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Date

Thursday, Feb. 26, 2026 at 5 p.m. ET

Call participants

  • President and Chief Executive Officer — Jeffrey Hirsch
  • Chief Financial Officer — Scott MacDonald
  • President, Starz Networks — Alison Hoffman
  • Head of Investor Relations — Nilay Shah

Takeaways

  • OTT subscribers -- 12,700,000 at quarter end, representing 7.6% year-over-year growth and an all-time high, with 370,000 net additions in the quarter.
  • Total U.S. subscribers -- 17,600,000, up 170,000, as domestic OTT gains offset linear decline.
  • Total revenue -- $323 million, up 60 basis points sequentially from the prior quarter, driven by distribution revenue related to the Canadian transition, partially offset by declines in linear and OTT segments during seasonal promotions.
  • Adjusted OIBDA -- $56 million for the quarter, up over 100% from the prior period due to lower programming amortization, reduced advertising and marketing, and higher revenue.
  • Full-year adjusted OIBDA -- $204 million, exceeding the $200 million guidance by 2%.
  • Leverage ratio -- 2.9 times at year-end, below the earlier 3.1 times guidance.
  • Net debt -- $589 million, remaining flat versus the prior quarter.
  • Gross debt -- $625 million, unchanged, consisting of $325 million in 5.5% senior unsecured notes and $300 million in Term Loan A.
  • Cash balance -- $36 million, with a $150 million revolving credit facility undrawn.
  • Full-year content spend guidance -- Expected to remain under $650 million in 2026.
  • 2026 outlook: OIBDA & free cash flow -- Management guides for low single-digit percentage adjusted OIBDA growth and unlevered free cash flow between $80 million and $120 million, with positive equity free cash flow anticipated.
  • 2026 leverage expectation -- Guided to approximately 2.7 times by year-end, aiming for the 2.5 times target.
  • No further subscriber reporting -- Company will stop disclosing quarterly subscriber figures starting March 2026, emphasizing "OTT revenue growth, profitability, converting adjusted OIBDA to free cash flow, and delevering" as key metrics.
  • Originals and content ownership -- Four originals in production, pursuit of 60%+ original slate ownership, and announced Sky as a co-commission partner for Fightland to improve unit economics.
  • International distribution -- Management highlighted established international demand from the UK and France and noted Lionsgate as the international sales partner for Fightland except in Sky markets.
  • Bundling initiatives -- Management reported bundled partnerships are "expanding our TAM," "driving net new additions," and "revenue accretive."
  • Pricing flexibility -- The CEO stated, "We have always wanted to be underpriced—way underpriced—relative to the broad-based streamers," and indicated room for price increases as competitors raise rates.
  • Production loan detail -- $41 million in production loans outstanding, solely for Fightland, with future shows likely to use similar financing.
  • Franchise leverage -- Franchises like Power and Outlander remain "reliable drivers of engagement, drivers of acquisition," and support launches for new IP.
  • AI utilization -- CEO Hirsch said, "AI is going to be a very powerful tool to enhance the business," citing use in Spartacus production and in optimizing programming, acquisition, and churn analytics for DTC operations.

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Risks

  • Management explicitly cited ongoing declines in traditional linear subscribers, which offset growth in OTT subscribers within the quarter.
  • Revenue was partially offset by "heavy holiday seasonal promotions, including lower-churn multi-month plans," which reduced linear and OTT revenue in the quarter.
  • Management confirmed quarterly adjusted OIBDA and cash flow have been "very up and down," largely due to separation from the parent studio and legacy content payment timing, which will require continued operational adjustment in early 2026.
  • The company will discontinue quarterly subscriber disclosures, removing a key externally visible growth indicator for investors beginning the March 2026 quarter.

Summary

Starz Entertainment (STRZ 6.28%) capped the fiscal year ended Dec. 31, 2025, achieving record OTT subscriber levels, sequential revenue gains, and delivered adjusted OIBDA above prior annual guidance. Management outlined a 2026 transition to prioritize free cash flow and further delevering, with guidance targeting unlevered free cash flow between $80 million and $120 million and OIBDA growth in the low single-digit percentage range. Operational strategy will pivot away from subscriber count disclosures in favor of OTT revenue, profitability, and margin improvement, while aiming for increased original content ownership and expanded international sales through strategic partnerships.

