Good day, and welcome to the Lionsgate first quarter 2023 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. To withdraw your question, please press star then two. Please note today's event is being recorded. I would now like to turn the conference over to Nilay Shah with Investor Relations. Please go ahead.
Good afternoon. Thank you for joining us for the Lionsgate fiscal 2023 first quarter conference call. We'll begin with opening remarks from our CEO, Jon Feltheimer, followed by remarks from our CFO, Jimmy Barge. After their remarks, we'll open the call for questions. Also joining us on the call today are Vice Chairman Michael Burns, COO Brian Goldsmith, Chairman of the TV group Kevin Beggs, and Chairman of the Motion Picture Group Joe Drake. From Starz, we have President and CEO Jeffrey Hirsch, CFO Scott MacDonald, President of Domestic Networks Alison Hoffman, and President of International Networks Suparna Kale. The matters discussed on this call include forward-looking statements, including those regarding the performance of future fiscal years. Such statements are subject to a number of risks and uncertainties.
Actual results could differ materially and adversely from those described in the forward-looking statements as a result of various factors. This includes the risk factors set forth in Lionsgate's most recent annual report on Form 10-K, as amended in our most recent quarterly report on Form 10-Q filed with the SEC. The company undertakes no obligation to publicly release the result of any revisions to these forward-looking statements that may be made to reflect any future events or circumstances. I'll now turn the call over to Jon.
Thank you, Nilay. Good afternoon, everyone. Thank you for joining us. We're pleased to report a quarter of strong global subscriber growth at Starz, continued growth of our film and television pipelines and key financial metrics in line with expectations. As I go through my remarks, you'll hear us focus on the operating environment, dealing with issues of economic uncertainty, recession fears, cord cutting, and the pandemic like everyone else. As I lay out how each of our businesses is addressing this environment, you'll also hear how our business model insulates us fairly well from some of the existing and potential headwinds. Starting with our motion picture business. With the box office making a strong comeback, our motion picture group is in great shape to capitalize on its return with a strong lineup of exciting movies. Let me lead with our tent poles.
We began shooting the eagerly anticipated Hunger Games prequel, The Ballad of Songbirds and Snakes, in Poland two weeks ago, and the early footage looks great. The film rolls out globally in a prime holiday slot on November 17 next year. The other anchor of next year's slate is John Wick, which has grown into a cultural phenomenon. We will release John Wick Chapter 4 on March 24, 2023 to our huge and engaged fan base around the world. As we expand the John Wick universe across multiple businesses, production has just wrapped on the John Wick prequel event series for television, The Continental. In that same regard, we're in advance pre-production on the John Wick action spinoff Ballerina, with Knives Out and No Time to Die star Ana de Armas in the title role.
Behind these tentpoles, Expend4bles will bring back a world-class cast of action stars next year. Dirty Dancing, starring Jennifer Grey, and our reimagining of the romantic classic, arrives in theaters in time for Valentine's Day 2024. We expect to have a major announcement in the coming weeks on Now You See Me 3. With titles including Naruto, Highlander, and the Michael Jackson event film lined up as well, we're growing a pipeline that can compete at any level theatrically. Our tentpole business is complemented financially and strategically by a consistently profitable, low-risk, multi-platform business for the 30-40 smaller and mid-size films we release each year. Especially in this current environment, our proficiency at delivering targeted films for a wide range of platforms is a profitable and repeatable strategy.
This includes a direct-to-streaming component that continues to gain traction as it transitions from a largely opportunistic response to the pandemic to a planned, strategically focused business with production deals in place with a growing number of platforms. Turning to television, our status as one of the few independent suppliers of premium series at scale is our best defense against economic uncertainty and other headwinds. We have strong relationships across more than two dozen platforms, with multiple hit series at the broadcast networks, streamers, and a growing roster of AVOD platforms, along with a strong slate to drive the growth of sister company Starz. This diverse group of buyers helps mitigate a pullback in content spending by any one platform and has been our consistent strategy in both up and down markets. We're also coming off one of the most active periods of content creation in our television group's history.
With more than 30 new shows picked up to series in the past three years, 90% of them renewed for additional seasons and valuable new properties, Ghosts, Home Economics, Minx, Julia, P-Valley, and a host of others, we will begin to generate increasing returns as they move into later seasons and create value in our library. For the past two years, our growth in television revenues hasn't been matched by growth in contribution and margin due to the investment in new series. This year, the television group segment profit is on track to increase by over 50% on improving margins with even stronger gains next year as our series continue to mature. At Starz, we had a strong subscriber growth quarter, adding 1.8 million global streaming subscribers, including 700,000 domestic subscribers.
