Lionsgate Studios Corp. (LGFA) Earnings Call Transcript & Summary

All right. kicking it off. Please note that important disclosures appear as a handout available in the registration area and on the Morgan Stanley public website. With that, I'm Thomas Yeh, the media research analyst at Morgan Stanley, and I have the distinct pleasure of welcoming Michael Burns, Vice Chairman of Lionsgate; and Jeff Hirsch, CEO of Starz. Thanks so much both for coming back.

Thanks for having us.

I appreciate you being here.

So it's been pretty busy at Lionsgate. I think there's been a couple of transactions, the recent eOne acquisition, the 3 Arts transaction, and of course, now the planned launch of the Lionsgate Studios. Can you help set the stage with what you're hoping to achieve this year with the SPAC in particular, and maybe what are the key highlights and priorities that you're hoping to get through?

It's funny because SPAC was the hot term and then it became a dirty word, and now here we go again. We really look at this as the sub-IPO disguised as a SPAC. We're in business with some old friends, Harry Sloan, Eli Baker and Sagansky. We like this opportunity. We thought this was the cleanest way to set a mark and also a floor for the studio. So the idea is we're going to sell 13% to 15% of the studio. So it will be a pure-play stock. The stock symbol will be LION, L-I-O-N, which should go out assuming everything goes according to the de-SPAC-ing, et cetera, call it, in early April that will be trading. So RemainCo will have 85% thereabouts of the studio and 100% of Mr. Hirsch's Starz from the get-go. And the plan is to spin off the remaining 85% by the end of the calendar year in 2024.

Okay. That makes sense. I mean I think the SPAC has certainly taken precedent in terms of time line over the previously announced separation. But as you just said, it sounds like that's still on track for the calendar year. Can you maybe just explain and talk about that process and if that changes at all due to the SPAC? Or how should we think about the ultimate separation in the end state for the [ asset ] ?

The full separation, we're targeting to do that, as I said, in this calendar year. And I don't see any reason why that shouldn't happen. The idea of raising this $350 million to $400 million is about making sure that when we separate the businesses that neither side of the business is overlevered. So yes, we spent some money before the year-end. We bought 3 Arts, wrote a $375 million check. And then on top of that, we bought 25% more of 3 Arts, which is in the management production business. When we first bought a piece of 3 Arts, that was 51% of it. Some 5 years ago, it was doing, let's say, in the $30 million EBITDA number, and it's doing a lot more than that. We love that business. We like that team. They're terrific producers. So -- and eOne is a transaction that we frankly just couldn't pass on. It was right in our wheelhouse. Thousands of titles in the movie library and the television library. We pick up shows like The Recruit, like The Rookie and Yellowjackets. So that was -- and a big reality television, unscripted business that we can augment with Craig Piligian and what he's doing on Pilgrim. So that was right in our wheelhouse like going way back when Trimark to Artisan to Summit and so that's going to be a very accretive transaction for us because we have so many synergies.

I think the original plan was to spin studio out of Starz. Is that still the appropriate way to think about how the separation occurs?

I would say that, yes. What's going to happen is there's always a tax-efficient way to do that. We had to retain at least 80% of the studio within the holding company, and we had to spend at least -- when you get to that part of the transaction, spend at least 80% -- my sense, it will be 85%, and the reason for that, so it's in a tax-efficient manner to our shareholders as well as the parent.

Makes sense. So I wanted to maybe touch on Starz as a stand-alone asset, Jeff. We've seen some stabilization in the revenues in the recent quarter. I met a large group of unprofitable to breakeven streaming services. You run a business that's 15% margins. You reiterated an expectation to get that back up to 20% over time? Can you maybe set the stage and talk about what the next phase of Starz looks like and how we should benchmark success for this year? And how should we think about that progress [indiscernible]?