  • The transition of Canadian operations to a licensing model distinctly boosted distribution revenue in the quarter.
  • Positive momentum in bundled partnerships and annual subscription offers was linked to higher retention and rising ARPU when subscribers roll from long-term offers to retail pricing.
  • Guidance sets full-year content spending for 2026 below $650 million, with expectations for more stable P&L cadence except for a stronger Q4.
  • Management indicated capital allocation priorities remain focused on delevering but may shift to shareholder returns as free cash builds and leverage approaches the 2.5 times target.

Industry glossary

  • OTT: Over-the-top; refers to streaming video content delivered directly to viewers via the internet, bypassing traditional cable or satellite TV platforms.
  • Adjusted OIBDA: Operating Income Before Depreciation and Amortization adjusted for certain non-cash or non-recurring items, used as a measure of operating performance.
  • TAM: Total addressable market; the total potential market demand for a product or service.
  • Pay-one movie: A film licensing window in which a network has exclusive rights to exhibit new films in the first run after theatrical and home-video release.
  • Equity free cash flow: Cash flow available to equity holders after all expenses, interest, and debt repayments, excluding leverage effects.

Full Conference Call Transcript

Operator: Good day, and thank you for standing by. Welcome to the Starz Entertainment Corp. Q4 2025 Earnings Call. At this time, all participants are in a listen-only mode. Please be advised that today's conference is being recorded. After the speakers' presentation, there will be a question and answer session. To ask a question, please press 1 on your telephone, and wait for your name to be announced. To withdraw your question, please press 1 again. I would now like to hand the conference over to your speaker today, Nilay Shah from Investor Relations.

Nilay Shah: Good afternoon. Thank you for joining us for Starz Entertainment Corp.'s fiscal 2025 fourth quarter earnings call. We will begin with opening remarks from our President and CEO, Jeffrey Hirsch, followed by remarks from our CFO, Scott MacDonald. Also joining us on the call today is Alison Hoffman, President of Starz Networks. After our opening remarks, we will open the call for questions. The matters discussed on the call include forward-looking statements, including those regarding expected future performance. 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 our most recently filed 10-Q for Starz Entertainment Corp. Starz Entertainment Corp. 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. The matters discussed today will also include non-GAAP measures. The reconciliation for these and additional required information is available in the 8-K we filed this afternoon, which is available on the Starz Entertainment Corp. Investor Relations website at investors.starz.com. I will now turn the call over to Jeffrey Hirsch.

Jeffrey Hirsch: Thank you, Nilay, and thank you everyone for joining us today. It has only been nine months since our separation, and I am pleased to report that Starz Entertainment Corp. delivered another strong quarter both financially and operationally. Before I get into the highlights of the quarter, I want to give everyone an update on how we are executing in our core operations, how we are positioned for 2026 and beyond. 2025 was a very successful year, one in which we exceeded all of our financial guidance. It is a feat we are especially proud of amidst the pressures you see happening across the industry.

We ended the year at an all-time high of 12,700,000 OTT subscribers, growing year over year by 7.6%. We grew OTT subscribers in three out of four quarters, including adding 370,000 in the fourth quarter alone. This resulted in a 170,000 total subscriber growth in Q4. We grew total revenue on a sequential basis in both Q3 and Q4. We exceeded our $200,000,000 outlook for 2025 by 2%, delivering $204,000,000, and grew adjusted EBITDA year over year. And we exceeded our leverage target ending the year lower than anticipated, at 2.9 times, versus a 3.1 times guide. The successful 2025 was aided by an exceptionally strong December.

