), the Israel-Hamas war, rising interest rates, inflation or a recession.
A significant portion of our library revenues comes from a small number of titles.
We depend on a limited number of titles in any given fiscal quarter for the majority of the revenues generated by our library. In addition, many of the titles in our library are not presently distributed and generate substantially no revenue. Moreover, our rights to the titles in our library vary; in some cases, we only hold the right to distribute titles in certain media and territories for a limited term; in other cases, certain rights may be reserved and/or granted to third parties or otherwise only granted to us for a limited period. If we cannot acquire new product and the rights to popular titles through production, distribution agreements, acquisitions, mergers, joint ventures or other strategic alliances, or renew expiring rights to titles generating a significant portion of our revenue on acceptable terms, any such failure could have a material adverse effect on our business, financial condition, operating results, liquidity and prospects. Other than our recent acquisition of eOne, we have not entered into any agreements regarding material acquisitions of titles, renewals, business combinations, joint ventures or sales that are pending. Completed material acquisitions have been previously disclosed in our reports that have been filed under the Exchange Act.
Changes in consumer behavior, as well as evolving technologies and distribution models, may negatively affect our business, financial condition or results of operations.
Our success depends on our ability to anticipate and adapt to shifting content consumption patterns. The ways in which viewers consume content, and technology and business models in our industry, continue to evolve, and new distribution platforms, as well as increased competition from new entrants and emerging technologies, have added to the complexity of maintaining predictable revenues. This trend has impacted certain traditional television distribution models, as demonstrated by industrywide declines in broadcast and cable ratings and declines in cable, direct broadcasting satellite and telco television subscribers (“cord cutting”).
Developments in technology and new content delivery products and services have also led to an increased amount of video content, as well as changes in consumers’ expectations regarding the availability of video content and their willingness to pay for access to such content. These changes include the increase in the number of advertising-based video on demand services or free, ad-supported streaming linear channels (also known as FAST channels) or increased cord-cutting. In addition, rules governing new technological developments, such as developments in generative artificial intelligence, remain unsettled, and these developments may affect aspects of our business model, including revenue streams for the use of its intellectual property and how we create and distribute our content. If we fail to successfully exploit emerging technologies and effectively anticipate or adapt to emerging competitors, content distribution platforms, changes in consumer behavior and shifting business models, this could have a material adverse effect on our competitive position, business, financial condition and results of operations.
Our business depends on the appeal of our programming, which is difficult to predict.
Our success depends, in part, upon popularity, viewer preferences and audience acceptance of our content. These preferences are difficult to predict and some of which are subject to influences beyond our control, such as the critical acclaim of our content, the format in which content is released, the talent involved, the genre and specific subject matter of our content, audience reaction to our content, the quality and acceptance of content that our competitors release into the marketplace, and the availability of alternative forms of entertainment (including user-generated content) and leisure activities, general economic conditions and other tangible and intangible factors. We may not be able to anticipate and react effectively to shifts in tastes and interests. A change in viewer preferences could cause STARZ’s programming to decline in popularity, which could adversely impact the terms of our affiliation agreements with distributors or jeopardize their renewal. Reduced popularity of our programs or negative publicity associated with our content or brands may decrease our audience share and viewer reach and could have a material adverse effect on our business, financial condition and results of operations. In addition, our competitors may have more flexible programming arrangements, as well as greater amounts of available content, distribution and capital resources and may be able to copy our successful programming strategies to our detriment or react more quickly than we can to shifts in tastes and interests.
To an increasing extent, the success of STARZ depends on exclusive original programming and our ability to accurately predict how audiences will respond to our original programming. We must invest substantial amounts in the production and marketing of our original programming before we learn whether such content will reach anticipated audience acceptance levels. Because original programming often involves a greater degree of financial commitment, as compared to acquired programming that we license from third parties, and because our branding strategies depend significantly on a relatively small number of original series, a failure to anticipate viewer preferences for such series could be especially detrimental to our business.
Our network’s success depends upon the availability of quality programming in a highly competitive marketplace, and we may be unable to secure or maintain such programming.
STARZ’s success depends upon the availability of quality programming, particularly original programming and films, that is suitable for our target markets. We obtain most of our programming through agreements with third parties that have produced or control the rights to such programming. These agreements expire at varying times and require us to be in compliance with certain terms. The market for video programming is intensely competitive and subject to rapid change; we also face increased costs for programming as the result of recent renegotiations of major collective bargaining agreements. We compete with other programming services, including cable television, national broadcast television, local broadcast television stations and digital streaming services to secure desired programming. Some content providers resist licensing their content to third parties, such as STARZ, which may impede our ability to secure desired programming.
Increased competition may drive up talent and production costs and has required us to increasingly commit to straight-to-series orders for programming instead of pilot orders. If a straight-to-series order does not meet anticipated production or quality standards or is otherwise not accepted by audiences, revisions to the programming may be necessary, which could increase production costs. The increased financial commitment for a straight-to-series order also could increase the risks associated with such an order. We cannot assure you that we will ultimately be successful in negotiating renewals of our programming rights agreements or in negotiating adequate substitute agreements. In the event that these agreements expire or are terminated and are not replaced by programming content, including additional original programming, acceptable to our distributors and subscribers, it could have a material adverse effect on our business, financial condition and results of operations.
We depend on distributors that carry our STARZ programming, and no assurance can be given that we will be able to maintain and renew these affiliation agreements on as favorable terms or at all.
STARZ currently distributes programming through affiliation agreements with many distributors, including Altice, Amazon, Charter, Comcast, Cox, DIRECTV, DISH Network, Hulu and Verizon. These agreements are scheduled to expire at various dates through 2027. The largest distributors can have significant leverage in their relationships with certain programmers, including us. Moreover, subscription streaming services and other technological innovations have changed when, where and how audiences consume video content. These changes pose risks to the traditional U.S. television industry, including the disruption of the traditional television content distribution model. In part as a result of these changes, over the past few years, the number of subscribers to traditional MVPDs in the United States has declined, placing additional cost pressure on the traditional MVPDs relationships with their programmers, including us. These changes and consolidations in the industry may provide distributors additional leverage in negotiating their affiliation agreements with us, which may result in less favorable terms to us, including fee reductions.
The renewal negotiation process for affiliation agreements is typically lengthy. In certain cases, renewals are not agreed upon prior to the expiration of a given agreement, and therefore the distributor could suspend carriage of our programming or the programming could continue to be carried by the relevant distributor pursuant to the terms and conditions in the expired affiliation agreement. It is possible that we may be unable to obtain renewals with our current distributors on as favorable terms, if at all. It is also possible that we may be unable to successfully negotiate affiliation agreements with new distributors to carry our programming. It is also possible that some distributors may even decide to exit the video delivery sector entirely. The failure to renew affiliation agreements on as favorable terms, or the failure to negotiate new affiliation agreements at all, in each case covering a significant portion of households, could result in a discontinuation of carriage, or could otherwise impair our subscriber growth, revenue and earnings which could have a materially adverse effect on our business, financial condition and results of operations.
In addition, affiliation agreements are complex and individually negotiated. If we were to disagree with a distributor on the interpretation of its affiliation agreement, it could materially adversely impact our business, financial condition and results of operations, as well damage our relationship with that distributor.
We depend in part on our distributors to market and present our services, the lack of which may result in reduced customer demand.
At times, certain of our distributors do not allow us to participate in marketing campaigns or other promotional activities to market our services or may not surface or position us favorably on their platforms. Our inability to participate in the marketing of our services or limited discoverability on distributor platforms may put us at a competitive disadvantage. If our distributors do not sign-up new subscribers to our services, we may lose subscribers, which could have a materially adverse effect on our business, financial condition and results of operations.
OurStarz’s efforts to attract and retain subscribers for STARZ services may not be successful, which may adversely affect ourits business.business, financial condition, results of operations and cash flows.
OurStarz’s ability to continue to attract and retain subscribers will depend in part on ourits ability to consistently provide compelling content choices, effectively market ourits services, as well as provide a quality user experience for ourits subscribers. Furthermore, ourits competitors’ relative service levels, content offerings, pricing and related features may adversely impactaffect ourStarz’s ability to attract and retain subscribers. For example, in the future, it is possible that prices for ourStarz services may increase, which could result in subscribers cancelling their subscriptions or potential subscribers not choosing to sign up for ourits services. WeSubscribers incurcancel significanttheir marketingsubscriptions expendituresfor many reasons, including a perception that they do not use the service sufficiently, that a particular program they subscribed for has ended, that they need to cut household expenses, the end of a promotional period, dissatisfaction with content, a preference for competitive services, and customer service issues that they believe are not satisfactorily resolved. Adverse economic conditions, including global pandemics, inflation or a recession, may also adversely affect Starz’s ability to attract subscribers, therefore retention of those subscribers is important to our business model. We continually seek to add new subscriptions both to replace canceled subscriptions and to grow beyond our current subscription base. If excessive numbers of subscribers cancel our services, we may be required to incur significantly higher marketing expenditures than we currently anticipate to replace these subscribers with newretain subscribers. While we permit multiple users within the same household to share a single account for noncommercial purposes, if account sharing is abused, our ability to add new subscribers may be hindered and our results of operations may be adversely impacted. If we are unable to successfully compete with current and new competitors in both retaining our existing subscriptions and attracting new subscriptions, it could pose a materially adverse effect on our business, financial condition and results of operations.