We're able to continue delivering these gains despite industry headwinds, given our differentiated offering of focused original programming coupled with a robust slate of pay-one output and library titles, all at a complimentary price that provides great value to the consumer. The fiscal 2023 slate has a consistent cadence of juggernaut performers, including Outlander, P-Valley, BMF, and the Power Universe, combined with tent-pole movies like Spider-Man: No Way Home. With the majority of the slate underpinned by series returning for second and third seasons, we're confident in our ability to continue our subscriber momentum, acquiring new customers, and extending the lifetime value of our existing subscriber base. In the quarter, we continued to execute our commitment to engage both of our major cohorts with a new show every week. With the successful debut of Power Book IV: Force, all three of our Power spinoffs have become hits.
The drama P-Valley achieved record ratings in its breakout second season, becoming one of Starz' most widely viewed series ever. Fan favorite Outlander returned for its sixth hit season, and earlier today, we announced the highly anticipated Outlander prequel, Blood of My Blood, to be written and executive produced by Outlander showrunner Matthew B. Roberts. The Watergate series, Gaslit, starring Julia Roberts and Sean Penn, debuted strongly in the quarter, strengthening the Starz brand and showcasing our ability to offer high-end programming comparable to anything on premium paid television. We continue to expand Starz distribution successfully around the world. We announced a bundling deal with Disney in LATAM in the quarter, following on the heels of recent partnerships with Canal+ in France and Viaplay in the Nordic territories.
This afternoon, I'm pleased to report that we've launched a deal with Vizio in the U.S., making Starz available to millions of Vizio smart TV users. As we've been saying, this is just the tip of the iceberg in terms of where the industry is heading, and Starz will be a critical and desirable part of bundles and packages with a growing number of platforms and devices. We're cognizant of the headwinds in today's business environment. The economic uncertainty does make it harder to forecast our business. The pandemic has gone on longer than expected and continues to add cost. There are growing pains in the streaming world and aging pains in the linear legacy businesses.
In response, we're taking steps to conserve capital, keep our balance sheet strong, streamline operations, and mitigate risk while we continue to do what we do best, create great content and franchises that build our most important long-term asset, our world-class library. In closing, in terms of our strategic initiatives, we are proceeding nicely. In spite of the turbulent economy and the complexity of ensuring that we retain and expand all of our strategic and operational benefits, we continue to advance conversations with potential sponsors and strategic partners, and we remain on track to conclude a transaction as early as the end of the fiscal year. Now I'll turn things over to Jimmy.
Thanks, Jon. Good afternoon, everyone. I'll briefly discuss our first quarter financial results and update you on the balance sheet. Q1 Adjusted OIBDA was $5 million, and total revenue was $894 million. The year-over-year Adjusted OIBDA variance reflects the expected timing of Starz programming as Media Networks had an elevated level of content amortization associated with the build of its fiscal year 2022 slate, as well as more expensive programming that launched in the quarter. Reported fully diluted earnings per share was a loss of $0.53 a share, and fully diluted adjusted earnings per share came in at a loss of $0.23 a share. Adjusted free cash flow for the quarter was a $62 million use of cash. Now let me briefly discuss the fiscal first quarter performance of the underlying segments compared to the previous year quarter.
Media Networks' quarterly revenue was $381 million, and segment profit was a loss of $37 million. Revenue was down slightly year- over- year as we continued to see favorable shifts in subscriber mix with OTT revenue growth accompanied by linear declines. Year-over-year domestic revenue declined 2.4%, while year-over-year international revenue was up 31%. The year-over-year decline in Media Networks segment profit primarily reflects the timing of content amortization and marketing costs with some foreign currency headwinds at Starzplay International. We ended the quarter with 37.3 million total global subscribers, including Starzplay Arabia. Total global Media Networks OTT subscribers grew 1.8 million sequentially to 26.3 million. This represents a year-over-year global OTT subscriber growth of 57%, comprised of domestic OTT growth of 26% and international OTT growth exceeding 100%.
Now I'd like to talk about the studio business in aggregate. Revenue of $711 million was up 5% year-over-year, driven by the television group. Segment profit of $70 million was up 48% year-over-year, driven by growth at both television and motion picture. Our total library revenue at the studio was $749 million on a trailing 12-month basis, up 1.4% over the $739 million of revenue reported in the first quarter last year. Breaking down the studio business between motion picture and television, let's start with the motion picture group. Motion picture revenue was down 4.3% to $279 million, while segment profit of $51 million was up 14% on increased margins.
Revenue and segment profit trends reflect continued strength in our library and an increased mix of direct-to-platform titles in the quarter. Finally, television revenue was up 12% to $432 million, driven by continued growth in output, which included both new and returning series. Segment profit came in at $20 million, up 500% year-over-year, reflecting new and returning series deliveries, continued strength at 3 Arts and favorable comparisons relative to last year's first quarter. On the balance sheet, we ended the quarter with leverage at 6.6x or 4.1x, excluding our investment in Starzplay International. We continue to retain significant liquidity with $379 million of cash on hand and $1.25 billion of an undrawn revolver.