Yes. Look, I think we took a much different tact and strategy into streaming. We looked at it as a natural evolution of technology. First, it was cable, then it was satellite, then there was ADSL. Now there's IP. And so we didn't look at this as a separate business and go hire a bunch of people, make a specific content for the service. We are kind of distribution agnostic. And so whether it's on Amazon, our own app, Comcast, DIRECTV, wherever the consumer wants to watch the business, we're there, right? And so what we've done is we've been able to transition off of the linear business -- or addition of digital to our great linear partners in a way that by the end of fiscal '25, we'll be 70% digital. Our revenue has been very stable over the last 5 years. We've just put our first rate increase in the business in the last 6 months. So revenue is starting to accelerate again. You've seen that increase over the last 2 quarters. And so we've got a business that's growing revenue. Like you said, it's got a [ 50% ] profit margin, really great return of unlevered free cash flow in terms of about 90% in the steady-state business. And I think the next phase as we separate Lionsgate, I think we've built a very compelling app internally with a great data stack. And so it's a [ balanced job ] that I think most people, if you're struggling in the streaming business could actually acquire and help fix some issues you're seeing in the broader space today. But I also think it gives us the opportunity to take and diversify revenue off of just SVOD into AVOD. And we're actually actively building an AVOD shelf within the Starz app today so that we get to launch and do some revenue diversification. So I think long term, you've got a business that is doing 3% to 5% revenue growth, doing 20% margins in the bottom. I think it's a good stand-alone business.

You made some hard decisions last year to restructure the business, including exiting some of the international markets and shifting more towards the domestic business. And even within the domestic business, I think you kind of aligned more towards the growth opportunities. Do you feel like we've reached a point where now this is where the inflection point happens, and we're kind of poised for growth from here?

Yes. Look, I think international was the right thing to do. I think we were very early. And I think it got a little costly, and so we just made the decision to come out. And so we did make, I think, a mistake there, but we've right that mistake. We focused on the domestic business. I think if you look at U.S. and Canada today, there's a real big opportunity. If you look at our 2 core demos, which were very, very valuable core demos in terms of women and underrepresented audience, very hard to replicate, very great to bundle with these broad-based services. I think as the world move from the traditional business into the digital business, it's starting to look like the old linear business again. So I think as these broad-based streaming platforms have stabilized, they figured out who they are, we will start to see bundling in earnest happen. And I think part of the next evolution of subscriber growth, not just for Starz, but for others, is these great bundles that you'll see in the business that ultimately drive a little ARPU down, but lifetime value and churn will come down significantly because you're partnered with folks. And we're starting seeing to that today on Verizon were bundled with Netflix and on Amazon with AMC+ and MGM+. And so I think you're going to start to see more and more of these bigger bundles that we'll start to replicate the old world based on broader streamers. And that's where I think the next phase of growth will be for Starz.

Interesting. I did want to ask about that bundling. I mean you've spoken about Starz being a complement service on a lot of these partnership models. The great rebundling seems to be happening a little bit more and fits in the Starz, I think, sometimes in slow motion, sometimes with confusing partnerships that create more consumer decisions at the margin and feels more fragmented. But what's your world view on the industry health and temperature? Is this picking up momentum? And are you -- what part of this makes you most excited about, the opportunity?

Look, we -- as -- we've always been viewed as kind of that cherry on top of broad-based television. I mean I think as you look at these big broad-based streamers, they become the #1 or #2 SVOD in the home, which is more of a cable replacement than anything else. Nobody in the old world pick DIRECTV or Starz.. They pick DIRECTV or Comcast, and they bought Starz on top of both. And we've actually replicated that in the new world that way, and we think that will happen. We have new distribution partners, whether it's Amazon, whether Hulu. These broad-based streamers, and as I think Max starts to realize that they're more than just a channel, they're a platform. I think you'll see Paramount Plus is starting to do that with Showtime being put in there, I guess, BET will go in next. And so I think as these broad-based streamers are starting to stabilize their platforms, start to ingest content, other's content in there, you'll start to see Starz flow through there. A lot of the delay, I think, in bundling has been from the technology side, right? Because you have to be able to ingest third-party content. You have to be able to put a billing code against it, you have to be able to build it, right? The cable business was really good at doing that. And I think in this, you've got content partners becoming platforms that you really need to understand that the businesses have really stabilized now, so I think that's the next kind of wave that you'll see.