Starz incurs significant advertising and marketing expenditures to attract and retain subscribers, and retention of those subscribers is important to its business model. Starz continually seeks to add new subscriptions both to replace canceled subscriptions and to grow beyond its current subscription base. If excessive numbers of subscribers cancel its services, Starz may be required to incur significantly higher advertising and marketing expenditures than it currently anticipates to replace these subscribers with new subscribers. If Starz is unable to successfully compete with current and new competitors in both retaining its existing subscriptions and attracting new subscriptions, it could adversely affect Starz’s business, financial condition, results of operations, and cash flows.
Starz’s business depends on viewer preferences, which are difficult to predict.
Starz’s success depends, in part, upon popularity, viewer preferences and audience acceptance of its content. These preferences are subject to influences such as the critical acclaim of its content, the format in which content is released, the talent involved, the genre and specific subject matter of its content, audience reaction to its content, the quality and acceptance of content that its competitors release into the marketplace, the availability of alternative forms of entertainment (including user-generated content) and leisure activities, general economic conditions and other tangible and intangible factors. These influences are difficult to predict and in some cases are subject to influences beyond its control. Starz may not be able to anticipate and react effectively to shifts in tastes and interests. A change in viewer preferences could cause Starz’s programming to decline in popularity, which could adversely affect the terms of its affiliation agreements with distributors or jeopardize their renewal. Reduced popularity of its programs or negative publicity associated with its content or brands may decrease its audience share and viewer reach and could have a material adverse effect on its business, financial condition and results of operations.
To an increasing extent, the success of Starz depends on exclusive original programming and its ability to accurately predict how audiences will respond to its original programming. Starz must invest substantial amounts in the development, production, and marketing of its original programming before it learns whether such content will reach anticipated audience acceptance levels. Because original programming often involves a greater degree of financial commitment, as compared to existing programming acquired from third parties, and because Starz’s branding strategies depend significantly on a relatively small number of original series, a failure to correctly anticipate viewer preferences for such series could be especially detrimental to Starz’s business.
Starz’s success depends upon the availability of quality programming in a highly competitive marketplace, and it may be unable to secure or maintain such programming.
Starz’s success depends upon the availability of quality video programming, particularly original television programming and films, which are suitable for its target markets. Starz believes that a positive reputation concerning its service is important in attracting and retaining subscribers. Starz obtains most of its programming through agreements with third parties that have produced or control the rights to such programming. The market for video programming is intensely competitive and subject to rapid change. Starz competes with other programming services, including cable television, national and local broadcast television, and digital streaming services to secure desired programming. Some content providers resist licensing their content to third parties, such as Starz, which may impede its ability to secure desired programming.
Increased competition may drive up talent and production costs and has required Starz to increasingly commit to “straight-to-series" orders for programming instead of pilot orders. The increased financial commitment for a straight-to-series order also could increase the risks associated with such an order. For example, if a program ordered as a straight-to-series order does not meet anticipated production or quality standards or is otherwise not accepted by audiences, more costly revisions to the programming may be necessary. In addition, many of Starz’s competitors have greater capital resources, and therefore may be able to have greater amounts of available content and/or outbid it for projects and talent (including through the use of exclusive first-look arrangements), and may be able to copy Starz’s successful programming strategies to its detriment or react more quickly than it can to shifts in tastes and interests. Starz also faces increased costs for programming as the result of recent renegotiation of major collective bargaining agreements.
To the extent Starz begins to produce original programming directly rather than through third party production companies, Starz will be responsible for production costs and related expenses directly, including costs relating to talent retention, and such activity will require significant resources and management attention. Our productions may be directly impacted by future negotiations and renewals of entertainment industry collective bargaining agreements, changes to various applicable tax credit regimes, and the potential imposition of U.S. tariffs on international productions. As both a producer and distributor of content, we will face potential liability for negligence, intellectual property infringement, and other similar or related claims based on the nature and content of the materials we acquire, create or distribute.
Starz cannot assure you that it will ultimately be successful in negotiating renewals of its programming license agreements or in negotiating adequate substitute agreements. If these agreements expire or are terminated and are not replaced by licenses to programming content, including additional original programming, acceptable to its distributors and subscribers, it could have a material adverse effect on Starz’s business, financial condition, results of operations and cash flows.
Starz depends on distributors that carry its programming, and no assurance can be given that Starz will be able to maintain and renew these affiliation agreements on favorable terms or at all.
Starz currently distributes programming through affiliation agreements with many distributors, including Altice, Amazon, Charter, Comcast, Cox, DIRECTV, DISH Network, Hulu and Verizon. These agreements are scheduled to expire at various dates through 2028. The largest distributors can have significant leverage in their relationships with certain programmers, including Starz. Moreover, subscription streaming services and other technological innovations have changed when, where and how audiences consume video content. These changes pose risks to the traditional television industry, including the disruption of the traditional television content distribution model. In part as a result of these changes, over the past few years, the number of subscribers to traditional multichannel video programming distributors in the U.S. has declined, placing additional cost pressure on the traditional multichannel video programming distributor relationships with their programmers, including Starz. These changes and consolidations in the industry may provide distributors additional leverage in negotiating their affiliation agreements with Starz, which may result in less favorable terms to Starz, including fee reductions.
The renewal negotiation process for affiliation agreements is typically lengthy. In certain cases, renewals are not agreed upon prior to the expiration of a given agreement, and therefore, the distributor could suspend or terminate carriage of Starz programming or the programming could continue to be carried by the relevant distributor pursuant to the terms and conditions in the expired affiliation agreement. It is possible that Starz may be unable to obtain renewals with its current distributors on as favorable terms, if at all. It is also possible that Starz may be unable to successfully negotiate affiliation agreements with new distributors to carry its programming. Some distributors may even decide to exit the video delivery sector entirely. The failure to renew affiliation agreements on as favorable terms, or the failure to negotiate new affiliation agreements at all, could result in a discontinuation of carriage, or could otherwise impair Starz’s subscriber growth, revenue and earnings which could have a material adverse effect on its business, financial condition and results of operations.
Starz relies on a few major distributors and the loss of any of those could reduce its revenue and operating results.
Although Starz currently distributes programming through affiliation agreements with many distributors, including Altice, Amazon, Charter, Comcast, Cox, DIRECTV, DISH Network, Hulu and Verizon, a few major distributors account for a material percentage of Starz’s revenue. In the fiscal year ended March 31, 2025, Starz generated 29.7% of its revenue from Amazon.com, Inc. and its subsidiaries. Starz cannot assure you that it will maintain favorable relationships with its distributors, that its offerings will continue to be attractive to distributors, or that it or they will not be adversely affected by economic conditions, including as a result of global pandemics, inflation or a recession.
Starz depends, in part, on distributors to market and present its services, the lack of which may result in reduced customer demand.