Our substantial subscriber growth in the quarter was fueled by the stellar reception to our programming slate. We premiered the highly anticipated Spartacus revival to critical acclaim, and Power Book IV: Force season three delivered impressive in-season viewership growth of 57%. The momentum from Q4 has continued into 2026, resulting in a strong start to the year. The success of our originals proves that our bedrock strategy is working. We deliver edgy premium content for women and underrepresented audiences that broad-based streamers do not address. Content remains core to everything we do. And as we look at the rest of 2026, it is clear we have one of our most compelling lineups of originals.

The slate includes the highly anticipated conclusion of Outlander, and Power Book III: Raising Kanan, the premiere of Starz Entertainment Corp.'s own Fightland, the return of Blood of My Blood, and the long-awaited return of one of our biggest hits, P-Valley, from Pulitzer Prize-winning showrunner Katori Hall. These 2026 originals, our pay-one movies from Lionsgate including films like The Housemaid and the Michael biopic, and our robust development pipeline, make it clear that Starz Entertainment Corp. has never been better positioned to keep our audience engaged, entertained, and growing. Before I get into our key financial targets for 2026, I want to recap our operational milestones in 2025.

We restructured our Canadian business into a licensing revenue stream, prioritizing our focus on the U.S. market. We greenlit and completed production on our first wholly owned series, Fightland, advancing our strategy of rebuilding our content library through ownership. And this morning, we announced that Sky will come on board as our co-commission partner for Fightland, further improving the already superior unit economics we get from owning the series. We have also made significant strides in de-aging our content slate this year, while still expanding our network-defining franchises Outlander and the Power Universe.

More specifically, we successfully launched Outlander prequel Blood of My Blood, and have greenlit a new Power Universe series, Power Origins, which has a supersized 18-episode order, is currently in production, and will give fans an action-packed origin story of fan-favorite characters Ghost and Tommy as ambitious young entrepreneurs. These shifts are critical in achieving our long-term targets of increasing margins to 20%, converting 70% of adjusted OIBDA to unlevered free cash flow, and delevering to 2.5 times as quickly as possible. The changes fortify our long-term path, and set us up to continue the growth we delivered in 2025 through 2026. Our outlook for 2026 is strong. We expect OTT revenue to grow.

We expect to deliver low single-digit percentage adjusted OIBDA growth versus 2025. We anticipate generating between $80,000,000 to $120,000,000 of positive unlevered free cash flow, converting the business to positive equity free cash flow. And we expect to end the year at approximately 2.7 times leverage, an improvement from our current 2.9 times leverage and well on our way to reaching our stated goal of 2.5 times leverage. As we stated, we have spent several quarters unwinding some of the legacy constraints of operating within a studio. We believe this has set up the business to drive strong cash flow generation going forward, with 2026 functioning as an inflection point.

With the long-term growth of the business as our North Star, we are deemphasizing the need to manage the business around quarterly subscriber levels. As a result, we will not be disclosing subscribers starting with the March 2026 quarter. We remain laser focused on OTT revenue growth, profitability, converting adjusted OIBDA to free cash flow, and delevering. We believe this decision is in the best interest of our shareholders, as it puts us on a path to achieving the targets we outlined.

Before I hand the call over to Scott, I want to reiterate that we continue to believe that there is an opportunity to scale our two core demos and grow our business as a result of the increased consolidation across the media landscape. Given our track record of profitably converting our business from linear to digital, and our industry-leading tech stack, we believe we are uniquely positioned to capitalize on potential M&A opportunities. We are poised to increase our scale as assets that are strategically valuable to Starz Entertainment Corp. become available. I will now turn the call over to Scott MacDonald to take you through the financials.

Scott MacDonald: Thank you, Jeff, and good afternoon, everyone. I will briefly discuss the fourth quarter's financial results, provide an update on our balance sheet, and discuss our outlook for 2026. It was a strong fourth quarter and calendar year for Starz Entertainment Corp., as Jeff outlined. We were able to reach the key milestones we outlined on our previous calls for both the quarter and the year. And we positioned the post-separation business to drive a significant increase in free cash flow generation from 2025 to 2026 while further bringing down our leverage. Let me start the breakdown of the quarter with an update on our subscribers.