At the beginning of the quarter, we used some of our excess cash to prepay the $194 million of term loan A notes that would have otherwise been due in the fourth quarter of this fiscal year. Currently, we have no maturities until the fourth quarter of our fiscal 2025. We remain committed to strengthening our balance sheet and continuing to pay down debt while funding our investment in content and marketing from adjusted free cash flow. We continue to see Adjusted OIBDA for fiscal 2023 at similar levels as fiscal 2022. We see the year being back half-weighted.
Given the magnitude of Adjusted OIBDA for the next three quarters as implied from our outlook, I want to give you some more color on how this increasing Cadence falls out over the next three quarters in the second half in particular. As expected, the biggest driver is the timing of Media Networks' content amortization and marketing costs, which naturally peaked in the first quarter and is expected to decline in each successive quarter of fiscal 2023. The level of first quarter content and marketing costs reflects both the carryover amortization following the step-up in the number of Starz originals in fiscal 2022, particularly the late fourth quarter premieres of Outlander and Shining Vale, and the full complement of marketing and content expenses related to higher cost programming launched in Q1, including Gaslit and P-Valley. This amortization curve will cycle through in declining amounts as the year progresses.
Finally, at Starzplay International, following strong subscriber trends in the first quarter and bundling opportunities with Disney in LATAM, we expect revenue performance will improve sequentially for the remainder of the year. At the TV studio, we expect steady revenue growth and an improvement in margins in fiscal year 2023, particularly as episodic deliveries scale in the second half. Additionally, we expect TV and motion picture will benefit from high-margin licensing revenue of key library titles in the second half as Schitt's Creek and earlier film franchise releases become available. Finally, while we'll have elevated P&A in the fourth quarter tied to the release of John Wick 4, we expect our alternative distribution strategy with the March quarter platform avail of Shotgun Wedding will facilitate a strong close to the year for motion picture. Now I'd like to turn the call over to Nilay for Q&A.
Thanks, Jimmy. Operator, can we open the call up for Q&A?
Absolutely. If you would like to ask a question, please press star then one on your touch-tone phone. If you are using a speakerphone, we ask that you please pick up your handset before pressing the keys. To withdraw your question, please press star then two. Today's first question comes from Philip Cusick with JP Morgan. Please go ahead.
Hi, guys. Thank you. I guess number one, can you give us an update on strategic changes? Anything you can share there would be helpful. Then second, I wonder if you can talk about churn at Starz, the rough level of that, and what's that you've expanded the content offering in the last year? Thanks.
I'll have Jeff go first with the Starz issue.
Yeah. Hi, Philip, how are you? You know, as we talked about over the last probably two-three years, our content strategy has been really about driving churn down to low single digits by lining up content.
To our core demos, you know, every week, 52 weeks a year. We're just in the ending of P-Valley. We premiere Raising Kanan on the 14th, and we'll move that base from P-Valley into Raising Kanan. What we've seen in post-season churn, you know, before we were in the strategy, post-Power churn was somewhere north of 40%. It's now below, you know, 15% as we line the content up. We continue to see churn come down. We've seen single digits. We continue to see it come down to all-time lows. We think as we continue to roll through this content slate, lining up the content every week for the two core demos, we'll continue to see it get down to the low single digits.
Phil, in terms of our strategic planning, I would say the ultimate plan to value both Starz and Studio sides of our business separately remains the same. I think I'd add that, as you can imagine, there's a number of ways to do this and actually numerous complexities to address in order to make sure that the sum of the two parts, when they are valued separately, is significantly more than they're currently valued together. In terms of timing, I'd say my comments today reflect what we've said before on the subject.
Thank you.
Thank you. Our next question today comes from Matt Thornton at Truist Securities. Please go ahead.
Hey, good afternoon, guys. Maybe one for Jon, one for Jimmy. Jon, just to follow up to the prior question. It sounds like getting an announcement by the end of the summer is still the way we should think about that. I guess my incremental question there is, I know a couple of years ago, you guys had done an independent third-party valuation of the library. I think the valuation at the time was, correct me if I'm wrong, but you know, $3 billion-$4 billion. And my question there is, do you think that's still pertinent, you know, one or two years later in the current environment? And then just secondly, for Jimmy, two housekeeping.
I know you talked about currency, which is not something we talk about, but obviously the international business is getting a little bit bigger. If you can quantify what that currency headwind was, and do you still expect to be about free cash flow, break even to positive for the full year? Thanks, guys.
If I got you right, I'm not sure you started with a timing issue and then went into library value. I'm not sure you're connecting those two. In terms of library value, you know, frankly, if anything, the library is well more valuable than it was in that time period, and continues to grow. It grows for two reasons. One, obviously, we're filling the pipeline with a lot of content. And the more renewals we get, particularly in the television business, the more valuable that content is. The second thing is, you know, we'll see in a recessionary environment if it's quite the same, but we are finding huge increases in demand with so many new buyers for our content.