Management's Discussion & Analysis (MD&A)
New heading “Basis of Presentation”
New heading “Relationship with New Lionsgate”
New heading “Components of Results of Operations”
New heading “Fiscal 2025 Compared to Fiscal 2024”
New heading “Combined Results of Operations”
New heading “Adjusted OIBDA and Non-GAAP Measures”
New heading “Adjusted OIBDA and Non-GAAP Measures”
New heading “Exchange Notes and Existing Notes”
New heading “Old Lionsgate Revolving Credit Facility”
New heading “Intercompany Revolver”
New heading “Programming Related Obligations”
New heading “Accounts Receivable Monetization”
New heading “Material Cash Requirements from Known Contractual and Other Obligations”
New heading “Fiscal 2025 Compared to Fiscal 2024 and Fiscal 2024 Compared to Fiscal 2023”
Removed heading “Business Combination”
Removed heading “Acquisition of eOne”
Removed heading “Media Networks Restructuring”
Removed heading “Industry Strikes”
Removed heading “Accounting for Films and Television Programs and Licensed Program Rights”
Removed heading “Segment Results of Operations and Non-GAAP Measures”
Removed heading “Television Production”
Removed heading “•Senior Credit Facilities:”
Removed heading “Film Related Obligations”
Removed heading “•Backlog Facility and Other:”
Removed heading “Accounts Receivable Monetization and Governmental Incentives”
Largest changes
“Management will continue to monitor all of its reporting units for further changes in the business environment that could impact the recoverability in future periods. The recoverability of goodwill is dependent upon the continued growth of revenue and cash flows from our business activities. …”see in full comparison
“The Company's primary measure of segment performance is segment profit. Segment profit is defined as segment revenues, less segment direct operating and segment distribution and marketing expense, less segment general and administration expenses. Total segment profit represents the sum of segment profit for our individual segments, net of eliminations for intersegment transactions. …”see in full comparison
“Adjusted OIBDA is defined as operating income (loss) before depreciation and amortization, adjusted for share-based compensation, restructuring and other costs, and unusual gains or losses (such as goodwill and intangible asset impairment), when applicable.”see in full comparison
“Fiscal 2024. In the second quarter of fiscal 2024, due to the continuing difficult macro and microeconomic conditions, industry trends, and their impact on the performance and projected cash flows of the Media Networks segment, including its growth in subscribers and revenue worldwide, and the expanded restructuring activities discussed in Note 15 to the consolidated financial statements, along with recent market valuation multiples, we updated our quantitative impairment assessment for the Media Networks reporting unit goodwill based on the most recent data and expected growth trends. …”see in full comparison
“Based on our quantitative impairment assessment, we determined that the fair value of our Media Networks reporting unit which was previously disclosed as a reporting unit "at risk" of impairment, was less than its carrying value (after the impairment write-down of its indefinite-lived intangible assets discussed below). …”see in full comparison
“Covenants. The Senior Credit Facilities contain representations and warranties, events of default and affirmative and negative covenants that are customary for similar financings and which include, among other things and subject to certain significant exceptions, restrictions on the ability to declare or pay dividends, create liens, incur additional indebtedness, make investments, dispose of assets and merge or consolidate with any other person. …”see in full comparison
Full comparison: every changed paragraph (410)
This section of our Annual Report Form 10-K includes a discussion and analysis of our financial condition and results of operation for the fiscal years ended March 31, 2024 and 2023, and year-to-year comparisons between fiscal 2024 and fiscal 2023. A discussion and analysis of our financial condition and results of operation for the fiscal year ended March 31, 2022 and year-to-year comparisons between fiscal 2023 and fiscal 2022 can be found in "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 2023, and is herein incorporated by reference.
Lions Gate Entertainment Corp. (the “Company,” “Lionsgate,” "Lions Gate," “we,” “us” or “our”) encompasses world-class motion picture and television studio operations (collectively referred to as the "Studio Business") aligned with the STARZ premium global subscription platform to bring a unique and varied portfolio of entertainment to consumers around the world. The Company’s film, television, subscription and location-based entertainment businesses are backed by a more than 20,000-title library and a valuable collection of iconic film and television franchises.
We manage and report our operating results through three reportable business segments: Motion Picture, Television Production, and Media Networks (see further discussion below). We refer to our Motion Picture and Television Production segments collectively as our Studio Business and our Media Networks segment as our Media Networks Business.
Business Combination
On May 13, 2024, SEAC II Corp., a Cayman Islands exempted company (“New SEAC”), consummated a business combination among New SEAC, Screaming Eagle Acquisition Corp., a Cayman Islands exempted company and then parent of New SEAC (“SEAC”), and LG Orion Holdings ULC, a British Columbia unlimited liability company (“StudioCo”) and a wholly-owned subsidiary of the Company, pursuant to a Business Combination Agreement, dated as of December 22, 2023, by and among New SEAC, SEAC, the Company, LG Sirius Holdings ULC, a British Columbia unlimited liability company and a wholly-owned subsidiary of the Company (“Studio HoldCo”), StudioCo, SEAC MergerCo, a Cayman Islands exempted company and a wholly-owned subsidiary of New SEAC (“MergerCo”), and 1455941 B.C. Unlimited Liability Company, a British Columbia unlimited liability company and a wholly-owned subsidiary of SEAC (“New BC Sub”). In connection with the closing of the business combination, SEAC II Corp. changed its name to “Lionsgate Studios Corp.” (referred to as “Lionsgate Studios”). Lionsgate Studios has continued the existing business operations of StudioCo, which consists of the Studio Business of Lionsgate. Lionsgate Studios became a separate publicly traded company and its common shares commenced trading on Nasdaq under the symbol “LION” on May 14, 2024. The "Studio Business" consists of the businesses of Lionsgate's Motion Picture and Television Production segments, together with substantially all of Lionsgate's corporate general and administrative functions and costs.
In connection with the business combination, the Company and StudioCo entered into a separation agreement pursuant to which (i) the assets and liabilities of the Company’s Studio Business (including certain subsidiaries of the Company engaged in the Studio Business) were separated from the assets and liabilities of the Company’s Starz Business (meaning substantially all of the assets and liabilities constituting the Media Networks segment, and including certain subsidiaries of the Company engaged in the Company’s Starz Business) and transferred to StudioCo such that StudioCo holds, directly or indirectly, all of the assets and liabilities of the Studio Business, and (ii) all of the Company’s equity interests in StudioCo were transferred to Studio HoldCo.
As a result, approximately 87.2% of the total shares of Lionsgate Studios continue to be held by the Company, while former SEAC public shareholders and founders and common equity financing investors own approximately 12.8% of Lionsgate Studios. In addition to establishing Lionsgate Studios as a standalone publicly-traded entity, the transaction resulted in approximately $350.0 million of gross proceeds to the Company, including $274.3 million in PIPE financing. Of the total gross proceeds, approximately $330.0 million was received at or shortly after the closing of the Business Combination, with the remaining $20.0 million expected to be received shortly. The net proceeds will be used to pay down amounts outstanding under the Term Loan A and Term Loan B pursuant to the Credit Agreement.
The Business Combination will be accounted for as a reverse recapitalization in accordance with U.S. GAAP. Under this method of accounting, Screaming Eagle will be treated as the acquired company and the Studio Business will be treated as the acquirer for financial reporting purposes. Accordingly, for accounting purposes, the financial statements of New SEAC will represent a continuation of the financial statements of the Studio Business, with the Business Combination treated as the equivalent of the Studio Business issuing stock for the historical net assets of Screaming Eagle, accompanied by a recapitalization. The net assets of Screaming Eagle will be stated at fair value, which approximates historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Business Combination will be those of the Studio Business. The Studio Business will continue to be a consolidated subsidiary of the Company. See Note 2 and Note 21 to our consolidated financial statements.
Harry E. Sloan, a member of the Company’s Board of Directors, is also the Chairman of Screaming Eagle, and owns, directly or indirectly, a material interest in Eagle Equity Partners V, LLC, a Delaware limited liability company, the Screaming Eagle sponsor. Mr. Sloan recused himself from the decisions to approve the Business Combination made by both the board of directors of Screaming Eagle and Lionsgate.
Acquisition of eOne
On December 27, 2023, the Company, and its subsidiaries, Lions Gate Entertainment Inc., a Delaware corporation (“LGEI”), and Lions Gate International Motion Pictures S.à.r.l., a Luxembourg société à responsabilité limitée (“LGIMP” and, with the Company and LGEI, collectively the “Buyers”), completed the previously announced acquisition of all of the issued and outstanding equity interests of the companies constituting the Entertainment One television and film (“eOne”) business from Hasbro, Inc., a Rhode Island corporation (“Hasbro”), pursuant to that certain Equity Purchase Agreement (the “Purchase Agreement”) dated August 3, 2023. The aggregate cash purchase price was approximately $385.1 million, inclusive of certain purchase price adjustments, including for cash, debt, and working capital. The preliminary purchase price is subject to further adjustments based on the final determination of the purchase price adjustments. The acquisition of eOne, a film and television production and distribution company, builds the Company's film and television library, strengthens the Company's scripted and unscripted television business, and continues to expand the Company's presence in Canada and the U.K.
The acquisition was accounted for under the acquisition method of accounting, with the financial results of eOne included in the Company's consolidated results from December 27, 2023. Revenues and loss before income taxes from eOne for the period from December 27, 2023 through March 31, 2024 amounted to approximately $113.8 million and $4.9 million, respectively. The Company incurred approximately $9.4 million of acquisition-related costs that were expensed in restructuring and other during the fiscal year ended March 31, 2024.
See Note 2 to our consolidated financial statements for further information.
Media Networks Restructuring
In fiscal 2023, we began a plan to restructure our LIONSGATE+ business, which initially included exiting the business in seven international territories (France, Germany, Italy, Spain, Benelux, the Nordics and Japan), and identifying additional cost-saving initiatives. This plan included a strategic review of content performance across Starz’s domestic and international platforms, resulting in certain programming being removed from those platforms and written down to fair value.
During the fiscal year ended March 31, 2024, the Company continued executing its restructuring plan, including its evaluation of the programming on Starz's domestic and international platforms. In connection with this review, the Company cancelled certain ordered programming, and identified certain other programming with limited strategic purpose which was removed from the Starz platforms and abandoned by the Media Networks segment. In addition, as a result of the continuing review of its international territories, the Company has made the strategic decision to shut down the LIONSGATE+ service in Latin America and the United Kingdom ("U.K.") with the only remaining international operations being in Canada and India, resulting in additional content impairment charges.