Okay. Understood. Michael, I think you and Jimmy have both on a couple of occasions mentioned the merits of separation as potentially unlocking increased strategic value on both the studio and the Starz side as stand-alone assets. I mean the topic of consolidation in media has only increased in recent months, I feel, but at the same time, it feels like the market seems skeptical that it's a real fantasy on the broader industry headwinds. I mean what do you see as the potential unlock that might happen if any of these assets move into a larger vertically integrated company?

Look, we're all dragged along with the media being a disfavorable place at the moment, but we have a completely different model in the major studios. I was talking to Adam Fogelson, this morning, who runs our Motion Picture business, and we were talking about the overhead and the motion picture business, which is, call it, $70 million. And I said that, I'm just sort of curious what you -- what's the overhead in some of the other major -- the majors. And he said, 5, 6, 7x that. So we have a different model. We can't get killed on any 1 movie because of the licensing that we do internationally. We make money on 75% of our wide releases and even factoring in the losses, it's a 31% of return on that. And then we have the segment through the multi-platform releases, which we're making money on 93% of them, and it's a really good business for us. And again, everybody else making less movies, that's good for us from a standpoint of getting screens and putting out those titles. Will there be consolidation? Yes. Why are we doing this? It's pretty simple math. We think that Starz will have its own multiple. It's a very profitable business. Jeff is doing a great job. We suffered our way to wisdom, at the Ancient Greeks say, with what we did internationally. We were too early. We spent a lot of money. We pulled back on that, and now we're very focused on the domestic play on the Starz side. Lionsgate is going to do more of the same, which we've done in the past, which sort of returning to our roots, the television business run by Kevin Beggs and Sandra Stern, a very steady business. The unscripted business, it's going to be a great business for us in the world where we have now another player, eOne being consolidated into that. We have the film library, which people don't give us credit for, but that's okay. It will ultimately be valued. The film library approaching $900 million over the last 12 months, it's a high-margin business, meaning over 50%. You can't replace it. It's over 20,000 titles. So how much is it worth? It's worth a lot. So if you couple the management business, which we really love, and top of the feature film business, the library in the television business, including reality and scripted, what multiple will the stand-alone studio trade? You're the analyst. You can tell us. But my sense in the past, it's had a low to mid-teen multiple. And then you factor in the scarcity value, and that's without deal chatter because we're always the consolidation conversation or in the conversation. So my sense is it will trade better than it will be coupled with Starz as great of a business as Jeff has. I asked Jeff to come here, up here and which is, all right, what's the trade these guys are in the business of making money? Well, if you look at the market, the enterprise value of Lionsgate with Starz right now, and you assume that this SPAC transaction, the LION trade is going to go through, well, then you're getting Starz for free, a couple of hundred million plus the EBITDA on that business growing, moving towards digital. So Starz is worth a heck of a lot more than 0, and I think it's actually a very valuable asset. So ahead of the transaction closing at the end of March, early April, at the parent company level, you basically get Starz for free. So you get a free option on Starz. Where it will trade ultimately on a full separation? I don't know what multiple it's going to be. It's going to be probably 5, 6, 8x. I don't really know. But again, he controls its own destiny. It's going to be a content machine because going forward, when Jeff separates all the content that he makes or buys from others or licenses, et cetera, in many cases, he'll have an ownership because in that. So I think 1 and 1 is going to be a lot more than 2, and we think we'll get a better multiple. And I think if you take a look at the asset value that we're building, it makes a lot of sense. Now you're going to say to me, what's going to happen ultimately? Well, I don't have a crystal ball. But I do believe that there are very interested opportunities with Starz and the consolidation of the independent channels, et cetera. And I think Lionsgate with our library and the film business and television business alone and a separate company are going to be a very interesting strategic alliance partner, that's euphemistically put, with many other players in the space. And I don't think we have an antitrust issue.

