For last Tuesday. I think the lawyers on both sides of the company have done a phenomenal job of getting that done, and so there's a lot of work, everything from systems integrations to HR payroll, splitting the, I mean, just all the stuff that you would think about. The good news is we've had three years to plan for this, so I think we're ready to go. I think people are excited, and so we're weeks away, as you said, and I think, you know, as Jimmy talked about in the call, we're out doing a credit facility through notes and a revolver that should wrap up in a couple weeks, and I think we're very thrilled with where we ended up on pricing and maturities, and so that will set the business up in a good way, post-separation, so you know, people are excited. We're ready to go.
I think both sides—this will be good for both sides of the company. There really has, I think, the board and leadership looked at when we first started looking at this, which is really put the value for both assets in the right place perfectly versus not getting that today. In terms of my role, I think, you know, obviously, we—because of the SPAC and a lot of the work that we've done over the last year or so, I would separate the companies. We haven't really gone out and told the STARZ story and the successful pivot from linear and the profitable pivot from linear, the fact that we will return a lot of unlevered free cash flow to our shareholders.
My job really becomes working with the team to get out and educate the investment community around what the asset really looks like and how valuable it really is.
Yeah. I think, you know, you mentioned the Term Loan A and the RCA. I think Jimmy on the last conference call mentioned that the capital raise or the refinance of the debt was kind of the, I think, the last thing really to come to complete from a STARZ's perspective. It sounds like that's relatively done. I know there's probably still some, some final paperwork for, for the spin and separation, but is it correct to think that, you know, at least from your perspective, you're, you're pretty much ready to go now?
Yeah. I think, you know, we're just, again, waiting for the SEC to come back and to go active, and then, you know, we've got to do a 30-day shareholder mailer, and then we shareholder vote, and then I think we're off and running, so.
And I want to get into a lot of the different pieces of the business, but, you know, you brought up now, you know, this desire to tell the story, a bit more strongly than you have over the last couple of years. There has been a much probably bigger focus by investors on the studio the last couple of years. You know, I often just look at Bloomberg and I see Lionsgate market cap and I see Lionsgate's market cap and do the subtraction, and it would seem that STARZ is trading at negative equity. So, you know, maybe a way to start is, you know, do you feel like this is a big opportunity once you separate to just explain what this business is, what its capital structure is?
You know, I won't necessarily ask you what you think it's worth, though you're welcome to answer that question, but, you know, kind of, start to recreate that value that seems a little bit inefficient in the price today.
Yeah. I think it's totally inefficient in the price. I think that's part of the reason why we want to do the separation. You know, you look at STARZ over the last five years, we've been very durable on the revenue side. We've been about $1 billion for revenue for the last five years in probably the time period where the linear networks, cable networks have dropped 12%. And so we've been, you know, we've made a successful transition. We're probably the only linear network that has successfully and profitably transitioned off of linear to digital by the end of this fiscal. 70% of our revenue will be OTT. We are sitting at a 15% profit margin. Unlevered free cash flow long-term should convert about 70%. And so that's where we sit today.
We've made a very conscious decision not to chase subscribers over the years, but to chase transition and profitability. And so you have a business that is digital-first, data-driven, generating around $200 million of profit that converts about 70% unlevered free cash flow. I think in the coming years you'll see the business as bundles become more bigger part of the revenue base right now. That's, t here are probably less than 1% of our revenue base. That plus some new distribution channels coming online, you can start to see the business grow top-line revenue between 1%-3%, with some cost efficiencies that we can get out as we separate. You know, I think we can get to that 20% margin I've talked about repeatedly on the calls.
And so, again, a business that's going to generate 70% conversion on a 20% margin business that's growing 1%-3%. I think it's a very, very investable business. And on top of that, we have a very unique content strategy that is complementary to everybody. We have some of the biggest shows on television that nobody talks about. If you look at our ratings versus our size, Ghost, BMF, they outperform almost anything on television. It's three times the size of Succession, which I know everybody at this conference likes to talk about, but it's a show that's three times the size. And so we have a unique, very valuable content strategy that is hard to replicate, which allows us to be a complementary partner, and we're also generating a lot of free cash flow and profit.