As a result of these restructuring initiatives, we recorded content impairment charges related to the Media Networks segment in the fiscal years ended March 31, 2024 and 2023 of $364.5 million and $379.3 million, respectively, which are included in restructuring and other in the consolidated statement of operations (see Note 15 to our consolidated financial statements). We have incurred impairment charges from the inception of the plan through March 31, 2024 amounting to $743.8 million.
Under the current restructuring plan and ongoing strategic content review, the net future cash outlay is estimated to range from approximately $80 million to $90 million, which includes contractual commitments on content in territories being exited, and payments on the remaining amounts payable for content removed or that may be removed from its services.
As the Company continues to evaluate the Media Networks business and its current restructuring plan in relation to the current micro and macroeconomic environment and the announced plan to separate the Company's Starz business (i.e., Media Networks segment) and Studio Business (i.e., Motion Picture and Television Production segments), including further strategic review of content performance and its strategy on a territory-by-territory basis, the Company may decide to expand its restructuring plan and exit additional territories or remove certain content off its platform in the future. Accordingly, the Company may incur additional content impairment and other restructuring charges beyond the estimates above.
Industry Strikes
In May 2023, the Writers Guild of America (“WGA”) commenced an industry-wide strike following the expiration of its collective bargaining agreement with the Alliance of Motion Picture and Television Producers (“AMPTP”). In July 2023, the Screen Actors Guild - American Federation of Television and Radio Artists (“SAG-AFTRA”) also commenced an industry-wide strike following the expiration of its collective bargaining agreement with the AMPTP. The WGA strike ended in September 2023, and the SAG-AFTRA strike ended in November 2023, and collective bargaining agreements were subsequently reached between the AMPTP and the WGA and SAG-AFTRA. These strikes resulted in temporary shutdowns of production on certain of our television and film programming, which resulted in less new content available for licensing and distribution, lower-than-expected spending for content and marketing costs in fiscal 2024, and reduced revenues in our talent management business due to the delays in productions across the industry.
Revenues
Our revenues are derived from the Motion Picture, Television Production and Media Networks segments, as described below. Our revenues are derived from the U.S., Canada, the United Kingdom and other foreign countries. None of the non-U.S. countries individually comprised greater than 10% of total revenues for the years ended March 31, 2024, 2023 and 2022.
Motion Picture: Our Motion Picture segment includes revenues derived from the following:
•Theatrical. Theatrical revenues are derived from the domestic theatrical release of motion pictures licensed to theatrical exhibitors on a picture-by-picture basis (distributed by us directly in the U.S. and through a sub-distributor in Canada). The revenues from Canada are reported net of distribution fees and release expenses of the Canadian sub-distributor. The financial terms that we negotiate with our theatrical exhibitors in the U.S. generally provide that we receive a percentage of the box office results.
•Home Entertainment. Home entertainment revenues are derived from the sale or rental of our film productions and acquired or licensed films and certain television programs (including theatrical and direct-to-video releases) on packaged media and through digital media platforms (including pay-per-view and video-on-demand platforms, electronic sell through, and digital rental). In addition, we have revenue sharing arrangements with certain digital media platforms which generally provide that, in exchange for a nominal or no upfront sales price, we share in the rental or sales revenues generated by the platform on a title-by-title basis.
•Television. Television revenues are primarily derived from the licensing of our theatrical productions and acquired films to the linear pay, basic cable and free television markets. In addition, when a license in our traditional pay television window is made to a subscription video-on-demand ("SVOD") or other digital platform, the revenues are included here.
•International. International revenues are derived from (1) licensing of our productions, acquired films, our catalog product and libraries of acquired titles to international distributors, on a territory-by-territory basis; and (2) the direct distribution of our productions, acquired films, and our catalog product and libraries of acquired titles in the United Kingdom.
•Other. Other revenues are derived from, among others, the licensing of our film and television and related content (games, music, location-based entertainment royalties, etc.) to other ancillary markets.
Television Production: Our Television Production segment includes revenues derived from the following:
•Television. Television revenues are derived from the licensing to domestic markets (linear pay, basic cable, free television and syndication) of scripted and unscripted series, television movies, mini-series and non-fiction programming. Television revenues include fixed fee arrangements as well as arrangements in which we earn advertising revenue from the exploitation of certain content on television networks. Television revenues also include revenue from licenses to SVOD platforms in which the initial license of a television series is to an SVOD platform.
•International. International revenues are derived from the licensing and syndication to international markets of scripted and unscripted series, television movies, mini-series and non-fiction programming.
•Home Entertainment. Home entertainment revenues are derived from the sale or rental of television production movies or series on packaged media and through digital media platforms.
•Other. Other revenues are derived from, among others, the licensing of our television programs to other ancillary markets, the sales and licensing of music from the television broadcasts of our productions, and from commissions and executive producer fees earned related to talent management.
Media Networks
Our Media Networks segment includes revenues derived from the following:
•StarzPrior Networks.to the Separation, as further discussed below, the Starz Networks’Business revenuessubstantially areconsisted derivedof fromOld Lionsgate’s Media Networks segment consisting of (i) Starz Networks, which includes the domestic distribution of our STARZ branded premium subscription video services through over-the-top ("“OTT"”) streaming platforms and distributors, on a direct-to-consumerdirect to- consumer basis through the Starz App,App and through wholesale U.S. and Canada OTT and multichannel video programming distributors (“MVPDs”), including cable operators, satellite television providers and telecommunications companies (collectively "Distributors") (in the aggregate,aggregate the "“Starz DomesticPlatform”), Platform"and (ii). International, which consists of the OTT distribution of subscription video services outside the U.S. and Canada.
Furthermore, as described in the Company's May 12, 2025 Form 8-K filing, on May 8, 2025, the Company’s Board of Directors approved a change in the Company's fiscal year end from March 31 to December 31. The date of the Company's next fiscal year end will be December 31, 2025. As a result of the change, the Company will file a Transition Report on Form 10-K for the nine-month transition period from April 1, 2025 to December 31, 2025.
Separation
On May 6, 2025, Old Lionsgate, through a series of transactions contemplated by Arrangement Agreement completed the separation of the LG Studios Business from the Starz Business (the “Separation”). As a result of the Arrangement Agreement, the pre-transaction shareholders of Old Lionsgate own shares in two separately traded public companies: (1) Old Lionsgate, which was renamed “Starz Entertainment Corp.” and holds, directly and through subsidiaries, the Starz Business previously held by Old Lionsgate, and (2) New Lionsgate, which was renamed “Lionsgate Studios Corp.” and holds, directly and through subsidiaries, the LG Studios Business previously held by Old Lionsgate, and is owned by Old Lionsgate shareholders and Legacy Lionsgate Studios shareholders. (See Note 18, Subsequent Events, to our audited combined financial statements for further details).
Notwithstanding the legal form of the Separation, for accounting and financial reporting purposes, in accordance with U.S. GAAP, due to the relative significance of the Studios Business as compared to the Starz Business and the continued involvement of Old Lionsgate’s senior management with New Lionsgate following the completion of the Starz Separation, New Lionsgate (which holds the LG Studios Business) is considered the accounting spinnor or divesting entity and Starz (which holds the Starz Business) is considered the accounting spinnee or divested entity. As a result, Old Lionsgate will be the accounting predecessor to New Lionsgate and the Starz Business' historical financial information has been prepared on a carve-out basis and are derived from Old Lionsgate’s consolidated financial statements and accounting records. These combined financial statements reflect the Company's combined historical financial position, results of operations and cash flows as they were historically managed.
See also "Management's Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources” for discussion of Separation related financing transactions.
Restructuring
In the fiscal year ended March 31, 2023, Old Lionsgate began a plan to restructure its international LIONSGATE+ business, which included the OTT distribution of the LIONSGATE+ branded premium subscription video services outside the U.S. and Canada. During the fiscal years ended March 31, 2025 and 2024, Old Lionsgate continued executing the restructuring plan, which included exiting all international territories of the Starz Business, with the exceptions of Canada (included in the Starz Networks segment) and India (included in the International segment), which was completed in May 2024. The historical results of operations of international territories shut down are presented as discontinued operations in the combined financial statements for all periods presented. See Note 2, Discontinued Operations, to our audited combined financial statements for further details.
As of March 31, 2025, Starz manages and reports its operating results through one reportable segment, Starz Networks, which now includes its Canadian operations. The continuing operations outside the U.S. and Canada, which primarily consists of our operations in India, is reported as International. Effective the fourth quarter of fiscal 2025, the measure of segment operating performance used by the Company’s chief operating decision maker (“CODM”) changed and, as a result, Starz's disclosed measure of segment profit/loss was updated. This change aligns with the update to how the CODM assesses performance and allocates resources for the Company’s segments. See Note 14, Segment Information, to our audited combined financial statements for further details.