Got it. I want to get to the growth drivers at Starz in a minute. But you did mention the film library at Studio, which I think has been a bright spot in financials for some time. I mean 2023 in my mind was a period of broader industry cost rationalization, which translates into greater austerity on content spending across some of the larger media players. But even then, you delivered profit growth across both film and TV over the same time frame, and your library sales have remained strong. So, can you talk about how discussions with buyers have changed over the last 1.5 years? And what's driving that resilience while there's greater focus on spending less?

I think it's the diversification of our library product. It's a -- we have a bunch of Quentin Tarantino movies now that are in our library. We have obviously the big franchises, the John Wicks of the world and The Hunger Games and The Twilight. And then we have -- you talk about both sides of the craziness as far as diversity of our library product, you go from Saw X to The Chosen, which is we have worldwide distribution rights on it. Nobody in this room is going to know what -- or maybe a few of you -- does anybody know what The Chosen is? One. We've got one in the back. So The Chosen is it was crowdfunding. It's the story of Jesus. We have -- they've done, I think, around 6 seasons. It's actually out theatrically. They put out the 2 or 3 episodes at a time. So we have worldwide rights of The Chosen. We're going to go out with that a worldwide distribution deal. And in my sense, it will be a bidding war. So the library itself, and that will be added to the library. Also, when you have this great IP inside a library, you have the ability to reboot and reimagine those. So I don't know if we said it publicly, but now I'll say it, we're going to go out with the Twilight series, an animated series. I think there'll be a lot of interest in that. I think we'll take one of our great action franchises starring Keanu Reeves. I think there'll be a television series ultimately on that. We did The Continental. Jeff was nice enough to greenlight that for us, The Continental, which was a three 1.5-hour movies. And ultimately, we cast him into the deal, got the green lit the show, and we ended up making a very relatively short-term deal on that show, with Peacock and Amazon. So I feel like the libraries are going to be in very good shape this year going forward. The margins are going to still be over 50-some percent. And we're going to continue to make our -- to release 10 to 12 wide releases, not going to deviate off of that, and another 30 to 40 of the multi-platform releases, make money on almost every piece of product that we put out there and a very similar model in many ways on the television side. And then if you have a little bit of a hedge for if talent gets more expensive, you're obviously hedging yourself out on the side of 3 Arts because they represent writers, actors, showrunners, et cetera. So that gives us a good hedge there.

I mean in a similar vein, I feel like some of your vertically integrated peers have increased their appetite to relicense content in the near term to support their free cash flow. Has that -- have you seen that in the market? Has that impacted the broader market price for the content that you're...

I think it's always good when some of the big streamers decide, okay, they're not going to make it all themselves, whether it's in the movie side or the television side. And I'm going to pick on Ted a little bit, which is there were there was a point where they're saying we're not going to license other people's content and then cut to look how Suits did. So we've got a bunch of successful television series that were licensed into Netflix. If you take a look at -- I saw that one of your counterparts points, Rich Greenfield, put up, look at Apple+ (sic) [ Apple TV+ ], they're now licensing product and other people's product. And so we have a bunch of movies in that package. I was on CNBC a couple of weeks ago. I was on American Airlines, and I was flipping through the movie sections, and I went to all movies, and 19 of the first 50 movies I looked at were Lionsgate movies. But what's happening is it's okay with everybody loosening up because if they decide they're going to be in the business licensing movies or television shows, we're obviously a great place to go because we have recognizable titles that do incredibly well. So I'm really happy to see it.