Frankly, again, such a significant portion of our content is scripted and premium. I'm frankly, that's what has the longest lifetime value and the most demand right now. That's what moves people's needles. When you see a lot of the big streamers obviously moving into new territories, you know, they need a lot of content. Frankly, it's expensive to make new content. You know, our library continues to grow significantly in value. It's an amazing library and again, we keep growing it. Did you have a question about timing?
Yeah, sorry for the confusion, Jon. Just to follow up on the prior question, it sounded like the way we were thinking about timing, getting resolution by the end of the summer and a deal closed by the end of the fiscal year is still the way we should think about it. I want to make sure I heard that right.
Yeah. Michael, why don't you jump in?
Great. As Jon said, we're on track. The key is to do the transaction or the initiative right and not fast. It's fairly complex. It's important to note that we have an attractively financed balance sheet and very valuable tax attributes, and we're working very hard to preserve the value of both of those. The structure that we're considering has become broader, and even in a separation, some of our potential partners have expressed interest in both the Studio and Starz. As always, our priority is to create significant shareholder value.
Matt, for your question on FX and free cash flow, yeah, we did see some foreign currency headwinds in the quarter. I think of it more as timing, but we'll have to wait and see. It was about $12 million for the quarter. About half of that would be Starzplay International, as you might expect. You know, we saw effectively what I think of as a full year effect in foreign currency occur in the first quarter. So we'll see where rates go from here. But generally speaking, we don't have a significant exposure to foreign currency, as you know. But relative to this quarter, relative to just the size of the first quarter profitability, it was, you know, kind of an outsized percentage relative to all things being considered. From a free cash flow standpoint, absolutely, yeah.
We still feel good that we can continue to finance our increased investment in content marketing cycle, including SPI or Starzplay International, from our positive free cash flow. It's a, you know, not a quarter-to-quarter thing. It's a trailing 12 months or a full year cycle because, as you know, content spend and cash flows move quarter to quarter. You know, we had a use of $62 million this quarter. I expect another use of cash in the second quarter as well. That is some tough comps as well on the trailing 12 months. Probably, peak leverage in Q2, and then reduce that into the levels of 5x by the end of the year. Again, on positive free cash flow.
Thanks, Matt. Operator, could we get the next question, please?
Absolutely. Our next question comes from Steven Cahall with Wells Fargo. Please go ahead.
Thanks. Maybe first for Michael or for Jon on the strategic alternatives. It sounds like you're having some discussions around both assets, maybe with multiple partners. I think the timing, you know, has maybe taken longer than some of us might have thought. I guess, unless you have surety on a transaction coming together, would you consider going ahead and separating the companies in order to generate some of the value that you're looking to get, maybe provide, you know, some valuation discovery as to what the market thinks those are worth? Or maybe you can talk to us about why it's better to not do that while you're pursuing the process that you currently are. Then Jon, at the beginning, you talked about the TV segment profit increasing.
It sounds like you're getting to some shows that are in later seasons. Could you maybe just talk us through what kinda profit growth we might expect over the next few years? Thanks.
I'll let Michael take the first and I'll take the second.
Yeah, Steven, we're not gonna give too many more details, but obviously this initiative is all about creating shareholder value. It's important to note that we are still on track to announce our intention in September.
In terms of television, I actually think I had it in my remarks. Again, we had virtually all of our shows renewed. Obviously, we're a little disappointed with The First Lady not going into second season, but we actually are exploring another potential buyer for that. Other than that, everything we had was picked up, and we're moving into the second, third, fourth season of a number of shows. As I said, I believed our contribution could go up something like 50%, I believe is in my remarks, and frankly, more the following year, which would be fiscal 2025. I'm sorry, fiscal 2024. Yeah, I think it's all working according to plan.
When you think in a recessionary period, frankly, it's a lot less expensive for networks and platforms to renew shows than actually to spend the $15 million or $20 million or more to launch new ones. We think, again, in that sense, we're a little bit insulated from recessionary pressure.
Great. Thank you.
You're welcome.
Thanks, Steven.
Absolutely.
Go ahead.
Absolutely. Our next question comes from Peter Supino with Wolfe Research. Please go ahead.
Hi. Thank you. This question relates to the eventual harvest of the investments that we see in your financials. Over the last five quarters, your programming investment has gone up by about $1 billion. Your TV margins have fallen from 10% to almost 0% on growing revenues. We've heard a lot of talk about deficit financing, and I wonder if you can talk about the importance of that and any other factors that would get you from your current run rate to much higher margins on higher revenues.
You wanna answer?
Yeah. I mean, we've got a lot of visibility in terms of what we're doing on the content side. As Jon's noted, we've had some great content generation and continue to do that. Yeah, it ultimately needs to pay back, right? It does. In television, I often say, you know, a lower margin at the time is a good thing because that means that what Kevin and the team is doing are killing it on building the future in all rights. In the first quarter, for example, we had a higher mix of deficit financing, which will be long-term benefits than we expect in the second half of the year. As we move through the year, that mix will change, and then that margin will start to increase.