You talked about unlevered free cash flow a number of times. Any reason to think that the total value of debt will be any different? I think around 700 is roughly where that debt quantum was being targeted.
I think we're going to sit around $600 million, and so it will be about three times coming out the gate. You know, we've done a lot of work around looking at small-cap companies, and what and how they trade based on where the leverage ratios sit. And we believe that anything that's under 2.8x trades pretty well. And so we're going to try to deleverage down to about two and a half times pretty quickly. I'm happy to have the conversation about being small. I don't want to have the conversation about being small and over-levered.
We're real committed to getting that into that range that we trade well.
Maybe now just getting into the business a bit deeper. So you had the $1 rate increase during the September quarter. I think you said you learned a lot from, just a moment for some technical difficulties.
Sorry. I'm speaking with my hands too much, I guess.
We good? Okay.
Better. Okay.
And we're back. So you did the $1 rate increase in September. I think you said that you learned a lot from last year's rate increase. Can you just talk about how you approached this cycle for the rate increase and what the implications are for churn that you might have learned a bit from?
Yeah. I look, I think the team did a really great job of taking what we did last year, learning from where we saw some shortcomings, and then really executing well this year, and you know, so much of putting in a rate increase is actually then dealing with the customer post the rate increase, right, so I think we learned a lot last year about customer journey, customer retention offers, specific offers to specific groups of customers, so a retention offer for a customer paying retail has to be fundamentally different than somebody's coming off a promotion, somebody coming off of, you know, whether they watched one or two originals versus one original in movies, that we had different characteristics around each of those customer types, and we created specific retention strategies for each of those offers so that we could defend the rate increase.
It took a lot of technical build. I think one of the unique and hidden capabilities of STARZ is our technical group in Denver and what they've built from a data analytics point of view and from the ability to actually, you know, put and manipulate offers into the marketplace when the customer comes through, you know, the stacks. If you look at somebody on the STARZ app, if we gave you a rate increase and you went to the settings profile in the app, we knew that you were probably going to disconnect, right? So then we had the analytics look back at what you watched last and what the last couple of things you had. And we had analytics and modeling around what the best retention offer was for that customer.
And so we threw that as your first offer, and then we threw a second one based on all that. So it was very uniquely, specifically designed for what the customer was and enabled to protect against the rate increase. And so I think, you know, doing that back-end journey once the rate increase came in was what made it really successful this year.
How do you think about kind of fair price of STARZ in this ecosystem? I mean, I think, if memory serves me correctly, this may only be your second real rate increase that you've done for at least most OTT subscribers. A lot of your peers in DTC have done more frequent and/or much more aggressive and/or much higher price points sometimes with ad supported as well. How do you kind of think about price to value, whether it's on number of originals or content budget and, and where you sit right now in that price to value equation?
Yeah. So I think we have probably one of the best portfolios of originals plus the Lionsgate Pay-1 , the Universal Pay-2 . We have Sony and Disney and the Pay-3 from our—so we have a really great portfolio of originals and movies at the same time. But we've always been viewed as this complementary service. You know, we never were, you know, back in the linear days, you never actually chose STARZ versus DIRECTV or STARZ versus Comcast. You chose Comcast or DIRECTV, and STARZ sat on top of both of them. And that's how we replicated it into the digital world, which is with that same add-on complementary service. And so we've always wanted to be priced significantly below the broad-based streaming services.
And so part of what's given us the ability to raise rate is that all of the broad-based streamers have raised rates significantly, which has created a lot of headroom for us to be priced significantly below them. And so I think Disney+ has done three or four rate increases. Netflix has done three or four rate increases. So we're sitting at $11 right now, but most everybody that's our broad-based base is around $18, $19. And so it gives us a lot of headroom to still maintain that complementary price point as well as being a great value proposition for our consumers. So I do think we have room. We will probably not do a rate increase next year. We'll probably sit and wait and see how it goes if it was successful.
But I do, you know, coming from my 15 years in cable, I understand the when you get on that train. It's hard to get off. And I think we're going to try to get off that and see where we sit right now. We'll watch it. We can always have the ability to turn it on quickly, but I do want to be very cautious about getting on that path and staying on it.