Got it. I mean the topic of library content demand is an interesting one, I think, in the context of movie demand at Starz. That's something that you mentioned, Jeff, on the most recent quarter. It sounded like Pay 2 output was, in particular, a big benefit to subscriber trends. Do you see catalog films playing double duty as churn reducers and potentially even subscriber gross acquisition?

I mean the hallmark of premium television always been great originals surrounded by Pay 1 and Pay 2 titles. In the quarter, we had John Wick from Lionsgate in the Pay 1, and we had a bunch of Pay 2 from Universal. And when we -- we've had, I think, 3 bad growth quarters in the history of the streaming business in the last 7 years. In each of those quarters, we were -- I would call them content bearing quarters bang big tentpole originals coupled with Pay 1 and Pay 2 titles, the business grows and we see that. And so we're excited that we've got Hunger Games coming up in a couple of months from Lionsgate. We've got 25 of the top 100 box office from last year, will be exclusively on Starz next year. And so we've got great titles coming to the service surrounding our big originals. We premiered BMF this weekend. It's off to a monster start. So our tentpole originals coupled, they're been really driving the business in a big way, and we couldn't be more thrilled.

I think your original roots come from the movie catalog, right, Jeff, before you really went into the original. How has that market overall changed over the last few years, especially with all these new streaming services kind of hunt for content buying catalog?

It's interesting. I mean I think the heyday of a lot of these pays were always coming into the premium services because we were smaller, right? So the idea would be you could go and monetize, pay against the smaller SVODs or premium services in the linear days than going second and third window I think the dollars have gotten so big that some of that has been lost, right? And so you're seeing split windows. Universal split their first window between Peacock and Amazon. And so I think you'll start to see more of those windows being shared going forward. But we really, the -- if you think about our 2 core demos, there's women, there's underrepresented audiences and the third leg of the stool is the movie audience, right? And so having a lot of big, fresh titles on the service coupled with the originals really when they're on, and we're in full -- you can see this grow like this. So it's really -- continues to be important, and we'll continue to look at library. The first-party data that we're getting off the app, we basically can tell based on title box and age of library when it's important to our service. And so we're not buying bulk like we used to anymore, where we just go to buy a library of this many dollars. We'll say, these are the titles we want. These are the ages that we want. This is what we're willing to pay for. And so streaming has given us a lot more insight into what movies actually perform against our demos. And when you couple -- you look at churn, which we really focus on lifetime value extension and churn reduction. If you watch an original and a Pay 1 movie, your lifetime value is 4x longer than if you just watch the original. So it's really important to have both of those 2 components together, working hard to drive profitability in the business.

You also referenced, I think, that you are refreshing the age of your original slate. Is that something -- I think that changes over time if you're thinking about how the film output strategy fits into the broader content portfolio? [indiscernible]

Yes. I mean, look, again, we have always said that we're using content as a way to drive lifetime value and reduce churn, right? So when we started with Power, we had 1 show. We would see making this up 1 million subs come on in the first week. And at week 10, 40% would leave because we didn't have an original behind them. And so we built out the power franchise and with BMF and P-Valley so that when you bring those customers on for the first show for 10 weeks, we would tie the finally of Power to the premier of BMF. And so we would move 80% of the audience from the first 10 weeks to the second 10 weeks. And so we would double the lifetime value of the customer just by content spend, right? So we weren't in the marketplace competing for subs with dollars and acquisition. We had the sub. So now we're going to spend money to drive lifetime value. We've seen lifetime value go up 40% in the last 2 years just because of the way we schedule and line up content against that. So the reality is we know we need a certain amount of originals to kind of keep that customer for the 52 weeks and then we can throw in big tentpole movies like Hunger Games and John Wick in gaps that we have that can bridge us to that next original. So I think the portfolio is the right number. The way that we get to the 20% margin long term is by refreshing the age of the originals, right? So we've got a lot of shows that are in their fourth and fifth season. When you go from season 3 to season 4, it's when the cost of a show really accelerates. It's really like salary cap management and the NFL, right? You've got to look at the show of the arc. You've got to realize where it sits and what's the allowable in the portfolio. And you know as the show is getting expensive, you have to have something in development that looks and feels like it that you could replace it with. So you go back to Season 1 economics versus season 5 economics. And that's the kind of path we're in right now to get to that 20% margin business coming out of fiscal '27.