Basis of Presentation
Prior to the Separation, the Starz Business historically operated as part of Old Lionsgate and not as a standalone company. The Company's combined financial statements, representing the historical assets, liabilities, operations and cash flows of the Starz Business, have been derived from the separate historical accounting records maintained by Old Lionsgate, and are presented on a carve-out basis as historically managed within Old Lionsgate through the use of a management approach in identifying the Starz Business's operations. In using the management approach, considerations over how the business operates were utilized to identify historical operations that should be presented within the carve-out financial statements.
All revenue and costs, as well as assets and liabilities directly associated with the business activity of the Starz Business are included in the accompanying combined financial statements. Revenue and costs associated with the Company are specifically identifiable in the accounting records maintained by Old Lionsgate and primarily represent the revenue and costs used for the determination of segment profit of the Media Networks segment of Old Lionsgate. In addition, these costs include an allocation of corporate general and administrative expense (inclusive of share-based compensation) which has been allocated to the Company as further discussed below. The costs relating to the Company are generally specifically identifiable as costs of the Company in the accounting records of Old Lionsgate and are included in the accompanying combined financial statements.
In May 2024, the Starz Business entered an intercompany revolving credit facility with Lionsgate Studios Corp. which was used to settle intercompany transactions prior to Separation. See Note 18, Subsequent Events, to our audited combined financial statements for further details.
In May 2024, Old Lionsgate consummated a series of transactions, by which the LG Studios Business became a separate publicly traded company, Legacy Lionsgate Studios (the “Studio Separation”). The LG Studios Business is substantially reflective of Old Lionsgate's Motion Pictures and Television Production segments together with a substantial portion of Old Lionsgate’s corporate general and administrative costs.
Prior to the Studio Separation, Old Lionsgate utilized a centralized approach to cash management. Cash generated by the Company was managed by Old Lionsgate’s centralized treasury function and cash was routinely transferred to the Starz Business or to the LG Studios Business to fund operating activities when needed. Cash and cash equivalents of the Starz Business are reflected in the combined balance sheets. Payables to and receivables from Old Lionsgate, primarily related to the Starz Business, were often settled through movement to the intercompany accounts between Old Lionsgate, the Starz Business and the LG Studios Business. Other than certain specific balances related to unsettled payables or receivables, the intercompany balances between the Starz Business and the remainder of Old Lionsgate were accounted for as parent net investment. See Note 17, Related Party Transactions, to the audited combined financial statements for further details.
Management believes the assumptions underlying our combined financial statements, including the assumptions regarding the allocation of general and administrative expenses from Old Lionsgate to us are reasonable. However, the allocations may not include all of the actual expenses that would have been incurred by us and may not reflect its combined results of operations, financial position and cash flows had we been a standalone company during the periods presented. It is not practicable to estimate actual costs that would have been incurred had we been a standalone company and operated as an unaffiliated entity during the periods presented. Actual costs that might have been incurred had we been a standalone company would depend on a number of factors, including the organizational structure, what corporate functions we might have performed directly or outsourced and strategic decisions we might have made in areas such as executive management, legal and other professional services, and certain corporate overhead functions. See Note 17, Related Party Transactions, to the audited combined financial statements for further details of the allocations included in our audited combined financial statements.
The issuer of Old Lionsgate's 5.5% senior notes due April 15, 2029 (the “5.5% Senior Notes”) was Starz Capital Holdings, LLC (previously known as Lions Gate Capital Holdings LLC), a Starz entity. The 5.5% Senior Notes were generally used as a method of financing Old Lionsgate's operations in totality and were not specifically identifiable to the LG Studios Business or the Starz Business. It is not practical to determine what the capital structure would have been historically for the Starz Business or the LG Studios Business prior to the Studio Separation as standalone companies; however, the 5.5% Senior Notes were issued by a subsidiary of Starz and are representative of the overall debt levels that were expected for the Starz Business following the completion of the Separation. In May 2024, the Starz Business issued $389.9 million aggregate principal amount of new 5.5% exchange notes due 2029 (the “Exchange Notes”) in exchange for $389.9 million of the existing 5.5% Senior Notes, (the "Exchange Transaction"). As a result of the Exchange Transaction, the principal amount of the 5.5% Senior Notes outstanding was reduced to $325.1 million and total aggregate debt outstanding was $715.0 million. See Note 6, Debt, and Note 7, Programming Related Obligations, to our audited combined financial statements for further details. Upon completion of the Separation, the Exchange Notes became obligations solely of New Lionsgate and are reflected in New Lionsgate's financial statements. The remaining 5.5% Senior Notes remained with the Company upon completion of the Separation. A portion of Old Lionsgate's corporate debt (the revolving credit facility, term loan A and term loan B, together referred to as the “Old Lionsgate Senior Credit Facilities”) has been assumed by the LG Studios Business under an intercompany note and accordingly, the Old Lionsgate Senior Credit Facilities and related interest expense are not reflected in the Starz Business’s combined financial statements. See Note 6, Debt, and Note 7, Programming Related Obligations, to our audited combined financial statements for further details.
In connection with the Separation, the Company entered into a new credit agreement (the "Credit Agreement") which provides for a $300.0 million senior secured term loan credit facility and a $150.0 million senior secured revolving credit facility. See "Management's Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources” for discussion of Separation related financing transactions. See Note 6, Debt, and Note 7, Programming Related Obligations, to our audited combined financial statements for further details Additional indebtedness directly related to the Company, including programming notes, are reflected in the Company's combined financial statements. See Note 6, Debt, and Note 7, Programming Related Obligations, to our audited combined financial statements for further details.
Old Lionsgate’s corporate general and administrative functions and costs, which were retained within New Lionsgate, have historically been provided to both the Starz Business and the LG Studios Business. These functions and costs include, but are not limited to, salaries and wages for certain executives and other corporate officers related to executive oversight, investor relations costs, costs for the maintenance of corporate facilities, and other common administrative support functions, including corporate accounting, finance and financial reporting, audit and tax costs, corporate and other legal support functions, and certain information technology and human resources expense. Accordingly, the combined financial statements of the Company, include allocations of certain general and administrative expenses (inclusive of share-based compensation) from Old Lionsgate related to these corporate and shared service functions historically provided by Old Lionsgate. In connection with the Studio Separation, during the fiscal year ended March 31, 2025, Old Lionsgate and Legacy Lionsgate Studios entered into a shared services and overhead sharing agreement (the “Shared Services Agreement”). The Shared Services Agreement facilitates the allocation to the LG Studios Business of all corporate general and administrative expenses of Old Lionsgate, except for an amount of $10.0 million charged annually to the Company. The $10.0 million charge of Old Lionsgate’s corporate general and administrative expenses to the Company pursuant to the Shared Services Agreement is designed to reflect the portion of corporate expenses expended and reflective of the level of effort and costs incurred related to management oversight and services provided for the Company following the Studio Separation. Prior to the Studio Separation, these expenses were allocated to the Starz Business on the basis of direct usage when identifiable, with the remainder allocated on a pro rata basis of consolidated Old Lionsgate revenue, payroll expense or other measures considered to be a reasonable reflection of the historical utilization levels of these services.
Old Lionsgate also paid certain expenses on behalf of the Starz Business prior to the Separation such as certain rent expense, employee benefits, insurance and other administrative operating costs which are reflected in the accompanying combined financial statements. The Starz Business also paid certain expenses on behalf of Old Lionsgate such as legal expenses, software development costs and severance. The settlement of reimbursable expenses between the Company and the LG Studios Business have been accounted for as parent net investment. See Note 17, Related Party Transactions, of our audited combined financial statements for further detail of parent net investment included in these combined financial statements.
Relationship with New Lionsgate
Following the Separation, certain functions that Old Lionsgate provided to us prior to the completion of the Separation will either continue to be provided to us by New Lionsgate under a Transition Services Agreement or will be performed using our own resources or third-party service providers. Additionally, under our original series programming license agreements, multiyear theatrical film output licensing agreements and library programming agreement with Old Lionsgate, we will continue to distribute New Lionsgate programming. We have incurred certain costs in establishing ourselves as a standalone public company, as well as ongoing additional costs associated with operating as an independent, publicly traded company. See “Components of Results of Operations” below for more information.
Restructuring
As described in Overview above, in the fiscal year ended March 31, 2023, the Starz Business began a plan to exit much of its international LIONSGATE+ business, which included the OTT distribution of the Starz Business's premium subscription video services outside the U.S. and Canada. The shut-down of the legacy LIONSGATE+ business in the territories to be exited has been completed and historical results of operations, with the exception of Canada and India, are presented as discontinued operations in combined financial statements for all periods presented.
What changed in the latest 10-Q
Risk Factors
There were no material changes to the risk factors previously reported in our Annual Report on Form 10-KT for the transition period ended December 31, 2025.