Please note that our financials for the fourth quarter reflect the transition of our Canadian operations to a content licensing relationship, and, hence, I will focus my discussion on subscriber trends on Starz Entertainment Corp.'s U.S. business. Starz Entertainment Corp. added 370,000 domestic OTT subscribers in the quarter, reaching an all-time high of 12,700,000 customers. Additionally, total U.S. subscribers grew 170,000 in the period to 17,600,000, as growth in OTT was partially offset by a decline in linear customers. The increase in subscribers in the seasonally strong fourth quarter was driven by demand for our scripted originals, including Force and Spartacus. Moving on to revenue. Total revenue in the quarter was $323,000,000, up 60 basis points on a sequential basis.

Sequential revenue growth was driven by an increase in distribution revenue, primarily from revenue recognized in the quarter related to the transition of our Canadian operations to a content licensing relationship, and is reflected in the linear and other revenue line item on our income statement. This growth in distribution revenue was partially offset by a decline in linear and OTT revenue, which stemmed from ongoing traditional linear declines and heavy holiday seasonal promotions, including lower-churn multi-month plans. Adjusted OIBDA for the quarter was $56,000,000, up over 100% due to lower programming amortization, lower advertising and marketing, and higher revenue. We ended the calendar year with $204,000,000 of adjusted OIBDA, exceeding our $200,000,000 outlook.

Looking at the balance sheet, we ended the quarter with net debt of $589,000,000, roughly flat with Q3 levels. Total gross debt was flat at $625,000,000 and includes $325,000,000 of our 5.5% senior unsecured notes as well as $300,000,000 of our Term Loan A. Cash was $36,000,000, and our $150,000,000 revolver remained undrawn at the end of the period. Leverage at the end of 2025 was 2.9 times, better than our previous guidance of exiting the year at 3.1 times. Looking forward, as Jeff noted in his prepared remarks, 2026 is going to be a year with significant focus on driving increased free cash flow.

More specifically, in 2026, we expect unlevered free cash flow to range between $80,000,000 to $120,000,000, and we expect to generate positive equity free cash flow for the year. This represents approximately an $80,000,000 to $120,000,000 improvement year over year in both measures. The improvement in cash flow stems from lower cash content spend in 2026 versus 2025, which drives a closer alignment of cash content spend with the programming amortization expense reflected on our income statement.

Finally, as we complete the transition in the first few months of 2026 from being part of a studio business, and bringing our content payment timing in better alignment with industry norms, with improved free cash flow and another year of at least $200,000,000 of adjusted OIBDA, we expect our leverage to continue to decline year over year and exit the year at approximately 2.7 times. We will now open for questions. I will turn the call back to Nilay for Q&A.

Nilay Shah: Operator, could we open up the call for Q&A?

Operator: Yes. Thank you. To ask a question, please press 1 on your telephone, and wait for your name to be announced. To withdraw your question, please press 1 again. One moment for questions. Our first question comes from Brent Penter with Raymond James & Associates. You may proceed.

Brent Penter: Hey, good afternoon, everyone. Thanks for taking the questions, and first and foremost, appreciate the $0.50 hold music there. So good to see the $100,000,000 target exceeded in 2025 and then expected to grow in 2026. Can you just walk us through some of the moving pieces? You talked about OTT revenue up. How should we think about total revenue? And then with that 20% margin target out there, exiting 2028, what kind of progress in 2026 does the guidance contemplate?

Jeffrey Hirsch: Hey, Brian. How are you? I am looking forward to seeing you on Monday. I will take the second question in terms of the margin. So we are well on our way to executing against getting to that 20% margin coming out of calendar 2028. You will see a slight improvement in 2026, but the lion's share of the improvement really comes in 2027 and 2028 when you start to see the Starz Entertainment Corp. originals really become a lion's share of our programming slate. And there is a lot of de-aging of the content there, ownership of the content we announced, offsetting some of the costs by bringing Sky in on Fightland as the co-commission partner.

So when you take all of the de-aging of the content, Starz Entertainment Corp.-owned content, creating that incremental revenue stream by selling it internationally, you really start to see us move significantly toward that 20% margin in 2027 and 2028. Scott, do you want to take the first part?

