A strong slate of movies and television shows coupled with discount pricing during the holiday shopping season helped Lionsgate's streaming service Starz grab more than 700,000 new subscribers during its most-recent fiscal quarter, the company revealed this week.
On Thursday, executives said Starz ended its third financial quarter (Q3) of fiscal 2024 with around 19.73 million domestic subscribers on cable, satellite and streaming, representing a net increase of 290,000 customers. The gain was directly attributed to the streaming product, which ended December with over 12.63 million customers, and fully offset a loss of 320,000 subscribers who previously paid for Starz through a cable or satellite platform.
The lift in subscribers came despite a modest price increase last year that brought the cost of Starz from $9 per month to $10 per month across platforms. The bump to $10 per month last August helped bring Lionsgate's media networks revenue to $417.2 million for the period ended December 31, 2023, a year-over increase of around 35%, with profit attributed to media networks at $85.5 million, or 72% higher when compared to the same quarter a year ago.
Overall quarterly revenue at Lionsgate clocked in at $975 million, or 2.5% lower than the previous year period.
During a conference call with investors on Thursday, a Lionsgate executive wouldn't rule out additional price increases in the future, but said the company was carefully scrutinizing the practice and felt it was better to focus on bundling Starz with another streaming service to unlock additional value for customers.
In doing so, Starz is positioning itself to be a complementary service that can be bundled with others, at a price that helps save customers money and that reduces overall churn in the space, Starz President and CEO Jeffrey Hirsch affirmed on the call.
"Our strategy and thought has always been with our two very valuable and profitable core demos, we're always looking to be the complementary service to these broad-based streaming services that are out there, so that we ultimately can be the cherry on top in terms of the add-on or a bundle" Hirsch said. "It's important to keep a price gap of size between the two, so the consumer understands that we are complementary — and, so, we'll always look at the broad-base set, see what they're doing on price to see if that gives us room to continue to drive price in an opportunistic way."
To that end, Hirsch said the company was already seeing an incremental lift in subscribers after two bundling partnerships came to market.
Last month, Verizon launched a package that coupled Starz with a premium version of Netflix priced at $26 per month, around $6 less than what each streaming service would cost on its own. The bundle is available to Verizon customers through its +Play subscription platform.
"We've seen great incremental lift on subscriber add on that partnership on Verizon," Hirsch affirmed.
Similarly, Amazon offers a bundle through its Prime Video Channels marketplace that groups Starz and Amazon-owned MGM+ into a single offering. The price of the bundle is $12 per month, or $5 less than the retail cost of each service.
Hirsch said Starz wants to do more bundling deals in the future, calling Starz a "great complementary service" when tethered to another one. Specifically, Hirsch said Starz is in discussions with Charter Communications and Comcast Corporation's streaming joint venture Xumo about offering some kind of streaming bundle through their platform, though he did not reveal further details of those discussions.
Still, Hirsch said there was little doubt that Starz would continue leveraging the power of the bundle, because it helps streamers unlock value from different services and helps reduce churn across the board.
"As you've seen in a lot of the different reports, the more services you put together, everybody's churn comes down," Hirsch said in response to an investor's question. "And, so, I think you're starting to see a big move toward that in a way from this year and next year that we haven't seen before — so, we're excited about that."
Executives also said Starz will continue buying content from Lionsgate once the two companies are split off, a move that is currently in progress and which is expected to be completed later this year.
"They are a buyer amongst many, and we are a supplier that I think knows their needs maybe more than others based on all our communication," Kevin Beggs, the Chairman of Lionsgate Television, said on Thursday. "We've tailored much of our deals and other things to try to make them the first stop."
During the previous quarter, Lionsgate expanded its film and television content library after finalizing its deal to acquire Entertainment One (eOne). The deal closed in December, bringing hit shows and films like "Yellowjackets," "1917" and "Naked and Afraid" under Lionsgate's ownership.