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AMC Networks and Lionsgate's fates will be closely watched

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Feb 15, 2024
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Illustration: Gabriella Turrisi/Axios

The eventual fate of Lionsgate and AMC Networks will be a litmus test for the long-term future of mid-size entertainment firms.

Why it matters: More consolidation is expected in the years ahead for Hollywood, and AMC Networks and Lionsgate are two of the most often cited acquisition targets.

The big picture: Takeover speculation on both has persisted for years, and M&A talk continued to dominate the latest earnings season for both.

  • AMC Networks' future has been in doubt since Josh Sapan exited as CEO in 2021. The Dolan family has insisted they're not interested in selling even as the cable bundle crashes around them, a stance reiterated during last week's earnings call.
  • "We see strength in being nimble and independent," CEO Kristin Dolan said Friday. "We have opportunities that are frankly not possible for non-vertically-integrated programmers who are tied to large broadcast networks or distribution businesses."

What they're saying: "It is hard to be optimistic about the company's future," MoffettNathanson analysts wrote Monday, even as they praised AMC Networks' ability to maintain relatively stable margins amid a shrinking business. The research firm has a neutral rating on the company.

Meanwhile, Lionsgate was busy selling investors on the upcoming split of its studio business from Starz, something it's spent the better part of two years figuring out.

  • Multiple analysts believe Lionsgate's studio and library are worth more than the company as a whole. The SPAC deal, which will spin out the studio, values it at $4.6 billion, almost double the company's market cap.
  • The remaining business for Lionsgate after the split will primarily consist of Starz, its pay-TV network and streaming service.
  • "It will be a great standalone channel. It will probably bulk up if we were to separate the business. Could we sell it? Again, we retain full optionality. So one way or the other, someone is going to take advantage of the value that they've created at Starz," Lionsgate CEO Jon Feltheimer told analysts in January.

Be smart: Lionsgate spinning out its studio business from Starz sets up one, or both, to draw further takeover speculation.

Zoom out: The M&A chatter around the entertainment sector has been buzzing amid a renewed wave of consolidation hopes that could reshape the industry.

  • Neither company is seen as big enough to stand on its own. Lionsgate has a $2.1 billion market cap, while AMC Networks is $637 million.
  • Lionsgate has made some moves to bulk up, most notably acquiring studio Entertainment One from Hasbro last year. The company also bought a majority stake in management firm and production company 3 Arts Entertainment in 2018, and upped its stake last year.
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