Just had a hit show Outlander. Do you want to talk about a little bit about the prequel?

Yes. So we forgot Outlander. It's going into season 8, which we've announced as the last season, which is fortunately because that's got such a passionate great fan base. We also are now shooting the prequel called Blood of My Blood, which is 20 years earlier than the first season, and it's a spectacular story. Same writers. Diana is writing for prequel books now, which will be great for the fan base. But I think it's really going to be, the fan base is going to love it when they see it. there are -- I won't run it for people, but there are some things that you will see in the prequel that you read about in the books that you never actually see in the books or you actually see in the show that we bring to the screen for the first time. So I think it's going to be a spectacular continuation of that franchise. And so you take that, that will end at 8. We'll bring this one on. And you've got Serpent Queen, which comes from 3 Arts, which is a phenomenal show. There's a whole plan that when we get out to Season 3, there's spin-offs coming off of that. And so when we find shows that work and work really well because we know the DNA for those 2 core audiences, we take stories out of each of those shows to extend the life but to reset the kind of cost basis as the season 1 shows so that we don't have gaps for our portfolio. So we're able to manufacture audience based on the fact that each of these shows are 1 click to the left or right of the core that drove a lot of audience. So we're not taking big swings at our left field. So we know when we do a BMF, when we do a BMF spin-off, we know that, that's going to have the DNA of those shows. It's going to have the same producers. We'll bring some of the cast over. We'll bring some cast from other shows into other shows to keep that universe together and so that we know that we can manufacture hits at that season 1 economics versus season 5.

Do we have a date on the last Outlander season and the [indiscernible]?

We do not. We do not.

We do but we're not telling.

We do not. We do not.

I have to tell my preacher.

We are shooting both right now in Scotland, but the fan base is really itching for it. I think the cast knows, but I don't think anybody else knows from here.

Got it. I'll wait for that announcement. So you talked about bridging shows with other shows that are at the similar vein. I think about that concept as it relates to churn and churn management and the price increase you rolled through. I think you referenced at the top that first digital price increase. Can we have the postmortem on that? What's the lessons that you've learned? And what do you think going forward? Do you think that the prices rate increases will continue to be a main part of your kind of revenue growth strategy?

Yes. Look, I think there's 3 components to revenue growth over the next couple of years, one of it is rate increases, which I'll talk about a minute the other, obviously, is continued subscriber growth probably through bundles more than straight à la carte at this point. And I think it's bringing on revenue diversification long term through AVOD, which is a whole different conversation. But in terms of the rate increase, we did $1 with our first rate increase in the history of the business. We've always wanted to be priced as a competitive service. So we always want to be below the broader-based streaming services. The nice thing that has happened in the business over the last couple of years is that everybody else has done 1 or 2 or 3 increases. So it's given us a lot of room to stay below the broader-based streamers because in the consumer's mind, the bigger the gap is between us and the broad-based services, the consumer believes that we are complementary, not competitive. And so we wanted to stay away from the price points of the Netflixs and the Hulus in those higher price points. Whenever you look at a rate increase, and I did this for 15 years, unfortunately, in the cable business, you always look at what you yield, what you from it, right? And what the yield is net is disconnects versus how much you had to give on a discount to keep a customer on. So we did $1 rate increase. What I would say is we were able to hold 60-plus percent given an actual number of that rate increase, which is really good. And so it leads us to believe that we actually could have done more. I think the team did a phenomenal job of not only introducing it on the front end, but really managing the life cycle on the back end. And I think the data really helped us build journeys for each of the customers groups. I'll give a quick example. We did it in front of Outlander right? And in order to disconnect from a rate increase in the Starz app, you have to go into the settings screen to get there. So we had an alarm that basically said that if you were an Outlander subscriber, you watched Outlander and you were going to the settings screens that you were likely to go because you've got the rate increase, you were likely to disconnect. And so what we did is we threw that customer, before they got there, a countdown clock to the next episode of Outlander and said Outlander's in 4 days, 12 minutes and 60 seconds. And half the people that went in there went back and didn't even go into the disconnect process. Then people that went in, we offered them multiple different ways to save that custom. And so we really look at churn from a long-term perspective. If you look at our churn, post 6 to 12 months, it looks, reflects a lot like the old cable churn. And so the goal is to use month-to-month SKUs and the yearly offers to get people on the service for greater than 6 months because the business is really, really stable in growth at that point. So I think the rate increase was executed very well. I think we'll come back to it in the next 2 to 4 quarters and probably put another one in the business because we feel like we have room.