So just so I got that last bit correctly, you're confident in what you've done, but, you know, taking that regular cadence to price increases is not necessarily what you're looking to do for the next couple of years, more of a wait-and-see approach.
Yeah. I think, look, I think there's a lot of opportunity to grow the subscriber base, right? I still think, you know, we're sitting around 22 million customers in the U.S. and Canada. I still think, you know, if we look at our domestic TAM, we think there's somewhere between 80 and 90 million households sitting in this demo that we serve in terms of the female demographic. We haven't even touched in some of the, you know, Latina community right now. I still think there's a lot of room to grow in the general female audience. I do think there's four or five of these broad-based platforms out there that are really going to lean into subscription businesses in the next year that we've had conversations with.
So I do think there's a lot of opportunity for us to drive the business through subscriber growth and not a combination of rate and subscriber. And so we'll see.
So, long-term subscriber growth, you know, is what you just spoke about. Short-term, I think you've said you hope to grow subscribers in the quarter. I think you have Outlander and Raising Kanan, both back this quarter. Any commentary on just how you feel like the slate is performing against your expectations? I think these are some churnier shows or acquisition shows, maybe is a better way to put it.
Yeah. I mean, look, I think we still have a little, I think everybody forgets we had two strikes. And so this year, we had three tentpoles, which are our big shows that, you know, we took Ghost and cut it into two parts to kind of try to manufacture a second tentpole out of it. And next year we have five tentpoles coming back. We have, like you said, we have BMF, we have Raising Kanan, we have the new Outlander prequel coming in, which is spectacular. We have Spartacus coming back on the network, for the first time. We have Hunting Wives, which is a new show that we think is going to be incredible. And so we've got five big tentpoles versus three this year. And so that really gives us great confidence in terms of continued subscriber growth and consistency.
You know, we've talked a lot about over the years about scheduling content as a way to do churn reduction and using content for churn reduction. Part of the reason why we pushed for so many franchise shows on, on Power was so that we could line them up, so instead of having a customer come on for 10 weeks, that we allow, we take the next show and put it behind it, and so you get a customer to come on for the first show, and we move them through four shows throughout the year, so lifetime value goes from 10 weeks to 40 weeks, and we've only done that with content, and so, some of the strike has created gaps in that strategy. Next year, we'll get back to that consistent flow of content, and so, like I said, I think you'll see subscriber growth this quarter.
We feel pretty good about it. With a month left in the quarter, we'll see it. And again, OTT subscriber growth, you'll see that next quarter as well. And I think as we get into the slate next year, that plus the movies from Lionsgate and Universal will be a really compelling, consistent slate throughout the year.
It seems like content cadence is like the key to this business. You know, there's DTC services with very vast libraries and original velocity. And then I think of STARZ as being in kind of a similar game as something like HBO was historically, maybe different audience, you know, definitely some nuances there. But, you know, you talked about having five tent poles and 25. You get 10-12 kind of shots on goal each year. How do you make sure that 10-12 is enough to sustain the base you have, you know, hopefully generate some ARPU growth over time, you know, grow the base? Like that's a constrained financial model that you're operating in. So how do you think about getting that cadence right?
First of all, we've got our hit rate has to be better than most, right? So we really have to, you know, and I think focusing on two core demos and knowing what our demo's like allows us to manufacture hits. I mean, we've been able to franchise universes in a way that others haven't. If you look at Parrot Analytics, you know, our hit rate is higher than most of the big broad-based streamers, and we've had to be because we're smaller, right? So, and so, you know, if you think about a portfolio of 10 originals, we, I look at it four for each of the two demos and two that try to push up into that TAM.
Those, the two, the last two are kind of trials into pushing into TAM, and the first eight are really about stability and growth in the core demos that we have. Cadence is important, right? Cadence is important for churn. Churn ultimately, if you can drive churn down by just putting content on the air, you're able to grow your base and you're able to grow your ARPU in a way that you can't by going back to the front of the market and doing customer acquisition. Ultimately, it should bring costs down too, right?