As Jon, you know, mentioned earlier, we feel really strong about that going into not only the rest of 2023, but 2024 and beyond. I'll just remind you that Kevin has a mix of business there and the team, you know, with about, you know, at least half, if not more than half to third parties as well, and obviously a great supply relationship in programming with Starz. So, a strong business and a return to follow.
Thanks, Peter. Operator, can you ask the next question, please?
Absolutely. Our next question comes from Thomas Yeh with Morgan Stanley. Please go ahead.
Thanks so much. Yeah, as we think about the potential standalone value of a studio business approaching the other end of this upcoming transaction, I was wondering if you can just talk a bit more about the content monetization engine. I know there's a variety of ways. For example, some of the library TV deals are structured. Some of them even include advertising revenue share and ad exposure. Maybe just give us an update on the structure of these deals, how they've evolved, especially given kind of the diversity of players that you mentioned that you work with in the space. As part of that, I also saw, you know, the recent announcement about a partnership with IMG on consumer products.
Given your deep portfolio of IP on the studio side, I was wondering if you can, you know, put some dimensions around that opportunity for you where you sit now, on that front, you know, versus where you have to go.
Yeah. I'm gonna have Kevin Beggs answer that first part of the question.
Sure. Thanks, Jon.
I mean, generally, you know, our television, and Jimmy was alluding to it just now, we take a portfolio approach, a mix of, deficit, licensee, controlling our own destiny with.
Global distribution and downstream domestic distribution and the emerging model of a cost-plus that you would see at Netflix and Apple and Amazon, a few of the other players, which is upfront, but a longer return to your library. Something like Ghosts on CBS is a clear winner for us. 22 episodes a year, a hit comedy, the number one new comedy of the year. We have the downstream domestic distribution, which we've already set up at Paramount+, which is exciting and just gonna continue to throw off. Even deep library, something like Nashville, continues to perform, outperform, and continues to be re-licensed. It's 132 episodes.
That, you know, those are the big wins that we look for, and we kind of leaven those near-term profitability shows with cost-plus buyers in between. Ultimately, holding onto rights is what we're all about and why we've always been in the deficit game and are gonna continue to be in that in every way that we can.
Yeah. I think I should point out, and I think most of you know this, that the multiples paid for businesses that are in the studio business where they control rights you've seen before, you know, multiples 15x-17x and above, as opposed to some of the multiples you see for the diversified businesses and the legacy businesses. We believe strongly in deficit financing. We believe strongly investing in content where we will own the copyright, we will own it for life, where we will be able to explore multiple distribution revenue streams forever and ever.
In terms of both that question and the last one, there's no question in my mind that this value creation is gonna be significant, and monetization will be a multiple of what we're putting into the business.
Thanks, Thomas. Operator, could we get the next question, please?
Absolutely. Our next question comes from Kutgun Maral with RBC Capital Markets. Please go ahead.
Great. Thank you for taking the question. You know, it's great to hear the profit outlook of the TV segment. I know that dynamics at Motion Pictures are a bit different than TV, and that for Motion Pictures, you know, 2023 will presumably be maybe down a little bit year-over-year. Given the slate that you have ahead, and you've talked about your distribution strategy, you've talked a lot about your very successful approach to monetizing the library, are we getting closer to a point where Motion Pictures can also really ramp the segment profit profile? Thank you.
Yeah, this is Joe. It's a great question. We very much are. You know, Jon talked about the robust slate that we're driving into 2023 with. We've been very intentional as, you know, we tested a few films this last year, and we got a couple at the end of the year to really position ourselves for coming back into the market with a really robust slate. Yet, he mentioned about, you know, how that streaming business and our multi-platform business has really been a deliberate business from what was opportunistic. What we've been able to do leading into 2023 is stand up another leg of the business, fast return on cash, high margins. Our margins have been very strong for the last three years.
We go into 2023 with really probably the best slate we've had in years. You've got some giant brands in there like Wick and The Hunger Games. We've got some super targeted stuff. You know, one of the things that we obviously wanna be able to compete at the box office, but we're equally focused on profit. When you look at the box office, everybody's focused on these big tent poles. We have our share of those. But if you also look, you'll see things like Scream, which we happen to be a participant in. Jackass, Dog, Black Phone, these middle movies are really some of the most profitable movies that are out there in the marketplace.
When you look at our slate, in addition to those big drivers, we've got a number of action movies, Expendables, little franchise for us, Shadow Force, where Jon mentioned we're launching a spin-off of the Wick franchise in Ballerina. Really compelling economics, smart price point with an opportunity to kind of extend that brand. The answer to your question is a resounding yes.