No wording changes found in this section.
Full comparison: every changed paragraph (0)
Management's Discussion & Analysis (MD&A)
New heading “RESULTS OF OPERATIONS”
New heading “Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025”
New heading “Consolidated Results of Operations”
Largest changes
Under the Starz Networks Strategic Content Review and International Restructuring, thesee in full comparisonnetliability associated with the future cash outlay less estimated recoveries forimpairmentcontractualcharges recorded through March 31, 2026 and the amountcommitments related totheprogrammingagreementcontenttorestructuringterminatechargescertainandlive-actioncontractfilmsterminationunder a post pay-one output licensing agreement that will befees recordedin the three months endedthrough June 30, 2026 is estimated to be approximately$250.0$205.0 million. During the six months ended June 30, 2026, we paid $61.9 milliontoof$270.0thismillion for contractual commitments onprogramming contentinrestructuringterritories exited and payments on the remaining amounts payable for content terminated or removed from our services, net of estimated recoveries.liability. See, Note 1, Description of Business, Basis of Presentation and Significant Accounting Policies,and Management's Discussion and Analysis of Financial Condition and Results of Operations, Starz Networks Strategic Content Review,for further details.
“Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025”see in full comparison
“•Goodwill impairment and intangible asset impairment, when applicable.”see in full comparison
“Restructuring and Other. Restructuring and other increased $144.8 million during the three months ended June 30, 2026 as compared to the three months ended June 30, 2025, and includes restructuring costs, certain transaction-related and other expenses, and unusual charges or benefits, as applicable. The increase is primarily the result of contract termination fees incurred during the three months ended June 30, 2026. Refer to Note 8, Restructuring and other, for further details.”see in full comparison
Full comparison: every changed paragraph (89)
During the three and six months ended June 30, 2026, Starz undertook actions to rationalize its content portfolio as part of its ongoing efforts to right-size its content cost structure in response to the evolving macroeconomic and industry environment, including continued declines in traditional linear services and operating as a standalone company following the Separation. These actions included evaluating programming on the Starz Platform, cancelling certain previously ordered programming, and removing and abandoning content determined to have limited strategic value.
In April 2026, Starz entered into an agreement to terminate certain live-action films under a post pay-one output licensing agreement. As a result, Starz recognized programming contract termination fees, which were recorded within Restructuring and other costs during the three and six months ended June 30, 2026.
During 2025 and 2026, due to the continued micro and macroeconomic environment, including the continued decline in traditional linear services, the preparation for the Separation and due to being a new standalone company, Starz evaluated the programming on the Starz Platform and identified certain programming with limited strategic purpose, which was removed from the Starz Platform and abandoned by the Company.
Following the Separation, Starz manages and reports its operating results through one reportable segment, Starz Networks, which includes our consolidated operations. During the quartersix months ended MarchJune 31,30, 2025,2026, International included our operations in India and Southeast Asia. Effective April 1, 2025, we transferred our operations in India and Southeast Asia to New Lionsgate. Given that Starz and New Lionsgate were under common control at the time of the transfer, no gain or loss was recorded related to the transfer.
We earn our revenue from the distribution of the STARZ branded premium subscription video services through OTT streaming platforms and distributors, on a direct-to-consumer basis through the Starz App and through MVPDs, including cable operators, satellite television providers and telecommunications companies.
In connection with the distribution rights obtained outside of the Starz Platform, we license rights to other parties who distribute our content for a fee. New Lionsgate acts as distributor in certain of these arrangements.
Residuals represent amounts payable to various unions or “guilds” such as the Screen Actors Guild - American Federation of Television and Radio Artists, Directors Guild of America, and Writers Guild of America, basedrelated onto the performanceexhibition or other exploitation of the film or television program in certain ancillaryowned marketsand orlicensed based on the individual’s (i.e., actor, director, writer) salary level in the television market.content.
We describe our significant accounting policies in Note 11, Description of Business, Basis of Presentation and Significant Accounting Policies, to the Company's Financial Statements included in our Form 10-KT. There have been no significant changes in our significant accounting policies since December 31, 2025.
Three Months Ended MarchJune 31,30, 2026 Compared to Three Months Ended MarchJune 31,30, 2025
The following table sets forth our consolidated results of operations for the three months ended MarchJune 31,30, 2026 and MarchJune 31,30, 2025.
Revenue. Consolidated revenue decreased $23.7$11.8 million. The decrease in Starz Networks revenueprimarily reflects declines in revenue of $15.1$13.2 million from traditional linear services and declines in OTT revenue of $14.4 million. These decreases resultedresulting from the continued decline in revenue from traditional linear services and a higher mix of discounting on the OTT services, including multi-month payment plans. The decrease in linear and other revenue werehouseholds, partially offset by an increase in distribution and other revenue of $5.8$1.1 million related to the recognition of revenue resulting from the change in our Canadian operations to a content licensing relationship. InternationalOTT declinedrevenue dueincreased $3.4 million for the three months ended June 30, 2026 compared to the transferthree months ended June 30, 2025, but was partially offset by a decrease of $3.3 million resulting from the change in our Canadian operations in India and Southeast Asia to Newa Lionsgatecontent effectivelicensing April 1, 2025.relationship.
During the three months ended MarchJune 31,30, 2026 and the three months ended MarchJune 31,30, 2025, the following original series premiered on STARZ:
Programming Amortization. The level of programming amortization for Starz Networks can fluctuate from period to period depending on the number of new original series and first-run output theatrical movies premiering on the network during such period, therefore programming amortization generally increases in periods wherewith increasedmore new original series and first-run theatrical movie premieres and decreasedecreases in periods wherewith fewer original series and first-run theatrical movie premieres.
During the three months ended MarchJune 31,30, 2026 as compared to the three months ended MarchJune 31,30, 2025, programming amortization expense increaseddecreased primarily due to thefewer higher costpremiers of originaloutput seriestitles anddue anto increasethe termination of certain live-action films under a post pay-one output licensing agreement in libraryApril content, partially offset by a decrease in output content2026 and the timing of contentlower airing.cost original series airing on the Starz Platform.
Other Operating Expenses. Other operating expenses by segment and share-based compensation expense which is not allocated to our segments were as follows for the three months ended MarchJune 31,30, 2026 and MarchJune 31,30, 2025:
Starz Networks other operating expenses increased $4.0 million during the three months ended June 30, 2026 primarily due to increases in operating employee related expenses. The increase in share-based compensation expense was driven by a higher STRZ share price during the quarter, which increased the value of certain equity awards and the related compensation expense recognized.
Other operating expenses decreased in the three months ended March 31, 2026 due to decreases at Starz Networks of $4.1 million, resulting from a decrease in residuals and programming and operating employee related expenses.
Advertising and Marketing Expenses. Advertising and marketing expenses by segment were as follows for the three months ended MarchJune 31,30, 2026 and MarchJune 31,30, 2025:
Advertising and marketing expenses decreasedincreased induring the three months ended MarchJune 31,30, 2026 as compared to the three months ended MarchJune 31,30, 2025, primarily due to lowerhigher directmarketing responsespend andrelated to timing of originals marketing spend.premieres.
General and Administrative Expenses. General and administrative expenses by segment and share-based compensation which is not allocated to our segmentsexpense were as follows for the three months ended MarchJune 31,30, 2026 and June 30, 2025:
During the three months ended MarchJune 31,30, 2026, Starz Networks' general and administrative expenses increased $4.7$1.7 million as compared to the three months ended MarchJune 31,30, 2025, primarily due to an increase in employee related costscosts, andpartially offset by a decrease in professional services. InternationalThe declinedincrease duein toshare-based compensation expense was driven by a higher STRZ share price during the transferquarter, which increased the value of ourcertain operationsequity in Indiaawards and Southeastthe Asiarelated tocompensation Newexpense Lionsgaterecognized effectiveThe Aprilfollowing 1,table 2025.presents share-based compensation expense by financial statement line item:
Depreciation and Amortization Expense. Depreciation and amortization of $67.3 million for the three months ended June 30, 2026 increased $18.6 million from $48.7 million during the three months ended June 30, 2025, due primarily to our Starz Traditional Affiliate customer relationship finite-lived intangible asset, which is amortized based on estimated total revenue expected to be generated from the underlying affiliation agreements over its remaining useful life. During the three months ended March 31, 2026, the Company reduced the life of the Starz Traditional Affiliate customer relationship finite-lived intangible asset from 14 years to 12 years, based on the continued decline in linear revenue resulting in higher amortization expense during the three months ended June 30, 2026.
Restructuring and Other. Restructuring and other increased $144.8 million during the three months ended June 30, 2026 as compared to the three months ended June 30, 2025, and includes restructuring costs, certain transaction-related and other expenses, and unusual charges or benefits, as applicable. The increase is primarily the result of contract termination fees incurred during the three months ended June 30, 2026. Refer to Note 8, Restructuring and other, for further details.
