Returning to Panem with “The Hunger Games: The Ballad of Songbirds and Snakes” proved to be very profitable for Lionsgate, but the writers and actors strikes that upended Hollywood imperiled the company’s ability to produce new television episodes, putting a strain on its third quarter earnings.
The company, which is in the midst of spinning off its film and television business from its Starz streaming platform, reported a net loss at $107.4 million, compared to the $15.2 million in profits that Lionsgate logged in the same quarter in 2022. Revenue topped out at $975.1 million, a drop from the $1 billion that the company reported in the prior-year quarter. The company’s adjusted earnings per-share of 27 cents was down from the 21 cents per-share it reported in the same period in 2022.
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It was a mixed report, one that showed the lingering financial impact of the strikes that ground the entertainment industry to a standstill as the creative community hit the picket lines. The company’s adjusted earnings beat Wall Street’s forecasts, even as revenues fell short of projections.
“Against the backdrop of an uncertain economy, geopolitical turmoil, the aftermath of two strikes and continued industry disruption, we continue to navigate the headwinds in our environment by leaning into the diversification of our businesses and the resilience of our culture to move the company forward,” Lionsgate CEO Jon Feltheimer told analysts on a call timed to the report’s release.
Lionsgate’s motion picture business was a source of strength with “The Hunger Games” prequel and “Saw X” scoring at the box office. Segment revenue increased by 53% to $443.2 million compared to the prior year quarter. Segment profit increased by 31% to $100.4 million.
At the same time, Lionsgate’s television business struggled to keep up, weighed down by the impact of the Hollywood labor disputes, as well as declines in television licensing fees. Segment revenue dropped to $248.4 million, a steep fall from the $605.4 million in revenue that the company reported in the prior year quarter. At the same time, the segment saw a drop in profits from $71.5 million to $8.1 million.
Looking ahead, Feltheimer talked up the company’s planned “Outlander” prequel “Blood of My Blood,” which is currently in production, as well as a biopic of controversial pop star Michael Jackson that will be directed by Antoine Fuqua.
The deal to spinoff Starz is expected to close in the spring. Lionsgate’s media networks operations, which includes the streaming service, saw revenue increase 10% to $417.2 million, while profit grew 73% to $85.5 million. The number of global subscriber stayed essentially unchanged at 27.9 million. Starz has curbed its international expansion plans, pulling out of Latin America, which helped cut costs.
In December, Lionsgate said its TV and film production and distribution segments and library with 18,000-plus titles, will spin off in a merger with Screaming Eagle Acquisition Corp., a special-purpose acquisition company (SPAC). The new publicly traded company will be known as Lionsgate Studios Corp. and will have an enterprise value of $4.6 billion.
Lionsgate also recently closed its $375 million acquisition of eOne, which produces the ABC franchise “The Rookie,” the Emmy-nominated Showtime series “Yellowjackets” and the the film rights to the “Monopoly” brand.
The entertainment business may not have turned the page on the labor strife that cast a pall over 2022. The International Alliance of Theatrical Stage Employees (IATSE) contract expires in July, along with the he pact that covers the Teamsters. On the call with analysts, Feltheimer was asked about the possibility of an IATSE strike if a new agreement can’t be reached.
“Nobody really wins in a strike, honestly, and we’re hoping that this strike won’t happen … because we’ve got to keep growing this business and innovating,” the Lionsgate chief said.
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