That cadence of having shows that manufacture against the same audience, it's a little, I wouldn't say easier for us, but because we're only focused on two demos and we don't have to program for kids and dogs and moms and wives and husbands and cousins, and it's just those demos, we're able to really focus our content on those two demos, which allows us to be successful. You know, you can take a show like P-Valley, and we have something in development that feels similar to P-Valley. We can take an actor from P-Valley and put it in there to make sure that we can drag the audience across. Season one economics versus a season three or four economics is better. I don't have to get 100% of the audience to be successful. I can get 80% or 90% of the audience.
But ultimately, because it feels like the same type of show and we know what works for the audience, we're able to move that audience across and be successful that way. And so we get the benefit of season one economics. We get the benefit of having the same type of show for that audience. So, audience hold, benefit of economics should be better for the bottom line.
Does the subscriber behavior that you see and, you know, because you're 70% digital, you can pretty much see what your subs are doing? Do you feel like you're competing against other services for content, or do you feel like your demo has an expectation as to what they want to see in a show for STARZ? And so you're really just competing on the quality of that show and whether or not, you know, kind of, because you talk about these demos as, you know, being pretty sticky. So maybe you can put some context for me.
Yeah. I mean, the revenue has been pretty durable over the last five years. So I think that and because we're 70% digital, which is, you know, I think if you look back in 2015, there was a bunch of analyst reports that said, well, nobody's picking STARZ. We're part of a bundle. And when the bundle blows up, no one's going to have STARZ and STARZ isn't going to have any customers, right? 82% of our entire customer base is either à la carte or reshare, which means customers have picked our product, which ultimately shows in the stability of our revenue. I do think people have come after our demos in a way that has been unsuccessful.
I think there are some shows out there that work, but I do believe that because we have been so focused and so successful with these demos, we have become the kind of first port of call or the destination for these demos to look at, and you can see it in Outlander with Droughtlander and how, you know, crazy the fan base gets when it gets off the air and what they want. You know, you can see it in the Power universe. I mean, people are online today, like, you know, begging 50 to actually get us to release a trailer for a show that's coming this year and wants to know when it's coming. And so there's a lot of intensity around our shows that you don't see in other places.
And I do think, you know, it isn't a choice, as the conversation we had earlier, between like, do I go look over here and over here? When they, you know, we launch our shows at midnight on Thursday, and the amount of intensity and viewership that come, that people stay up at midnight to watch the show, and the viewership and engagement in that first hour is nothing like I've seen on television. And so I do think we, because of what we do and the uniqueness of it, we aren't as in as competitive battles for content as others. And you can see that in the town. Yeah.
I mean, hearing you describe it that way, it does make me, you know, kind of wonder. You talked about the subscriber opportunity more so than the pricing opportunity. This sounds like a very dedicated subscriber base, but maybe not the broad TAM of some of the services with bigger content budgets. So maybe just, you know, you could go revisit this question of like how you think about sub growth versus ARPU growth.
Yeah. Look, I think ultimately we are, like I said, 22 million subs is a TAM of 80-90 million subs. So there's a lot of TAM left to get. I do think what you're seeing in the space right now is services that have viewed themselves to have channels that are really platforms are starting to realize that they're platforms, right? And the more that these services see themselves as platforms, it leads into our strategy to be a complementary add-on service, right? And so you look at Amazon today, we're one of the fastest growing add-on channels on Amazon.
As other broad-based channels realize that they become platforms and there's revenue opportunities to put STARZ on top of that share in the economics, benefit from having our demos as part of their service, it creates opportunities to grow subscribers within the platforms that sit out there today, right? And so I do think these broad-based streamers, as they look to try to, you know, advertising has become another revenue driver for them as they realize that advertising is a thief, but they need more. It's like, okay, do I go to a third party now and share in the economics that we do with Amazon on their platforms, right? So if you look at, you know, in the old regime we had with, with Paramount+, The Chi is a huge show on Showtime, right? But it's the only show that actually mirrors our audience.
