10-KT: Starz Navigates Post-Spinoff Challenges, Reports Q3 Loss

Starz Entertainment Corp. reports a net loss of $115.8 million for the nine months ended December 31, 2025, as it navigates its separation from Lionsgate and faces declining revenue in a competitive streaming market.

Summary

• Starz Entertainment Corp. completed its separation from Lions Gate Entertainment Corp. (Old Lionsgate) on May 6, 2025, becoming a standalone public company.
• The company changed its fiscal year end from March 31 to December 31, filing this 10-KT for the nine-month transition period from April 1, 2025, to December 31, 2025.
• Reported a net loss from continuing operations of $115.8 million for the nine months ended December 31, 2025, compared to a net loss of $61.3 million for the same period in 2024.
• Total revenue decreased by $75.6 million (7.3%) to $963.4 million for the nine months ended December 31, 2025, driven by declines in both OTT and linear services.
• U.S. OTT subscribers increased to 12.66 million as of December 31, 2025, from 11.77 million in 2024, but total U.S. subscribers slightly decreased to 17.63 million from 17.68 million.
• Canadian operations transitioned from an SVOD operating venture to a content licensing arrangement in October 2025, impacting revenue and subscriber reporting.
• Adjusted OIBDA increased slightly to $110.7 million for the nine months ended December 31, 2025, from $108.2 million in the prior year, primarily due to decreased programming amortization and advertising expenses, partially offset by lower revenue and higher general and administrative expenses.
• The company faces ongoing legal proceedings regarding alleged breach of indenture for 5.5% senior notes due 2029, with a ruling pending on a motion to dismiss.
• Starz is focusing on developing and distributing original programming that resonates with women and underrepresented audiences.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this as a challenging period for Starz, marked by increased losses and declining revenue post-separation, despite a slight improvement in Adjusted OIBDA. The significant legal and competitive risks, coupled with the costs of operating as a standalone entity, weigh heavily on the outlook.

Positives

• U.S. OTT subscribers increased to 12.66 million as of December 31, 2025, from 11.77 million in the prior year, indicating growth in its direct-to-consumer streaming segment.
• Adjusted OIBDA for Starz Networks increased by $1.0 million to $110.7 million for the nine months ended December 31, 2025, primarily due to lower programming amortization and advertising expenses.
• The STARZ App has received high user ratings and Editor's Choice awards from both Apple and Google Play, suggesting a strong user experience.
• Starz has a clear corporate strategy to focus on developing authentic and engaging original programming for women and underrepresented audiences, aiming to differentiate itself in the market.
• The company holds valuable exclusive multiyear output licensing agreements with New Lionsgate (at least 2030) and Universal (at least 2029) for theatrical films.
• Management believes current cash flow from operations, cash on hand, and credit facilities will be adequate to meet known operational cash and debt service requirements for the next twelve months and beyond.

Negatives

• Net loss from continuing operations significantly increased to $115.8 million for the nine months ended December 31, 2025, from $61.3 million in the prior year, indicating worsening profitability.
• Total revenue decreased by $75.6 million (7.3%) to $963.4 million for the nine months ended December 31, 2025, reflecting declines in both OTT and traditional linear services.
• Total Starz Networks subscribers decreased to 17.63 million as of December 31, 2025, from 19.93 million in the prior year, primarily driven by a decline in linear subscribers.
• General and administrative expenses increased by $13.3 million (17.4%) to $89.7 million, largely due to costs associated with operating as an independent public company.
• Interest expense increased by $8.5 million (24.5%) to $43.2 million, primarily due to higher interest rates on programming related obligations and the new Term Loan A.
• Restructuring and other costs increased substantially to $20.8 million from $0.6 million, mainly due to content impairments recognized for the Canadian film group.
• The company is a smaller, less diversified entity post-separation, making it more vulnerable to market changes and diminishing capital allocation flexibility compared to its predecessor.
• An ongoing lawsuit by purported noteholders claims breach of indenture for 5.5% senior notes, seeking to nullify an exchange transaction and potentially accelerate debt payments, posing a significant financial risk.