Just remember. If you raise prices of dollar and far and away, the best value proposition out there worth hundreds and hundreds of movies, the Pay 1 deal, the Pay 2 deals, the original programming, you put $1 price increase in there, and most of it sticks. Add that to 22 million subscribers per month, that's a lot of free cash flow.

You mentioned also subscriber growth over time through bundling partnerships. Do you see more opportunities for that? I mean we talked a little bit about the Verizon and the Netflix and all that. But in the coming months, is there an expectation that, that continues to proliferate and there's more opportunity for other partners to come on board?

Yes. Look, I think you'll see bundling 2 ways, right? One, I think you'll see, and it's kind of the size of the fish in the pond, right? So there are services that are smaller than us that don't have the tech that we have or the customer acquisition infrastructure that we've built that we can actually bundle into the Starz app and do a lot of that on their behalf. And I think you see some of that coming. I think you'll see the other way where you look at our 2 core demos in our movies, right? These are really valuable assets to add to a broad-based service. Anybody who really has the show or 2 that are focused on our 2 demos, we can actually put 4 or 5 shows against that show to help with churn for them. And if it's a tier upgrade, we share in the economics. So you don't have to spend content dollars to get churn reduction and you can take some of our economics. So I think there's a way that you'll see us just like we're on Amazon today as a tier upgrade in a lot of these services. I also think you'll see us bundle in because, again, if you can take the Lionsgate Pay 1, the Universal Pay 2 our originals, comingle it within yours a value discount for consumers, it's a really good service for both. We had a bundle in Lat Am where we studied it for a long time, and lifetime value was 60% longer in that bundle than it was à la carte in that market. And so it works. What you give up for ARPU you're making long-term retention. And so -- and I thank everybody is starting to kind of try to talk. I mean David has talked about looking into more bundling and pay service, and I think you'll see a lot of us coming together and doing that for consumers.

Consumers ultimately get what they want, and they don't want 5 bills.

Right. Right. And I would be remiss if not to dig a little bit deeper into the studio side as well of the business. You mentioned Adam Fogelson stepping in. What's the appetite to kind of invest behind more on that front on the film side? And what are you excited about over the coming years in terms of the tentpole franchises?

You mean this is my selfish choice question?

Exactly.

Look, I think the Michael Jackson biopic has got the potential to be just a gigantic movie for us. We don't have a budget for giant hits. I think the idea that we'll have another Now You See Me is very exciting. This Marc Forster movie out of the Wonder universe, so White Bird is just a beautiful, beautiful movie. Borderlands, I'm happy to tell you I saw it. I finally saw it. It was in pandemic and there was shooting schedules and the movie is really fun. I talked to Strauss Zelnick who runs Take-Two a couple of days ago, and it's a big selling game for them, and that's a movie -- it was expensive, but it was -- we have a great release date in August and the movie is a lot of fun. So I feel like we have -- it's very typical Lionsgate schedule. We'll have 1 or 2 tentpoles. I think this Ballerina, which is going to come out not this summer, but next summer with Ana de Armas in the John Wick universe has a lot of potential to break out. Again, our Motion Picture business with, call it, 10 to 12 wide releases and another 30, 40 of those are going to be the multi-platform. Movies like Sisu, which is a movie we can buy for $0.05. Did you see Sisu?