Scott MacDonald: Well, I would just say on OTT revenue, we feel really good about growth next year. When you look at our slate, it is probably one of the best we have ever had. It is very consistently placed throughout the year. So we feel really good about that as well as our focus on our pricing strategy.

Brent Penter: Got it. And then thanks for the commentary on industry consolidation. Sounds like you all are ready to capitalize if there is an opportunity. So I guess what kind of assets would you be interested in, and then how should we think about the constraints in terms of your ability to buy something? Is there a leverage level you want to go above or an equity valuation that you would want to be at before doing any kind of deal, or just can you help frame those constraints?

Jeffrey Hirsch: Yeah, great question. I am not going to comment on our conversations to date, but what I will say, and we have said this repeatedly, we have two very valuable core demos that make us really complementary and important in the ecosystem, and there are a lot of, I would say, linear networks out there that have great brands that kind of complement our two core demos, but are really marooned on the linear side of the business without any kind of tech capability or desire from their larger corporate parent to try to transition them and them, with their consumers that have moved to the digital side.

And so those are kind of the characteristics that we look at to make sure that we are continuing to lean into what we do on an SVOD side much more on an ad-supported side. And, again, we continue to drive leverage down. Scott and I continue to focus on getting leverage down to that 2.5 times. And so that is where we would like to operate. So any kind of deal that we do, we would have to stick within that kind of leverage constraint to keep it around. We do not really want to operate a business that is four or five, six or times levered.

And so we will be very cautious about what kind of deal we do when it comes to leverage.

Brent Penter: Got it. And then putting M&A aside, given that free cash flow is starting to inflect, how do you rank order your other capital allocation priorities? Obviously, delevering has been the top goal so far, but as you start to get closer to that 2.5 goal, what are your other capital allocation goals? And, you know, at what point given where the valuation is do you start to consider shareholder returns?

Scott MacDonald: I think we look at this as it is going to be a good problem to have as we move forward. As I noted, we expect free cash flow to improve or come in the range, on an unlevered basis, $80,000,000 to $120,000,000. That is a significant improvement over the year. You will start to have cash that will start to build, which will give us an opportunity to delever, further invest in the business. And at that point, we would be in a position to make the decision to start returning some of that cash to shareholders.

Brent Penter: Okay. Great. Thanks, everyone.

Nilay Shah: Thank you. Operator, could we get the next question, please?

Operator: Our next question comes from Thomas Yeh with Morgan Stanley. You may proceed.

Thomas Yeh: Thanks. On the OTT subscriber momentum into this year, I think you mentioned Q1 is pacing pretty healthy. Can you just talk about the retention patterns that you are seeing for the subscribers that might have come in for Spartacus or came back for Power Book IV season three? Is the slate structured to run that retention through, or is there something more to do there still?

Jeffrey Hirsch: I think there are really two components to that. One is the slate is really set up to have a great connected year throughout the year. We have some of our biggest shows throughout the year, you know, Kanan, P-Valley, Fightland. That is a real long good run across the year against one of our demos. We have got the Outlander finale, Blood of My Blood coming in. We have a couple acquisitions to fill the gaps there. So we have a great complete slate, again surrounded by great movies from the Lionsgate pay-one and the Universal pay-two. That plus, we really deployed what we have seen in our data.

We really deployed longer-term offers, so annual offers, which we see really have, you know, when people roll from that twelve-month offer to retail, the take rate up to retail is significantly higher, and so you see a lot more spike in ARPU at the end of those offers. And they are also great for long-term churn. And so the combination of a great slate and longer-term offers really lead us to push churn down over the next twelve to eighteen months.

Thomas Yeh: Okay. That is helpful. Anything on the distribution partnership side that is kicking in as well, or any update on progress there in terms of the bundled partnerships that you have taken on?