And so they have a huge problem where people come on and they watch it and they churn after it. Instead of them spending a bunch of money to create more shows to create less churn against that show, if they bundled it with STARZ and put our four or five shows for that same demo against it, shared in our economics, it is actually a revenue generator for them and they get to share that content across it. And so that is why I think ultimately you are going to see bundling to your point about cadence. One of the things that bundling does, you know, when we talk about reduction of churn is it allows you to share content moments with other partners and create kind of, you know, synthetic cadence of other people's shows that are around the same demos at the same time.
And so that's ultimately why you see that churn reduction. There's also value in price, but the biggest thing about sharing and bundling is if you line up your content slate against each other and it's not an overlap, but it fills gaps for each other, it really helps create subscriber growth through lower churn. And so ultimately you get ARPU there because you have longer tenured customers that are paying you more and not on a discount.
Switching gears a little bit. So, you know, I don't recall how STARZ acquired versus produced and licensed content prior to the Lionsgate acquisition, but, you know, being part of a studio meant that you had essentially access to content. I think you purchased the majority of your at least original content budget through your sister company in Lionsgate. How do you think about transitioning that business model now as a separate entity? You know, are you interested in underwriting and owning shows? Are you interested in owner economics? We've seen some of your peers like AMC Networks, you know, build a library of IP. Yeah.
Yeah. Look, I think there's three components to a studio that are really important. Obviously, content sourcing, you know, production and sales, right? And so if you think about, as we separate the companies, I think Lionsgate does a spectacular job of content production. They do a spectacular job in all three areas, but they do a great job content production, content sales, right? And so we're not going to go rebuild that capability. We'll continue to rely on Lionsgate to produce our shows and to sell our shows. And we have great intercompany deals that we've worked out that kind of, you know, govern the interaction of the two companies together. In terms of content, you know, look, we've got, we've always had, and we've always said there's Kevin Beggs's group does a great job of sourcing and finding content.
I have a group that does that as well. And it was the best of both worlds where we had two groups looking for content. We've got a lot of stuff in a lot of content in development at STARZ today that we will own post-separation. Lionsgate will then produce post-separation and then sell for us and monetize, but I do think having control of the economics and our economics around content will be an important mix of what we do going forward. It won't be all of it because we will still source shows from Lionsgate. We'll still source shows from Sony and UCP and Warner as we do today. But I think it's good to have a mix of both because you can actually benefit from third-party sales outside the U.S. since we are a domestic business.
But I do think that's part of how we get to that 20% margin long term.
And how much control do you have over the IP for which you still have returning seasons where the studio, you know, probably has some library rights? And I would say, you know, specifically to Netflix, I think we've seen a lot of shows, you know, sort of reborn in a new life of reach where they go onto a mass platform, which can often then drive returning seasons, or you've seen this with a number of the Taylor Sheridan shows, you know, grow outside of the Paramount universe and other places. So how do you think about just where your IP, you know, is going to be and what it means for STARZ?
So when we separate, we'll have again intercompany deals. Most of the library will travel with the studio. We do have obviously, you know, rights to use the STARZ originals, you know, for a long period of time at very low cost. We do have protections against our shows so that we can, you know, continue to drive our business and benefit from that content scarcity. And then they can obviously monetize those shows in second and third windows and do what they do really well and then internationally. And so but I do think I'm much more of a believer of content scarcity than content ubiquity. I don't, you know, we've had real-life kind of examples of Power on a network and Outlander on a network.
And we just don't, we don't see the accruing benefit to the subscriber base of the new seasons. I think people, especially our demos, sit where they are economically and they wait. And so we haven't seen the benefit of that that other networks have seen. And so, I think having scarcity and control over our content where, where it sits, but being on our network is really important. When we launch a new season of a show, we still see a lot of people come on for season one to catch up. And so first title streams of a season one, even if we're in a season four, are still very, very prevalent. And so having that exclusive to us, I think will continue to drive our subscriber base.
But that's. I think I'm much more of the, you know, let's keep it for us. It's what we do. It's who we are and drive the business that way.