That's very helpful. Thank you so much. If I could actually just maybe follow up, you know, related to the transaction and the studio, and you teased us with a comment. Structure has become broader and that there's unsurprisingly interest in the studio as well. You know, we just talked about how Motion Pictures, at least, you know, the results and profitability over there is probably very subdued given all the investments. You know, in a multi-year period, if you have the patience, you should probably see that inflect quite nicely.
You know, when you talk with interested parties about valuation, you know, what's kind of the framework that you look at to make sure that, you know, you'd be getting potentially fair value for this asset that at least from the street's perspective, has been, you know, arguably undervalued?
I would answer that a little differently. I think the whole reason that we've entered into these discussions to separate the values of these businesses, we found that there's, interestingly enough, two very different sets of investors. Some investors really like the fact that we've got this targeted platform, very specific. I would say again, even in this recessionary period, we're sort of in the fourth or fifth inning, and sometimes it's better to be smaller, and our expectations are a little bit different. We're already making money in our domestic streaming business. Honestly, we're like in the fourth inning internationally in that business. Instead of adding new territories, which everybody's doing, we're actually going the other way.
We're kind of scrubbing each territory to make sure it's a territory we need to be in. As we've said before, we're sort of within two years of a run rate of cash positive in our international business. We have, you know, a different way of looking at those businesses. Certainly there seem to be a group of investors that really like the streaming side and the platform side. There's another that understands that the immense value that we have is really after the MGM sale to Amazon, really the only real actionable investable studio. You know, again, MGM, if that's a comp, well, there you go. Use that. Our library, honestly, is better than the MGM library. It's newer, it's fresher.
We've been investing in it for five or six or seven years. If you want, use that as a comp. Again, at the end of the day, it is not surprising that people might show interest in both sides, but we still have to create a vehicle so that we can value both sides separately right now. That's what we're doing. As Michael said, there are good complexities. The complexities of having a really smart financing structure, NOLs, and things that we wanna preserve in this structure. We're taking our time and we think we're on track in terms of our timing, as I said, to potentially be able to close the transaction as early as the end of our fiscal year.
We're gonna do this right. We're gonna create the value for our shareholders. Again, we're advancing just really pretty much at the speed we expected to.
That's great. Thank you both for all the color.
Thanks. Kutgun, Operator can we get the next question, please?
Absolutely. Our next question comes from Bryan Kraft at Deutsche Bank. Please go ahead.
Hi, good afternoon. Wanted to ask you, I guess two questions. First, on international sub growth at Starz, can you just talk about, you know, sustainability of that and, you know, how your confidence in the next few quarters being able to, you know, continue to grow the way you did this quarter or even better the way you did last quarter? Separately, I guess for Kevin, what are you seeing is generally as far as third party demand for newly produced content?
I know that the studio's doing well and growing, but with some of the streamers like Netflix and Warner trying to become more disciplined around content spending, are you seeing, you know, any changes in demand for new projects or any renewed discipline around cost of those projects, you know, maybe on the leading edge of, you know, the conversations at this point? Thank you.
Start with Jeff.
Hey. Hey, it's Jeff. Thanks for the question. You know, I think there's really two things that are giving us great confidence in continued subscriber growth in the international business. We're seeing a lot of great momentum in distribution deals. We've got a lot of distribution deals that are, you know, about to be signed and about to be launched. We're bringing, as Jon said, instead of launching new markets, we're going deeper in existing markets where there's more consumers. We're seeing a lot of consumer uptake. We're seeing a lot of momentum in the distribution side of the business. We talked about, in Jon's prepared remarks, we launched a bundle with Disney. We've got some bundles in Benelux that we launched.
I think on top of that, if you take a step back, the content from the U.S. is really driving into the international business. Much like we talked about on the domestic side, now that we've lined up the content in international, that content is really starting to come online and drive the subscriber business. In territories like Latin America, Mexico, we've got these great originals that we knew we had a programming gap from the U.S., and we built in these great originals. Señorita 89 has performed really, really well. We're excited about Nacho coming out of Spain to come onto the platform very soon.
We feel really good about that we're on track to hit that 50-60 million subscriber target for the world in 2025, and and that we'll come out of that, you know, on a run rate breakeven coming out of the end of calendar 2024.
On the TV side and the demand, you know, it's always been the way that, you know, some platforms are a little more aggressive than others. The challenger brands, which is where we've really always built our business with new players that are emerging, that have bigger needs, that are not only programming but marketing with their programming. When you go back to Mad Men, it built the AMC brand along with being a great show and opened the door for a lot of other great shows. That's where we always wanna be. While there is some discipline being displayed within some of the legacy streamers, if you can call them that now, the challenger brands are eager to take market share.