(1) In April 2026, Starz entered into an agreement to terminate certain live-action films under a post pay-one output licensing agreement. As a result, Starz recognized programming contract termination fees, which were recorded within Restructuring and other costs during the three months ended June 30, 2026.
(2) During the three months ended June 30, 2026 and June 30, 2025, Starz undertook actions to rationalize its content portfolio as part of its ongoing efforts to right-size its content cost structure in response to the evolving macroeconomic and industry environment, including continued declines in traditional linear services and operating as a standalone company following the Separation. These actions included evaluating programming on the Starz Platform, cancelling certain previously ordered programming, and removing and abandoning content determined to have limited strategic value.
(3) Transaction and other costs during the three months ended June 30, 2026 and June 30, 2025 reflect costs associated with certain potential strategic transactions, costs associated with certain legal matters, and transaction, integration, and legal costs associated with the Separation.
(4) Severance costs for the three months ended June 30, 2026, represent a reduction in our work force due to cost-saving initiatives and the continued decline in traditional linear services.
Interest Expense. Interest expense of $13.6 million during the three months ended June 30, 2026 increased $0.4 million from the three months ended June 30, 2025 due primarily to an increase in our programming related obligations.
Interest and Other Income. Interest and other income of $0.5 million for the three months ended June 30, 2026 increased by $0.5 million compared to interest and other income of nil for the three months ended June 30, 2025, due to increased cash held in interest-bearing operating bank accounts during the three months ended June 30, 2026.
Other Expense. Other expense of $2.0 million for the three months ended June 30, 2026 decreased by $0.5 million compared to other expense of $2.5 million for the three months ended June 30, 2025, which primarily represents the loss recorded related to our monetization of accounts receivable program. See Note 13, Additional Financial Information, to our consolidated financial statements for further details.
Income Tax Benefit. We had an income tax benefit of $1.2 million for the three months ended June 30, 2026, compared to an income tax benefit of $0.1 million for the three months ended June 30, 2025. Our income tax provision differs from the U.S. federal statutory rate multiplied by pre-tax income (loss) due to the income tax effects of state income taxes, and changes in the valuation allowance against our deferred tax assets.
Net Loss from Continuing Operations. Net loss from continuing operations for the three months ended June 30, 2026 was $189.4 million. This compares to net loss from continuing operations for the three months ended June 30, 2025 of $42.5 million.
RESULTS OF OPERATIONS
Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025
Consolidated Results of Operations
The following table sets forth our consolidated results of operations for the six months ended June 30, 2026 and June 30, 2025.
Revenue. Revenue by segment was as follows for the six months ended June 30, 2026 and June 30, 2025:
Consolidated revenue decreased $35.5 million. The decrease in Starz Networks revenue reflects declines of $28.3 million from traditional linear services and $14.2 million from OTT services. These decreases were driven by the continued decline in traditional linear revenue due to lower linear households and a higher mix of discounting on OTT services, including multi-month payment plans. OTT revenue also declined $6.3 million from the prior period due to the change in our Canadian operations to a content licensing relationship resulting in no Canadian OTT revenue in the current period.
During the six months ended June 30, 2026 and the six months ended June 30, 2025, the following original series premiered on STARZ:
Programming Amortization. The level of programming amortization for Starz Networks can fluctuate from period to period depending on the number of new original series and first-run output theatrical movies premiering on the network during such period. Therefore, programming amortization generally increases in periods where increased new original series and first-run theatrical movies premiere and decreases in periods where fewer original series and first-run theatrical movies premiere.
During the six months ended June 30, 2026 as compared to the six months ended June 30, 2025, Starz Networks' programming amortization expense decreased primarily due to fewer output titles due to the termination of certain live-action films under a post pay-one output licensing agreement in April 2026, partially offset by the timing, and higher number, of original series airing on the Starz Platform.
Other Operating Expenses and Advertising and Marketing Expenses. Other operating expenses include programming and operating related salaries, residual expenses, development costs, credit losses on accounts receivable, and foreign exchange gains and losses. The level of other operating expenses and advertising and marketing costs can fluctuate from period to period depending on the number of new original series and first-run output theatrical movies premiering on the Starz Platform during such period. Advertising and marketing costs generally increase in periods with increased original series and first-run theatrical movie premieres and decrease in periods with fewer original series and first-run movie premieres.
Other Operating Expenses. Other operating expenses by segment and share-based compensation expense which is not allocated to our segments were as follows for the six months ended June 30, 2026 and June 30, 2025:
Starz Networks' other operating expenses decreased by $2.6 million during the six months ended June 30, 2026, resulting from a decrease in residuals offset by an increase in operating employee related expenses The increase in share-based compensation expense was driven by a higher STRZ share price during the period, which increased the value of certain employee equity awards and the related compensation expense recognized.
Advertising and Marketing Expenses. Advertising and marketing expenses by segment were as follows for the six months ended June 30, 2026 and June 30, 2025:
Starz Networks' advertising and marketing expenses decreased during the six months ended June 30, 2026 as compared to the six months ended June 30, 2025, primarily due to lower originals marketing spend. International declined due to the transfer of our operations in India and Southeast Asia to New Lionsgate effective April 1, 2025.
General and Administrative Expenses. General and administrative expenses by segment and share-based compensation expense which is not allocated to our segments were as follows for the six months ended June 30, 2026 and 2025:
During the six months ended June 30, 2026, Starz Networks' general and administrative expenses increased $6.4 million as compared to the six months ended June 30, 2025, primarily due to an increase in employee related costs and professional services. International declined due to the transfer of our operations in India and Southeast Asia to New Lionsgate effective April 1, 2025. The increase in share-based compensation expense was driven by a higher STRZ share price during the period, which increased the value of certain employee equity awards and the related compensation expense recognized.
Depreciation and Amortization Expense. Depreciation and amortization of $68.5$135.8 million for the threesix months ended MarchJune 31,30, 2026 increased $20.4$39.0 million from $48.1$96.8 million in the threesix months ended MarchJune 31,30, 2025, due primarily to our Starz Traditional Affiliate customer relationship finite-lived intangible asset, which is amortized based on estimated total revenue expected to be generated from the underlying affiliation agreements over its remaining useful life. During the three months ended March 31, 2026, the Company reduced the life of the Starz Traditional Affiliate customer relationship finite-lived intangible asset from 14 years to 12 years, based on the continued decline in linear revenue.revenue resulting in higher amortization expense during the six months ended June 30, 2026.
Restructuring and Other. Restructuring and other decreasedincreased $44.3$100.5 million induring the threesix months ended MarchJune 31,30, 2026 as compared to the threesix months ended MarchJune 31,30, 2025, and includes restructuring costs, certain transaction-related and other expenses, and unusual charges or benefits, as applicable. The decreaseincrease is primarily the result of lowerthe rationalization of the content impairmentsportfolio and the termination of certain live-action films under a post pay-one output licensing agreement discussed below, partially offset by lower legal and other costs incurred related to transaction-related expenses as compared to the prior year quarter. Refer to Note 8, Restructuring and Other,other, for further details.
(1) During the three months ended March 31, 2026 and the three months ended March 31, 2025, Starz undertook actions to rationalize its content portfolio as part of its ongoing efforts to right-size its content cost structure in response to the evolving macroeconomic and industry environment, including continued declines in traditional linear services and operating as a standalone company following the Separation. These actions included evaluating programming on the Starz Platform, cancelling certain previously ordered programming, and removing and abandoning content determined to have limited strategic value.
(1) In April 2026, Starz entered into an agreement to terminate certain live-action films under a post pay-one output licensing agreement. SuchAs a result, Starz recognized programming contract termination willfees, impactwhich were recorded within Restructuring and Otherother costs induring the threesix months ended June 30, 2026. Refer to Note 16, Subsequent Events, for further details.
(2) During the six months ended June 30, 2026 and June 30, 2025, Starz undertook actions to rationalize its content portfolio as part of its ongoing efforts to right-size its content cost structure in response to the evolving macroeconomic and industry environment, including continued declines in traditional linear services and operating as a standalone company following the Separation. These actions included evaluating programming on the Starz Platform, cancelling certain previously ordered programming, and removing and abandoning content determined to have limited strategic value.
(23) Transaction and other costs during the threesix months ended MarchJune 31,30, 2026 and MarchJune 31,30, 2025 reflect costs associated with certain potential strategic transactions, costs associated with certain legal matters, and transaction, integration, and legal costs associated with the Separation.
(34) Severance costs for threethe six months ended MarchJune 31,30, 2026 and MarchJune 31,30, 2025, represent a reduction in our work force due to cost-saving initiatives and the continued decline in traditional linear services.
Interest Expense. Interest expense of $13.9$27.5 million induring the threesix months ended MarchJune 31,30, 2026 increased $3.0$3.4 million from the threesix months ended MarchJune 31,30, 2025 due primarily to an increase in our programming related obligations.