I did.

I mean, look, we bought it for a $0.05. Who doesn't want to see Nazis get killed? And so it was a -- we put the trailer, we spent $8 million, put the trailer on John Wick, and the movie did great business. You'll see us in the horror space. We have Imaginary coming out with Blumhouse. That's coming out in a couple of weeks, made for the right price point. I think it's highly likely that you'll see some other movies with Jason Blum, utilizing some of the IP that we have in the Lionsgate library because nobody does horror better than Jason. I think that, again, it will be the combination of a few big budget movies, a lot of them right in the middle. We have this movie. And again, it's a great movie, but it fits right in our wheelhouse. We made a movie that Mel Gibson directed called Flight Risk, starting Mark Wahlberg. It's a thriller and it's really fun and scary. And my guess is the foreign sales pretty much cover the entire budget, maybe even more. So we're going to stick to our model and put 40, 50 movies a year, theatrical movies or multi-platform into the library, continue to make television shows, probably invest somewhere between $1.2 billion and $1.5 billion of content, make money almost -- on every single piece of content, put it in the library and continue to ring the cash register. I mean the business is an odd business in many ways because, again, we weren't betting on a particular platform or technology. Some of this -- there was no AVOD, there was no FAST channel. It didn't even make any sense to me, but those businesses combined are going to be $125 million of revenue to us next year. So -- and then I don't want to hype it, but I did this demonstration. I reached out to this fellow that runs or founded Runway. Runway is a competitor. It's a unicorn, a competitor in many ways, but could be aligned with, for example, Microsoft and all the things that they're doing in that AI world. But I said, "Hey, take John Wick, and take a few scenes, and I could show it you, but your -- even though you're in a technology conference, I'm going to show this," but -- and I'd probably get sued, but the idea is take John Wick, take a bunch -- and give it to me and animate it in a certain style, and it's incredible. And this is text to video for the most part. So the idea when you have 25,000 titles in your library and you have a lot of things you're starting with source material and you could say, "hey, let's take an R-rated version and let's do a PG-13 version of that particular and we'll animate that," that's pretty exciting. And AI is going to be great for special effects in the world of dubbing and subtitling and all of that. And so that's exciting.

That mid-sized tentpole strategy is really working out for you. I mean are there lessons from revitalizing The Hunger Games franchise as an example where you have a view on how to structure some of these films and how to sustain that franchise for longevity?

We wondered whether we waited too long, but you have to wait -- Suzanne Collins, we have to wait for it to finish her book. I'm desperate for Stephenie Meyer to write another Twilight because that franchise just keeps going and going and going, and it's just such a great, great thing for all of us. So what did we learn? We learned that great IP never dies.

Interesting. I mean, we are, I think, approaching the highest profit level at the segment for Motion Picture for some time now, probably 8 years. How sustainable is that? Is that structural because of the library sales and the way that you're financing these films in the IP? Or do you think that this is a hit-or-miss business ultimately? And what's preventing us from going back to that $200 million level that we were seeing more consistently in the prior years?

I think Adam Fogelson if he was up here, he thinks he's going to grow that number dramatically because he's got the bread and butter business on a multi-platform, and it's just a question of getting the right wide releases and the right economic model. So I'd look for growth in that area. I'd look for television. As I talked about, Twilight and John Wick. And Mad Men, for example, from a library standpoint, I think that comes back to us in October. That television series is going to have a lot of interest in the world of the library. So I feel like that you're asking specifically about the Motion Picture business. I think that Adam is going to grow that business significantly.

Got it. We're out of time, but really appreciate both of you for being here. Thanks so much.

Thanks for having us.