Premium streaming service Starz announced a significant restructuring of its operations, including layoffs and the termination of its operations in the U.K. and Australia. The announcement, which was made in a note by CEO Jeffrey Hirsch, indicated that the layoffs would constitute over 10% of its 670 employees, resulting in less than 100 but high double-digit job losses.
The restructuring comes as Starz's parent company Lionsgate prepares to spin the streaming service off as a separate entity in the first quarter of 2024. This move led to a 6.2% rise in Lionsgate's shares. The changes are geared towards aligning Starz with growth sectors and preparing it for standalone operations.
Starz had previously announced an exit from Latin America to focus on the U.S., U.K., and Canada. However, the recent decision to also leave the U.K. market is expected to downsize operations and could potentially pave the way for a merger or acquisition with U.S.-based media entities such as A&E Networks or Paramount Global's BET.
As part of this restructuring, Starz will also be integrating its Canadian business into its U.S. operations. Known for series that target female and Black audiences like "Outlander" and "Power," Starz boasts about 12 million domestic streaming subscribers and 20 million total customers, including traditional pay TV.
The announcement comes at a time when the media industry globally is experiencing extensive layoffs and closures. Among other media organizations undergoing similar changes are TVA Group, Condé Nast, Google (NASDAQ:GOOGL) News, and many others who are grappling with declining audiences and ad revenues.
Lionsgate is set to report its third-quarter earnings soon, which will provide more insights into these strategic changes at Starz. Hulu has also been mentioned as a potential player in future advertising strategies for Starz.
InvestingPro Insights
As Starz ventures into a significant restructuring phase under Lionsgate's stewardship, it's crucial to consider some key financial indicators and InvestingPro Tips for Lionsgate (LGFa (NYSE:LGFa)).
InvestingPro data reveals that Lionsgate has a market capitalization of $2140.0M, reflecting its size in the current market. Despite a challenging financial landscape, the company has seen a revenue growth of 7.58% over the last twelve months as of Q1 2024. This growth is in line with InvestingPro Tip 1, indicating that Lionsgate's revenue growth has been accelerating.
However, the company's P/E ratio stands at -1.07, pointing to a declining trend in earnings per share, aligning with InvestingPro Tip 2. Additionally, the company's return on assets stands at -23.78%, which resonates with InvestingPro Tip 4, suggesting that the company operates with a poor return on assets.
In the short term, Lionsgate's stock has shown a significant return over the last week, with a 13.13% increase, aligning with InvestingPro Tip 3. This could be attributed to the strategic changes being implemented at Starz.
InvestingPro offers an extensive list of additional tips and real-time data, providing a comprehensive understanding of the company's financial health and market position. It's essential to consider these insights while making informed investment decisions.
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