STARZ ENTERTAINMENT CORP /CN/ (STRZ)
Business: Starz provides premium subscription VOD as Starz App & 17 linear networks (U.S. & Canada), and an OTT service in India. Key Metrics (FY2025 vs FY2024): - Revenue: $1.369B (down 1.6%) - Net loss (cont ops): $(215.3M) (vs $(804.6M) incl. goodwill write-down) - Adjusted OIBDA: +$2...
Starz FY2025 10-K Review: Balancing Content Strength Against Competitive Pressures
Executive Summary
Starz Entertainment Corp. (formerly part of Lionsgate) released its first standalone 10-K for the fiscal year ending March 31, 2025. The report highlights Starz’s position as a leading subscription video service, its strategic pivot away from international markets, its post-separation capital structure, and its robust content lineup. Despite a modest revenue dip and net losses, Starz achieved positive Adjusted OIBDA, underscoring its operational strength. However, mounting debt, ongoing subscriber declines, and fierce streaming competition are key headwinds.
Warren.AI 💰 4.5 / 10
1. Business Overview and Corporate Restructuring
Core Operations
- Starz Networks: Premium SVOD service in the U.S. and Canada, delivering 17 linear channels and the Starz App.
- International (India): Continues to serve the direct-to-consumer market in India postwithdrawals in other territories.
Separation from Lionsgate
On May 6, 2025, Lionsgate split into two public companies:
- Starz Entertainment Corp.: Houses the Starz SVOD business.
- Lionsgate Studios Corp.: Focuses on motion picture and TV production.
Studio Separation vs. Carve-Out
- Starz’s 2025 results are presented on a “carve-out” basis, reflecting the metrics of the former Lionsgate Media Networks segment.
- Combined financials include direct costs plus a carve-out allocation (e.g., corporate legal, finance) under a shared-services agreement.
2. Financial Highlights (Continuing Operations)
Revenue Trends
- FY 2025: $1.369 billion (down 1.6% vs. FY 2024)
- FY 2024: $1.392 billion (down 2.1% vs. FY 2023)
Net Loss
- FY 2025: $(215.3 million)
- FY 2024: $(804.6 million) — includes a $663.9 million goodwill/intangible impairment
- Discontinued Ops: $(4.1 million) in FY 2025 vs. $(110.6 million) in FY 2024
Adjusted OIBDA
- FY 2025: +$201.5 million
- FY 2024: +$170.2 million
Adjusted OIBDA excludes depreciation & amortization, share-based comp, restructuring charges, and one-time goodwill write-downs. It underscores operational profitability despite net losses.
Programming Spend
- FY 2025: $(791 million)** for programming content**
- FY 2024: $(987.6 million)
- FY 2023: $(1.1585 billion)
Additions & Amortization
- Programming content, net: $1.096 billion at March 31, 2025
- Amortization of licensed content: $633 million in FY 2025
Capex & Cash Flow
- Capex: $17.6 million in FY 2025 vs. $20.4 million in FY 2024
- Operating cash flow: $(39.4 million) in FY 2025 vs. $5.9 million in FY 2024
3. Subscriber and Content Metrics
North America Subscribers
| Metric | FY 2025 | FY 2024 | FY 2023 |
|---|---|---|---|
| OTT Subscribers | 13.04 M | 13.38 M | 12.95 M |
| Linear Subscribers | 6.56 M | 8.42 M | 9.83 M |
| Total | 19.60 M | 21.80 M | 22.78 M |
- FY 2025 vs. FY 2024: NA subscribers down by 2.2 million (–10%).
- OTT growth is offset by linear declines as consumers shift from traditional pay TV.
Original Programming Slate (FY 2025)
- Outlander S7, Power Book II/III/IV, P-Valley, Three Women, Mary & George, BMF, Hightown, Fat Joe Talks, Sweetpea.
Premium originals remain Starz’s strategic edge in a crowded market.