Risks

• Starz is a smaller, less diversified company than its predecessor, Old Lionsgate, with a business concentrated on premium subscription video services, making it more vulnerable to changing market conditions.
• Risks related to business restructuring, which have affected and may continue to affect asset values, including potential future write-downs of programming content and intangible assets.
• Inability to attract and retain subscribers or sustain engagement due to competition, pricing, content choices, or adverse economic conditions.
• Business success depends on unpredictable viewer preferences, and failure to anticipate shifts could adversely affect affiliation agreements and subscriber numbers.
• Dependence on the availability of quality programming in a highly competitive marketplace, with risks of increased talent and production costs, and inability to secure or maintain desired content.
• Reliance on a few major distributors (e.g., Amazon.com, Inc. accounted for 29.0% of revenue in the nine months ended December 31, 2025), with risks of unfavorable renewal terms or loss of carriage.
• Distributors may not adequately market Starz's services or position them favorably, leading to reduced customer demand.
• Changes in consumer behavior, evolving technologies (e.g., AI, FAST channels), and distribution models may negatively affect business.
• Vulnerability to business interruptions (fire, floods, power loss, pandemics, strikes) and reliance on third-party uplink facilities and satellites.
• Reliance on third-party sales platforms (Amazon, Apple, Google, Roku) and internet-connected devices for direct-to-consumer distribution, with risks of access issues or unfavorable terms.
• Payment processing risks, including increased fees, changes in payment ecosystem, fraud, and chargebacks.
• Substantial competition in all aspects of its business, including for marketing, carriage, and content, from larger, more diversified competitors.
• Economic, political, and regulatory risks from international licensing partners, including potential loss of partners, adverse trade policies, anti-corruption laws, and communicable diseases.
• Risks of legal claims related to content (defamation, privacy, infringement) and potential liability from third-party production arrangements.
• Failure to adequately protect intellectual property rights (trademarks, copyrights, patents) or accusations of infringing third-party rights, including from non-practicing patent holders.
• Exposure to litigation and other legal proceedings (class action lawsuits, VPPA, CIPA claims), which can be costly and disruptive.
• Inflation or economic instability could increase production and marketing costs, reduce consumer demand for premium services, and affect distributors.
• Technology failures, unavailability, or unexpected operation of proprietary and third-party systems could impair service delivery and subscriber retention.
• Reliance on cloud computing services, with risks of disruptions or interference.
• High costs and ongoing challenges in protecting electronically stored data from unauthorized access, modification, or exfiltration, leading to potential costs, lost opportunities, and reputational damage.
• Subject to stringent and changing regulatory obligations (privacy laws like VPPA, CIPA; consumer protection laws; levies/taxes; network regulations), which may increase costs or limit business.
• Loss of key personnel and artistic talent could adversely affect business.
• Labor disputes or union actions could increase costs and restrict access to content.
• Risks associated with possible future acquisitions, dispositions, business combinations, or joint ventures, including failure to realize benefits, assumed liabilities, integration challenges, and regulatory restrictions.
• Purported noteholders have instituted a lawsuit claiming breach of indenture for 5.5% senior notes, potentially leading to accelerated debt payments.
• Incurrence of debt obligations ($625.1 million as of February 10, 2026) could adversely affect profitability, cash flow, and ability to meet other obligations, limiting flexibility and increasing vulnerability to adverse conditions.
• Inability to generate sufficient cash to service all indebtedness, potentially forcing asset disposals or refinancing on unfavorable terms.
• Ability to incur substantially more debt despite current levels, exacerbating financial risks.
• Restrictive covenants in corporate indebtedness agreements limit current and future operations, including ability to incur debt/liens, pay dividends, make investments, or sell assets.
• Changes in, or interpretations of, tax rules and regulations (e.g., Section 7874 of the Internal Revenue Code) could adversely affect tax status or increase tax liability.
• Uncertainty in tax rates due to dynamic tax laws and policies, and potential loss or reduction of tax incentives for programming production.

Future Outlook

Management believes that cash flow from operations, existing cash on hand, the $150 million senior secured revolving credit facility (undrawn as of December 31, 2025), monetization of trade accounts receivable, and available programming related obligations will be sufficient to meet operational cash and debt service requirements for the next twelve months and beyond. The company continues its strategic review of content strategy and performance, which may lead to additional content impairment charges. Starz may also pursue acquisitions or asset sales, financed through various means, and acknowledges potential adverse effects from future legislation or regulatory changes.

Management Comments

• "Starz is focusing on developing and distributing authentic and engaging original programming that resonates with audiences that have been traditionally underrepresented (or underserved) in the premium television space."
• "Starz believes this strategy, combined with a proven management team, will ensure its services remain a must have for subscribers and a meaningful profit center for its distributors."
• "Management believes the assumptions underlying our financial statements, including the assumptions regarding the allocation of general and administrative expenses from Old Lionsgate are reasonable."
• "Management believes that, as of December 31, 2025, the Company maintained effective internal control over financial reporting."
• "Management does not presently believe that the resolution of [legal] matters will have a material adverse effect on the Company's financial position, results of operations or cash flows."