What's the market currently look like for film library? You talked about, you know, you have the Lionsgate Pay-1 , the Universal Pay-2 . Again, it seems like you now kind of have a probably broader aperture with which you can deploy your content budget than maybe you thought about before. Maybe that's incorrect, but that is how I see it. What do you think is the opportunity in film?
Movies are really important to the service. 50% of our first title streams, which is a proxy for acquisition, are come out from movies. Thrilled with the Lionsgate Pay-1 It's been great. John Wick and Hunger Games have been massive drivers of acquisition for us. Even some of the smaller movies like The Blackening and Margaret have done really well in the service in terms of engagement and viewership. Thrilled with the Pay-1 . Universal Pay-2 is a great complement to that. It gives us a real growth of movies. Movies are really important to the service. They always have been. I mean, we launched as a movie service out of Liberty back in the day. We have, you know, we do library deals with everybody across the board. We have a great portfolio of movies.
Do I ever think that we're going to get into original movies for the service? I don't think so. It's not what we do well. We do originals really, really well. Studios do movies really, really well. And I think on the scale of the company, doing what we do well and focusing on what we do well is important. And so I think we'll continue to buy movies from studios and make originals of our own. So, I do think there's opportunities for, you know, some windowing of the deals that we have today, but that's, you know, conversations that we're having with each of the studios.
I think probably the most trending word in media for 2024 is bundling. Everything seems like it's been rebundled in some way, shape, or form over the last year. You know, you have Charter now recutting deals with a much bigger streaming bundle that's part of a traditional video bundle. At your size scope, it would seem like there is a lot of benefit to having more scale through a bundle. What do you think some of the most logical partnerships or opportunities are?
Anybody who's a broad-based service that serves everybody in the home is a great opportunity for us to add our complementary content to. The cable opportunities, I mean, as a retired cable guy, I always think there's still a lot of opportunity for us in the cable world. I think what Charter has been doing in terms of, you know, I'll call it the new TV everywhere, which is, you know, getting all those apps for free was kind of what we had already done originally, which is if you have STARZ on Charter, you get our app authenticated. I mean, it's kind of what they're doing. The content's a little different. But you know, our strategy has been content, you know, we're distribution agnostic. Our content is the same across all of our distribution platforms.
We don't benefit our D2C product versus Amazon versus Charter versus Comcast. And so, you know, we want to be, you know, wherever the consumer wants to watch STARZ, we want to be there. We know based on data where the most profitable consumer is. So we move content around. But ultimately, bundling does a lot of things. We talked about it, you know, content cadence is important because you're sharing content. It helps churn reduction. But ultimately, it's easy for the consumer, right? And I think part of what you've seen is we've talked about bundling in the space a lot, but it's been slow to adopt because there's a whole technical hurdle, right? And, you know, Amazon's a great place.
We have two bundles on Amazon today because all of our content is ingested in Amazon and it's a click of a box to get that bundle, and so it's very, there's not a lot of consumer friction. It's very easy for the consumer to sign up for a bundle on Amazon because they don't have to leave your app to go to a BuyFlow and somebody else's app to put in a code, and that becomes very, very tough for a consumer to do. If you look at what we just did with BritBox and STARZ, we actually have bundled BritBox into STARZ. The BuyFlow is very simple and easy. We've done a lot of stuff behind the scenes to make everything transfer easy, but ultimately it's still two environments.
Phase two of that is a toggle where it will look like to the consumer you're within one app, but it's still, you know, it's one front end and two back ends. So it's pretty seamless to the consumer, but that's still not what you get on the cable company where it's just a billing code or on Amazon, and so until, like I said, a lot of these channels realize that they're platforms and have the ability to ingest our content and make a billing code that puts the two together and makes it very simple for the consumer to choose, bundling will be the word of the day, but it won't, it, you know, won't propagate through the business until we make a decision to allow our content to then ingest it into other people's platforms. We're ingested through Hulu today.
It's very easy to do a Hulu STARZ bundle. Same thing on Amazon, and I do think some of these other broad-based streamers will start to do that in the coming 12- 18 months.