4. Balance Sheet & Liquidity
Assets & Liabilities
| Category | March 31, 2025 | March 31, 2024 |
|---|---|---|
| Total Assets | $2.173 B | $2.139 B |
| Programming Content, net | $1.096 B | $0.943 B |
| Finite‐lived Intangibles, net | $0.816 B | $0.966 B |
| Total Liabilities | $1.407 B | $1.220 B |
| — of which debt | $0.700 B | $0.697 B |
| Parent Net Investment (Equity) | $0.747 B | $0.900 B |
Debt & Financing
- 5.5% Senior Notes: $715 million outstanding maturity 2029
- Programming Notes: $90.7 million outstanding
- Credit Facilities (post-Separation):
- $300 million senior secured term loan
- $150 million senior secured revolver
Lease Obligations
- ROU assets: $27 million
- Operating lease liabilities: $55.5 million total
5. Restructuring & Impairments
International Exit & Content Impairment
- Discontinued: LIONSGATE+ in 7 European markets, Latin America, and UK completed May 2024.
- Charges: $156.4 million in FY 2025; $213 million in FY 2024.
- Programming write-downs reflect removal of low-performing content post-exit and site consolidation.
Goodwill & Indefinite-Lived Intangible Impairments
- FY 2023: $1.475 billion total goodwill impairment ($1.262 billion Starz Networks; $213 million LIONSGATE+) upon international pullback.
- FY 2024: Additional $494 million goodwill impairment on Starz Networks.
- Trade Name: $170 million impairment charge and reclassification to finite lived with a 10-year useful life.
6. Critical Accounting Estimates
- Programming Content: Estimates of fair value when impairing film groups, using DCF assumptions (discount rates 10–14%, growth rates 2–3%).
- Finite‐Lived Intangibles: Amortization driven by revenue forecasts over remaining life; no impairment recorded in FY 2025.
- Goodwill & Indefinite Ilives: Quantitative tests require projecting cash flows and market multiples under uncertain macroeconomics.
- Revenue Estimates: Estimated unreported revenue from distributors relies on subscriber count and historical trends.
7. Risk Factors & Outlook
Debt Burden
- High leverage ($715 M notes + $90 M programming debt + $450 M new facilities), requiring significant cash flow generation.
Subscriber Erosion
- NA subscribers down 10% in FY 2025. With intense streaming competition, retention and growth are crucial.
Content Costs
- Programming spend ~ $800 M/year; high up‐front investments carry revenue recognition lag.
Competition
- Netflix, Disney+, Max, Paramount+, Prime Video, Peacock & free/AVOD alternatives.
Macro Challenges
- Inflation, rising interest rates, consumer budget pressures, global uncertainty.
Positive Drivers
- Strong original content franchises (Outlander, Power Universe, P-Valley, BMF).
- Pricing power via Starz App; direct relationship with SVOD subscribers.
Management Focus
1) Stabilize core NA subscriber base
2) Debt reduction and cost discipline post-separation
3) Maximize ROI on Starz Originals
4) Simplify international footprint
8. Investment Outlook & Score
Starz’s strong content slate and operational profitability (Adjusted OIBDA) demonstrate resilience and brand value. However, substantial net losses, high leverage, subscriber declines, and intense streaming competition pose significant headwinds. The pullback from international markets simplifies operations but highlights distribution challenges.
Investment Score: 4.5 / 10
- Pros: Content library, stable EBITDA, pricing power.
- Cons: Net losses, leverage risk, subscriber churn, macro pressures.
Neutral-to-Cautious: Suitable for investors seeking content-driven upside balanced against balance-sheet and growth concerns.
References:
- Starz Entertainment Corp. Form 10-K for FY 2025
- Segment operating details (Note 14)
- Debt and cash flow information (Note 6, 7, 16, 18)
- Restructuring and impairments (Note 2, 13)
- Share-based compensation (Note 11)