I mean, it's a high bar, because the gray area between feature film and television talent has been blending over the last many years, and big stars and big auspices drive television events and television series. As a challenger independent, we have to be better than everybody else, certainly the internal studios. That's what drives us. We're super competitive. We wanna win. Most of the shows we're bringing to the market these days have multiple bidders. We're feeling really good about that. Development is just development. It's converting to production and making those shows for a disciplined price which continues to renew our business.
Okay, thanks very much.
Thanks, Bryan. Operator, could we get the next question, please?
Absolutely. Our next question comes from Jim Goss with Barrington Research. Please go ahead.
Thanks. Good afternoon.
Jim.
Some of these things have been addressed, but what I'm sort of interested in knowing is post-separation, I was wondering if you could frame out the studio strategy as a renewed standalone business. Not long ago, you had smaller TV productions and sort of mostly singles in the film side. Then you moved more aggressively with Hunger Games and Twilight, and recently you've been focusing on working with Starz. With this new lease on life, how do you think you'd characterize your approach on the TV side and the film side? I think you just were talking a bit about the TV, but, you know, is there a way investors should perceive the overall approach to the business in terms of getting that 15-17x multiple you referred to earlier?
Yeah, I honestly continue to do exactly what we do right now. Continue to build great, particularly scripted television shows and big feature films. Take our franchises. There's more announcements coming on John Wick. Look what we're doing in television with The Continental. You know, I'm not gonna give all of Joe's fun away, but you'll see some interesting announcements coming down the pike. We're not gonna separate these businesses without maintaining a lot of the synergies between Starz and Lionsgate Television's business. I can promise you that. I would say actually, you know, both sides would be free ultimately to consolidate potentially some other businesses. At the end of the day, both are strong in and of themselves.
They will maintain a tremendous amount of synergy, as I just said. I like our mix of products in television. As Kevin said, he mixes in the portfolio some things with less deficit, but of course, less rights. Joe, I like the fact that he is now got a diversified portfolio as well with big brands, bigger movies. Our core sort of mid-range action pictures, as well as he and I both have said, a deliberate strategy around streamers and multi-platform. Probably areas where of all of the other studios really won't spend much time, but where we make $50-$60 million a year. I like our businesses on both sides.
I like that, Starz on the international side is going to be in a much shorter timeframe than most of the other big streamers, operating cash flow positive. Yeah, I don't foresee huge changes other than, as I say, it is possible that they will scale up each of their businesses, but much more specific to their business.
Do you think you'd have one or two bigger franchise films every year or two or something like that to keep that interest going along? On the distribution strategy side, I know internationally, you know, you don't have your own distribution network. I wonder how that will work as well.
Okay. Well, Jim, again, when you say that, all you're really talking about in that is the international exhibition business, which I don't consider a distribution business.
Right.
Frankly, the discipline that we have of being able to go to a market internationally and cover so much of our budget in terms of our movies from taking both third-party international distributors as well as going to streamers and putting those pieces together. I think it gives us tremendous flexibility, particularly in a period where you don't know, are we in inflationary and recessionary? We do self-distribute in the U.K. We like that market, but we retain, don't forget, as much as we can in LATAM, for example. We retain all of our other rights other than the exhibition rights. You know, I like the fact that we are scrappy and entrepreneurial and we don't have any legacy mores that we have to follow.
We build these business models as the business changes. That's what we're gonna keep doing. I like the business that we do. Again, the multiples I referred to. If you look at some of the purchases of some businesses recently that actually don't even retain rights, and you look at the prices that are paid, you would say that this library and that this studio is immensely valuable.
Thanks, Jim.
Thank you much.
Thank you, Jim.
Yes, sir. Our next question comes from Alan Gould at Loop Capital. Please go ahead.
Thanks for taking the question. I've got two for Jeff and one for Joe. Jeff, we're starting to see a lot of advertising coming into the streaming business. Just wondering how that's gonna affect Starz. You know, you'll be differentiated as one of the few that doesn't offer an ad business, but it may keep prices lower. Also, if you could just address what's happening with the ARPU, both domestically and internationally at Starz. For Joe. Joe, pre-pandemic, Lionsgate was averaging about 14 wide releases per year. Now, given the changes in the box office environment, does it make sense for you to just be doing half that amount or a fewer number of films, but just bigger budgets such as The Hunger Games, John Wick?
Hey, Alan, it's Jeff. How are you? Look, I think, you know, other streamers start to replicate what we used to see in the linear business with advertising. It actually really, I like to say, the more things change, the more they look the same. It really then recreates what we used to have in terms of being that cherry on top of an advertising broad base.
Service. We think it lowers price points. It makes Starz more accessible. It makes us a better bundling partner where we have non-ad supported, very adult, very premium content as a great complement to all of the broader services that can have advertising on it. We are actually excited for that to happen. We look forward to those services getting launched and seeing where we can create some kind of commercial, you know, synergies through bundles of each of those services. In terms of the ARPU on the domestic side, relatively flat sequentially, we had a lot of big growth in the back third of the quarter, you'll see that, but I expect that to set us up pretty well for the rest of the year.