I think if I unpack some of the international noise from STARZ, I guess segment profit is what it's been called the last two years, but let's just call that EBITDA. You'd be at about $200 million-ish range for EBITDA. You know, maybe first you've talked about growing the top line kind of low single digit, 20% margins. Do you think there's some scope for margin expansion there or where would you see some scope for margin expansion? And then within that, can you give us some sense of what the content budget is? And do you think the content budget where it sits today is the right level? You know, would you like to spend a bit more, a bit less?
You know, we're sitting at a 15% margin today. I think we've said publicly that, you know, I've said publicly, I guess we can get that up to about 20% coming at a fiscal 2028. It's a combination of top line growth and also a combination of right-sizing some of the content spend. You know, I think we are a little heavy right now in content spend, partly due to the age or some of our content in terms of the seasons on the air, partly to, you know, I think we'll have to do some interesting things on windowing on the Pay-1 and the Pay-2 , more and really try to drive the economics back to the right place and so that we can get to that 20% margin.
So the combination of some top line growth and some, you know, some expense management on the, on the bottom will get us to that 20% margin. We've got a pretty good line of sight to get there. As anything with content, these things take time. So it's going to take us, you know, 18- 24 months to kind of get into that range. But I feel good about the number of shows. I feel very good about the amount of movies that we have in terms of a complementary service. And now we just have to execute.
So I'm thinking about that correctly, then maybe there's a little bit of relief ahead in the cash content spend, either rate of growth or total amount spend. You know, we can make some guesstimates as to what the cost of debt is on about $600 million. Will you be a meaningful cash taxpayer after spend?
Yeah, we probably, we've got some NOLs, so we don't, we won't be a cash taxpayer for a couple of years.
Okay. Driving levered free cash flow conversion would also be a pretty high percentage, I would think.
Yeah, I think on a levered basis, there's some noise in the international shutdown. There's still some third-party obligations that we have to pay out through the end of this year and coming into 2026, fiscal 2026, but after that, I think you should expect us to be around 70% conversion on unlevered free cash flow. And so as you expand margin to 20%, that just follows it up. When, you know, the strike, the two strikes and stuff really kind of created this kind of uniqueness in terms of content deliveries, content cash payment, and amortization. We're kind of out of that now. So once you really get back to paying on deliveries, airing it within the same timeframe, you'll really start to get back to that, you know, that 70% conversion of profit into unlevered free cash flow.
Comcast has announced this spinoff of Entertainment Cable Networks. They've suggested it could act as a roll-up vehicle. You know, you're currently a pure play in prestige direct to consumer, which is not something that's in this network bundle. This network bundle has some scale, or at least on my numbers, a lot more EBITDA than STARZ has, which would seem to have some benefits as well. So how do you think about the consolidation opportunities among some of these assets?
It's a good, I mean, I you know, saw the announcement. Obviously, I think Mark's a tremendous operator and we'll do a great job. I think I have a lot more questions and I have answers based on what I saw. But look, from a STARZ point of view, I think we've built a really unique and special asset, right? And it's one of two things. We've got a great tech stack, a great app that I think still we're rated one of the best in the business. We've got a data capability that very few have in the business today. And everything that we execute is based around data. And we have the ability to do things like we talked about with BritBox into the STARZ app.
So it makes it, you know, you couple that capability plus these two very valuable demos that have been very hard for others to replicate. It makes it a great add-on asset to one of these bigger, broader services. And so I can see a world where a lot of folks are interested in the STARZ asset post-separation.
But I also think based on the tech stack, the platform that we built, the data, capabilities that we have, and the fact that we have successfully transitioned from linear to digital and have an organization that can execute that transition, there's also an opportunity for us to go get, you know, linear networks that fit our demos that don't have a digital future or a digital mirror and actually do the same conversion for some of these assets that are shrinking in broader companies that have a hundred things to focus on and fix that don't have the ability to do what we did because of our focus and actually build some revenue diversification through an SVOD and an AVOD business sitting on top of STARZ.
And so I think we are uniquely positioned to be much like the NBC asset is, that's uniquely positioned to actually be an aggregator as well in the space, but also based on our capabilities, it's a prime kind of asset to put in something that's bigger.
Great. Thank you.
Thank you. Appreciate the time.