Industry Context

StockSavvy.ai notes that Starz's strategic focus on underrepresented audiences and original programming is a common tactic in the highly competitive streaming market, aiming to carve out a niche amidst larger, more diversified players like Netflix, Disney+, and HBO Max. The decline in traditional linear subscribers and the rise of OTT services and ad-supported models (FAST channels) reflect broader industry trends of cord-cutting and evolving consumer consumption patterns. The company's reliance on a few major distributors, such as Amazon, highlights the significant leverage these platforms hold in content distribution, a challenge faced by many independent content providers. The ongoing legal dispute regarding senior notes underscores the financial complexities and potential vulnerabilities for companies undergoing significant corporate restructuring in a dynamic market.

Corporate Governance

Legal Proceedings

• A lawsuit filed on August 27, 2024, by purported holders of 5.5% Senior Notes, claiming breach of indenture related to a May 2024 exchange transaction and Supplemental Indenture No. 10. Plaintiffs seek a declaration that the supplemental indenture and exchange transaction are null and void, potentially leading to accelerated debt payments. Oral arguments on Starz's motion to dismiss occurred on September 22, 2025, with a ruling pending.
• Arbitration claims arising from alleged violation of the federal Video Privacy Protection Act (VPPA) and analogous state laws related to the company's alleged use of a third-party pixel on its subscription video service website. Management does not presently believe that the resolution of these matters will have a material adverse effect on the company's financial position, results of operations or cash flows.

Related Party Transactions

• Exclusive multiyear output licensing agreement with New Lionsgate for Lionsgate label titles (theatrically released in the U.S. starting January 1, 2022) and Summit label titles (starting January 1, 2023).
• New Lionsgate continues to provide certain corporate and administrative services to Starz under a Transition Services Agreement (TSA) for a defined transition period.
• Prior to the separation, Old Lionsgate allocated corporate general and administrative expenses to Starz, and Starz paid certain expenses on behalf of Old Lionsgate.
• An Intercompany Revolver with Lionsgate Studios Corp. (New Lionsgate) was used to settle intercompany transactions prior to the separation, with all outstanding obligations repaid and commitments terminated upon separation.
• The 5.5% Exchange Notes, with an aggregate outstanding principal of $389.9 million, became obligations solely of New Lionsgate upon completion of the Separation, releasing Starz from these obligations.

Stakeholder Impact

• Shareholders face potential dilution if additional capital is raised through equity issuance, and the share price could be adversely affected by large equity offerings. There is also a risk of accelerated debt payments if the noteholder lawsuit is unsuccessful. No dividends were paid in the nine months ended December 31, 2025.
• Employees may be impacted by labor disputes or union actions, and the company's ability to attract and retain key personnel and artistic talent is crucial for its success. Starz offers a comprehensive benefits package and employee programs.
• Customers (subscribers) are affected by the quality and choice of content, potential price increases, and the evolving landscape of streaming services. Service interruptions due to technology failures are a risk.
• Distributors are key partners, and maintaining favorable affiliation agreements is essential. Industry consolidation and leverage held by major distributors could lead to less favorable terms for Starz, impacting its revenue and market presence.
• Creditors are exposed to risks related to Starz's substantial indebtedness ($625.1 million). The ongoing legal proceedings regarding senior notes could lead to accelerated debt payments, and restrictive covenants in credit agreements limit the company's operational flexibility.

Next Steps

• Renew affiliation agreements with distributors as they expire through 2028.
• Continue strategic review of content and performance, potentially leading to further content removals and impairment charges.
• Establish standalone corporate and administrative capabilities as the Transition Services Agreement with New Lionsgate phases out.
• Potentially acquire businesses or assets complementary to its business.
• Defend against the ongoing lawsuit by purported noteholders regarding the 5.5% Senior Notes.
• File definitive proxy statement for annual meeting by April 2, 2026.

Key Dates

Recommendation

Starz is in a transitional phase post-separation, facing significant financial headwinds with increased losses and declining revenue. While the strategic focus on niche content and a slight improvement in Adjusted OIBDA offer some stability, the substantial debt, ongoing legal challenges, and intense competitive pressures in the streaming market present considerable risks. A 'Hold' recommendation reflects the uncertainty and the need for investors to monitor the company's ability to execute its strategy, manage its debt, and resolve legal issues before a more definitive stance can be taken. The company's long-term content licensing agreements and focus on underserved audiences provide a foundation, but the immediate financial performance and legal overhang warrant caution.

Keywords

Streaming, Premium Video, Subscription Service, OTT, Media Networks, Content Licensing, Original Programming, SEC Filing, Financial Report, Corporate Governance, Risk Factors, Debt, Lionsgate Spinoff, Subscriber Data, Entertainment Industry, British Columbia, Nasdaq, STRZ