- Starz reported revenue of $306.9 million on a net loss of $164.9 million, or 9.83 per share. Wall Street expected revenue of $305.7 million on a loss of 81 cents per share, per Yahoo Finance.
- The company exited a Pay 2 film deal with Universal after lower than expected viewership
- Starz has moved up its timeline for reaching a 20% margin to the back half of 2027, a year ahead of previous guidance
As Starz celebrated the one-year anniversary of its separation from Lionsgate, the company posted a widened net loss of $164.9 million in its first quarter, largely driven by a $139 million restructuring charge primarily from content write-offs. Revenue also declined 7% to $306.9 million on lower streaming and linear revenues.
But CEO Jeff Hirsch emphasized that the company is “structurally stronger” than when it separated from the film studio and that the company’s leadership is “increasingly confident” in its ability to grow streaming revenue, reduce leverage, expand margins and generate sustainable free cash flow in the years ahead.
During the company’s earnings call on Thursday, Hirsch noted that 2026 would be a “financial inflection point” for the company. Chief Financial Officer Scott McDonald added that 2027 would be “very significant year for margin expansion and improved free cash flow generation” driven by a restructuring benefit, the continued ramp up of owned originals and ongoing content cost reductions.
Looking ahead, the company maintained guidance of positive year over year streaming revenue growth and low single-digit adjusted operating income growth for 2026. Additionally, Starz moved up its 20% margin target to the back half of 2027 — a year ahead of previous guidance.
Other long-term goals include converting 70% of its adjusted operating income to unlevered free cash flow and to reach a leverage ratio of 2.5 times as quickly as possible. It expects unlevered free cash flow between $80 million and $120 million and a leverage ratio of approximately 2.7 times exiting 2026.
Hirsch attributed the increased timeline for its 20% margin goal to its ongoing efforts to right size the company, including a decision to exit a Pay 2 film deal with Universal. The company is also ramping up its owned original content library, with the goal of that making up 50% of its slate by 2027.
“As we continue to put more ownership on the network, de-age the slate, get into ’28 and ’29 where the majority of our originals are owned by Starz and bring the entire portfolio over, there may be some opportunity to continue to grow margin as well,” Hirsch added.
Starz exits pay 2 film deal with Universal after lower than expected viewership
Under the terms of the deal, Universal titles were originally set to air on Starz through 2028.
While acknowledging those titles are “incredibly popular” and bring “tremendous box office strength,” Hirsch said they are heavily watched on Amazon, where there is high subscriber overlap with Starz.
“This unique dynamic with Amazon has resulted in lower viewership than we originally projected,” he said. “In order to replace the revenue component of the Pay 2, we will reinvest and acquire high-performing titles at superior economics.”
Despite backing out of the deal, Hirsch said that the move “brings the profitability of the company greater into a shorter period of time” and gives management a greater line of sight into its margin profile.
During the quarter, Starz recorded a $139 million restructuring charge, the majority of which came from the write-off of content with “limited strategic value” for the company’s platforms. A restructuring charge from exiting the Universal agreement will be incurred in the second quarter, though it will see a significant reduction in cash content spend beginning in 2027.
Starz spent $113 million in cash content spend in the first quarter, down year over year due to the timing of spend on output movies and originals. For the full year, cash content spend is expected to come in below $650 million.
Linear and streaming revenue tumbles
Streaming revenue fell 5.5% to $211.1 million, reflecting the company’s restructuring of its Canada business into a licensing revenue stream, while linear and other revenue fell 6.8% to $95.8 million as pay TV audiences continue to erode.
Content highlights during the quarter included the finale of “Power Book IV: Force” and the premiere of “Outlander” Season 8. The latter achieved a four-year series high in its premiere week. Though “The Housemaid” released after the first quarter, it has already set a record as Starz’s best-performing pay 1 film in both acquisition and streaming viewership.
As for the rest of the year, its content slate includes the return of series “Raising Kanan,” “Outlander: Blood of My Blood” and “P-Valley” and the premiere of its first owned-original series “Fightland” on July 31. It also expects a benefit from Lionsgate’s “Michael” biopic.
In addition to “Fightland,” Starz has greenlit its second owned original, an untitled Black rodeo show, with production set to begin this fall. Other projects in development include “Kingmaker” and “Masquerade,” which have opened writers rooms and “All Fours,” which will be produced in parntership with Plan B Entertainment.
“The pipeline has never been more full and more exciting,” Hirsch said. “You couple that with the pay one deal with Lionsgate and we’re going to have a very, very strong content slate for the next one to three years. So we’re right on track to delivering against that 50% goal and I think we’ll actually accelerate past that.”
Starz ends quarterly subscriber disclosures, increases prices to $11.99 per month
Starz is no longer disclosing its subscriber figures on a quarterly basis, following in the footsteps of major players Netflix, Disney and Warner Bros. Discovery. The company last disclosed a total of 12.7 million over-the-top subscribers and 5 million linear TV subscribers.
Starz Networks president Alison Hoffman said that the company has seen churn reached an all-time low in its business. She added that engagement increased about 8% year over year.
“We feel really good that this is the right way to approach and operate the business for the long term revenue growth goals that we have as opposed to, orienting around a quarterly sub chase,” she said.
The company also raised its prices to $11.99 per month in April, which MacDonald said would flow through the company’s subscriber base starting in the second quarter.
“So far, the price increase is digesting really well throughout our business. It’s going to expectations,” Hoffman added. “We’ll have more information as we get into the summer and it really plays out through the business, but it’s going to plan and going very well. We think that we’re very, very well positioned at that price point.”
Starz reiterates its open to ‘complementary and additive’ M&A, talks shareholder rights plan
In addition to its 20% margin target, Hirsch reiterated that the company remains disciplined in its growth strategy around M&A.
Executives said they would look for opportunities that are “complementary and additive” to their core audience, fit within an “acceptable leverage parameter,” and create “clear and identifiable value for our shareholders.”
“Given the strength and the profitability of our core business, we do not need
M&A to maximize shareholder value,” Hirsch added.
In March, Starz adopted a limited-duration shareholder rights plan, commonly referred to as a “poison pill,” which is typically used to defend companies from hostile takeovers.
Under the terms of the plan, Starz will issue one right for each outstanding common share. For shares issued and outstanding as of March 20, the rights will be paid to shareholders through a dividend. The rights will become exercisable if a person or group acquires 17.5% or more of Starz’s outstanding shares. Anyone who currently owns more than the triggering percentage will not be allowed to acquire additional shares. If the rights become exercisable, all holders of rights other than the person or group triggering the plan will be entitled to acquire common shares at a 50% discount to the then-current market price.
The move, came on the heels of Allen Media Group founder Byron Allen acquiring a 10.7% stake in the company through a $25 million sale with Lionsgate board member and former Treasury Secrteray Steven Mnuchin’s Liberty Funds investment firm.
“We wanted to make sure that we had the ability and the time to get the business right-sized and get value to the right place and I think you’re seeing that reflected in the stock in the market cap today,” Hirsch said. “The board was really coalesced around making sure that we had the ability to get the business in the right place. Also, I think the board is really also coalesced around our long term vision for the for the business and how we can scale the business and wanted to make sure that we were laser focused on that without any distraction.”
The plan will expire on March 10, 2027, with the option to extend it to March 10, 2029 or be terminated early.