Interest and Other Income. Interest and other income of $0.9 million during the six months ended June 30, 2026 decreased by $0.8 million compared to interest and other income of $1.7 million for the six months ended June 30, 2025, which was related to guarantee fees from Old Lionsgate received during the six months ended June 30, 2025.
Other Expense. Other expense of $3.8 million during the six months ended June 30, 2026 decreased by $0.5 million compared to other expense of $4.3 million for the six months ended June 30, 2025, which primarily represents the loss recorded related to our monetization of accounts receivable program. See Note 13, Additional Financial Information, to our consolidated financial statements for further details.
Income Tax Benefit. We had an income tax benefit of $3.2$4.4 million forduring the threesix months ended MarchJune 31,30, 2026, compared to an income tax benefit of nil$0.1 million for the threesix months ended MarchJune 31,30, 2025. Our income tax provision differs from the U.S. federal statutory rate multiplied by pre-tax income (loss) due to the income tax effects of state income taxes, and changes in the valuation allowance against our deferred tax assets.
Net Loss from Continuing Operations. Net loss from continuing operations for the threesix months ended MarchJune 31,30, 2026 was $164.9$354.3 million. This compares to net loss from continuing operations for the threesix months ended MarchJune 31,30, 2025 of $154.0$196.5 million.
STRZ insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 4 Form 4 filings (3 insiders, 2 trade dates, 26,000 shares, about $583.9K) and open-market sales in 4 filings (2 insiders, 4 trade dates, 62,416 shares, about $1.5M). Net open-market shares: -36,416 (purchases minus sales); net value about -$880.6K.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-09-14 | Burns Michael Raymond |
Grant/award | 13,476 | — | — |
| 2026-08-13 | Hoffman Alison |
Open-market sale | 10,455 | $24.97 | $261.1K |
| 2026-08-13 | Hoffman Alison |
Open-market sale | 1,036 | $26.09 | $27.0K |
| 2026-08-12 | Hoffman Alison |
Open-market sale | 400 | $25.57 | $10.2K |
| 2026-08-12 | Hoffman Alison |
Open-market sale | 20,400 | $24.97 | $509.4K |
| 2026-08-10 | Kapenstein James M. |
Open-market purchase | 1,000 | $25.73 | $25.7K |
| 2026-08-10 | Hirsch Jeffrey |
Open-market purchase | 10,000 | $24.80 | $248.0K |
| 2026-08-04 | Macdonald Scott D |
Grant/award | 5,935 | — | — |
| 2026-08-04 | Macdonald Scott D |
Shares withheld for tax | 1,303 | $26.05 | $33.9K |
| 2026-08-04 | Macdonald Scott D |
Shares withheld for tax | 2,597 | $26.05 | $67.7K |
| 2026-08-04 | Hoffman Alison |
Grant/award | 8,940 | — | — |
| 2026-08-04 | Hoffman Alison |
Shares withheld for tax | 2,145 | $26.05 | $55.9K |
| 2026-08-04 | Hoffman Alison |
Shares withheld for tax | 4,274 | $26.05 | $111.3K |
| 2026-08-04 | Wyrick Jason |
Grant/award | 3,087 | — | — |
| 2026-08-04 | Wyrick Jason |
Shares withheld for tax | 446 | $26.05 | $11.6K |
| 2026-08-04 | Wyrick Jason |
Shares withheld for tax | 888 | $26.05 | $23.1K |
| 2026-08-04 | Hirsch Jeffrey |
Grant/award | 40,862 | — | — |
| 2026-08-04 | Hirsch Jeffrey |
Shares withheld for tax | 19,533 | $26.05 | $508.8K |
| 2026-08-04 | Hirsch Jeffrey |
Shares withheld for tax | 9,804 | $26.05 | $255.4K |
| 2026-07-28 | Rachesky Mark H Md |
Grant/award | 1,946 | — | — |
| 2026-07-28 | Fine Emily |
Grant/award | 1,946 | — | — |
| 2026-07-28 | Wilson Royce E. |
Grant/award | 973 | — | — |
| 2026-07-28 | Simmons Hardwick |
Grant/award | 1,265 | — | — |
| 2026-07-28 | Hirsch Jeffrey |
Grant/award | 112,146 | — | — |
| 2026-07-28 | Sapan Joshua W |
Grant/award | 1,265 | — | — |
| 2026-07-28 | Gersh Lisa |
Grant/award | 2,336 | — | — |
| 2026-07-28 | Clyburn Mignon L |
Grant/award | 973 | — | — |
| 2026-07-03 | Hoffman Alison |
Shares withheld for tax | 10,441 | $28.99 | $302.7K |
| 2026-07-03 | Hirsch Jeffrey |
Shares withheld for tax | 23,866 | $28.99 | $691.9K |
| 2026-07-03 | Macdonald Scott D |
Shares withheld for tax | 5,458 | $28.99 | $158.2K |
| 2026-07-03 | Wyrick Jason |
Shares withheld for tax | 1,153 | $28.99 | $33.4K |
| 2026-07-01 | Hoffman Alison |
Shares withheld for tax | 6,767 | $28.86 | $195.3K |
| 2026-07-01 | Wyrick Jason |
Shares withheld for tax | 1,286 | $28.86 | $37.1K |
| 2026-07-01 | Hirsch Jeffrey |
Shares withheld for tax | 16,048 | $28.86 | $463.1K |
| 2026-07-01 | Macdonald Scott D |
Shares withheld for tax | 4,223 | $28.86 | $121.9K |
| 2026-06-17 | Kapenstein James M. |
Grant/award | 11,302 | — | — |
| 2026-06-02 | Wyrick Jason |
Option exercise | 2,803 | $19.20 | $53.8K |
| 2026-06-02 | Wyrick Jason |
Open-market sale | 2,803 | $25.47 | $71.4K |
| 2026-05-15 | Rachesky Mark H Md |
Grant/award | 6,488 | — | — |
| 2026-05-15 | Fine Emily |
Grant/award | 6,488 | — | — |
| 2026-05-15 | Clyburn Mignon L |
Grant/award | 6,488 | — | — |
| 2026-05-15 | Sapan Joshua W |
Grant/award | 6,488 | — | — |
| 2026-05-15 | Gersh Lisa |
Grant/award | 6,488 | — | — |
| 2026-05-15 | Arani Ramin |
Grant/award | 6,488 | — | — |
| 2026-05-15 | Wilson Royce E. |
Grant/award | 6,488 | — | — |
| 2026-05-15 | Simmons Hardwick |
Grant/award | 6,488 | — | — |
| 2026-05-14 | Hoffman Alison |
Open-market sale | 300 | $23.14 | $6.9K |
| 2026-05-14 | Hoffman Alison |
Open-market sale | 11,664 | $21.27 | $248.1K |
| 2026-05-14 | Hoffman Alison |
Open-market sale | 1,697 | $22.18 | $37.6K |
| 2026-05-14 | Hoffman Alison |
Option exercise | 13,661 | $8.39 | $114.6K |
| 2026-05-14 | Hoffman Alison |
Open-market sale | 300 | $23.14 | $6.9K |
| 2026-05-14 | Hoffman Alison |
Open-market sale | 1,697 | $22.18 | $37.6K |
| 2026-05-14 | Hoffman Alison |
Open-market sale | 11,664 | $21.27 | $248.1K |
| 2026-05-14 | Hoffman Alison |
Option exercise | 13,661 | $8.39 | $114.6K |
| 2026-05-13 | Hoffman Alison |
Grant/award | 17,821 | — | — |
| 2026-05-13 | Hoffman Alison |
Grant/award | 17,821 | — | — |
| 2026-05-13 | Wyrick Jason |
Grant/award | 6,338 | — | — |
| 2026-05-13 | Macdonald Scott D |
Grant/award | 12,185 | — | — |
| 2026-05-12 | Macdonald Scott D |
Open-market purchase | 5,000 | $20.59 | $103.0K |
| 2026-05-12 | Hirsch Jeffrey |
Open-market purchase | 10,000 | $20.72 | $207.2K |
Well-known investors holding STRZ (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| D. E. Shaw & Co. | 2026-06-30 | 166,255 | $4.8M | 0.0% | Added 63% |
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 82,904 | $2.4M | 0.0% | Reduced 23% |
| Two Sigma Investments | 2026-06-30 | 50,592 | $1.5M | 0.0% | New position |
| AQR Capital Management (Cliff Asness) | 2026-06-30 | 32,716 | $941.2K | 0.0% | Reduced 26% |
| Millennium Management (Israel Englander) | 2026-06-30 | 27,275 | $787.2K | 0.0% | Reduced 80% |
| Renaissance Technologies | 2026-06-30 | 50,200 | $577.3K | — | Sold out |
| Point72 Asset Management (Steve Cohen) | 2026-06-30 | 20,161 | $231.9K | — | Sold out |