P-Valley came in the back third, and that's what you saw there. On the international side, we had a big bundling deal come in the quarter that drove ARPU down a bit. I do think long term, they'll still somewhere between, you know, non-bundled, somewhere between EUR 2 and EUR 3 or $2 and $3. I would expect that number to start to accelerate as well in the coming quarters.
Thank you.
Yeah. Thanks, Alan. The way we've geared the business is around eight to 12 films in terms of really driving the flywheel. Because of these other areas of growth, our international business is stronger than ever in terms of the value of our rights. Our multi-platform business, our streaming business have added growth overall. We don't require as many films. We're geared so that if we have 12 great offerings and in fact the F23 slate right now is 12 films, we're certainly capable of still driving that output, but we don't need as many to hit our numbers.
Okay. Thanks, Joe.
Thanks, Alan. Operator, could we get the next question, please?
Absolutely. Our next question comes from Matthew Harrigan with Benchmark. Please go ahead.
Thank you. Actually honing in again on Jon's very favorable comments on TV. Firstly, if you do the math and you're up 50% this year and you're up a good pop again next year, it feels like you probably have about a $75 million increment or so where the Street is on the TV profit in 2024. Should we probably disregard that as a buffer to the economic macro uncertainty and creative execution and all that? Or are you feeling, you know, more optimistic about your overall outlook for the next couple years? Then I guess as a corollary to that, you know, listening to the Warner Bros. Discovery call, I mean, it feels like they're trying to rectify the effort to have.
Of tearing apart their business at one point and taking a more, you know, balanced approach. I know you've got a good relationship with HBO. I think it's like five pilots and Casey Bloys just renewed his contract. Is some of your admission that things are looking better for the TV business just kind of a sense that things are rebalancing at some of the larger, you know, legacy streamers as you alluded to, and it's helping you? I mean, is the TV increment kind of a surprise from where you are a couple months ago, or are you just being a little bit more, you know, open kimono about it? Thanks.
Go ahead, Kevin. You start.
I mean, I think, you know, there's a lot of positive momentum in television because there's just so many buyers, so many new buyers, and as Jeffrey alluded to, kind of the realignment of the linear bundle moving into the digital bundle, AVOD players are pressuring legacy SVOD streamers and legacy television in the same way that basic cable was pressuring the networks, you know, 15-18 years ago. That's just great from a selling perspective. A lot of optionality in places where we can sell and make at different price points based on customer and client needs. We have a great relationship with, you know, all parts of the HBO Warner Bros. Discovery family. We have several shows. We don't have any pilots there right now.
We have shows that are being made or renewed and limited series. We expect and hope that those will continue to go on and be successful. If anyone falls out, there's others to replace them elsewhere. We just look at the business holistically, and it's a very different business than even five years ago with all the entrants. They're competing with each other, and that's great business for us. We've also had, you know, the amazing partnership and good fortune of partnering with Jeff and his entire team of Starz that's built our business. We're gonna continue that relationship in any iteration of the structure that's being alluded to before because we have so much shared in common and know each other so well and speak so frequently and have had a great partnership and relationship.
Those have all been reasons that that revenue is driven. As we've gotten older in age, we're kinda like pre-teen in the television business. Most of our competitors have been doing this for 60 or 70 years. We've been doing it for 20. Some of those libraries are now really turning into ongoing revenue. Many of our competitors have massive libraries that have been going since the 1950s. The other big component that we should just not fail to mention is that 3 Arts is an amazing engine. That transaction was accretive on day one. All the partners have a huge business in the management and production side, and now we have four shared series together. We expect to have more. The Serpent Queen is coming up on Starz. We're excited about that.
Julia's been a big success for HBO Max and Warner. We have a great model together, and we expect more down the line. Mythic Quest just got renewed for two more seasons. Season 3 is in the can. Those kind of things just didn't exist before, and it really goes back to Jon and Michael's overall strategy of getting closer to content and content creators. It's a smart strategy in a world that continues to shift every day as we're seeing today on the other earnings calls.
Yeah. I'll try to drill down even a little bit more for you. Again, the good news about television at this point in time, and it includes with 3 Arts and the shows they know are being picked up, and the visibility Kevin has, including having the shows at Starz. You know, again, we have great visibility, and I don't know how you extrapolated your number. I would say the television margin and contribution for fiscal 2023 is significantly higher. I don't know that your number is that far off. I could see a similar kind of a jump into fiscal 2024. I hope that's helpful.
Great. Thanks, Jon. Thanks, Kevin.
Thanks, operator.
Yes, sir. That concludes the question and answer session. I'd like to turn it back to the management team for any final remarks.
Thanks, everyone. Please refer to the press releases and events tab under the investor relations section of the company's website for a discussion of certain non-GAAP forward-looking measures discussed on this call. Thank you, everyone, and have a good evening.
Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful evening.