Alison Hoffman: You know, Thomas, we continue to be at the forefront of bundling. This is really a focus for us. We have set up the business to be a complementary or an add-on partner to a broad-based streamer, to targeted streamers, and so that is a real focus for us. I think that we are excited to expand our bundling relationships and we are excited to see expansion in our distribution relationships. And we think that even with the disruption in the industry that those will come. And just to comment on particularly the bundling piece, our data is showing that it is very good for business. The bundles that we have in place are expanding our TAM.

They are driving net new additions to the business. They are revenue accretive, and then also ultimately are driving better retention for the business. So bundling and distribution are a big focus for us, and we are excited about the year to come.

Thomas Yeh: Okay, great. And then last one for me. You have talked about a timeline to get to 60%+ slate ownership. If we just think about the opportunities there, is it fair to assume that we should think about the international sales as concurrent with that ramp? And then ancillaries maybe start to build thereafter.

Jeffrey Hirsch: I think that is spot on. We have announced four originals that we have in some stage of production. All Fours, we have just brought in Plan B, a production agency, to help produce that show, and we are super excited about that. Kingmaker Masquerade, the rooms have just finished, and we are just getting the materials into a place. We are out looking for production partners there as well to see where we are going to shoot those shows and at what cost.

And, again, as you saw with the Sky announcement this morning, we have somewhat of a first-look deal with Sky where they continue to look at our slate and be excited about it, and I expect that partnership to build and grow. Also, Fightland was—Lionsgate, who is our international sales partner today, took Fightland out to Content London last night to very, very great reviews. So outside of the Sky market, Lionsgate will sell that for us. So I expect the unit economics of Fightland to only continue to get better.

Thomas Yeh: Okay. Appreciate it. Thank you.

Nilay Shah: Operator, could we get the next question, please?

Operator: Thank you. Our next question comes from David Joyce with Seaport Research Partners. You may proceed.

David Joyce: Thank you. Couple things. Last year, you had a few volatile quarters of cash flows in and out and margins up and down, tied to some of the final content arrangements with Lionsgate. How should we think about the cadence this year of both EBITDA and free cash flow? And on the free cash flow side, is it going to be moving around based on spending for originals? That is the first question.

Scott MacDonald: Okay. Thanks, David. That is a good question. When you think about our P&L, it has been very up and down. A lot of that was driven by the transition from being part of a bigger studio. Same thing with the related cash. We worked over the last few months to bring that into better alignment. We worked with our teams just to better sync up when we are spending the dollars on the production and getting that more in alignment when they are much more in line with industry standards. When you are part of a bigger organization, the cash management is just totally different. It is not necessarily based on just what Starz Entertainment Corp.'s needs are.

So we feel like we are getting that into a really good place now as we move into 2026. There is a little bit of work to do here in the first part of the year, but we feel like we are on a really good glide path to improve our spend. And we see content spend coming in under about $650,000,000 next year. From a P&L cadence, you will see very consistent over the year, especially the first three quarters. The fourth quarter in 2026 will be a more positive quarter, but the first three will be very consistent. It will not be as choppy as you have seen in the past.

David Joyce: Thanks. And on my other question, I see you have got $41,000,000 in production loans now. How many projects is that for? Is that just Fightland or is that a couple others? And how many originals do you think will be in production by the time you are exiting 2026?

Scott MacDonald: That is just for Fightland, that particular production loan. We look—it is very cost-effective cost of capital, so we like to use those. They help us line up our cash flows with those shows. As we greenlight the new shows coming up here, we would expect to have production loans for those shows. It will take time as those will build up over time. But, you know, at some point the show will be completed, you will repay the loan. So it should end up being a fairly consistent balance after we get through the end of this year.

David Joyce: Thank you.

Scott MacDonald: Thanks.

Nilay Shah: Operator, could we get the next question, please?

Operator: Thank you. Our next question comes from Vikram Kesavabhotla with Baird. You may proceed.

Vikram Kesavabhotla: Yes. Hey, thanks for taking the questions. Wanted to follow up on the co-commission deal with Sky. Can you talk more about why they were the right partner? And from a higher level, when you look at the content slate, the planned, how would you characterize the demand environment for your programming internationally?

Jeffrey Hirsch: Hey, it is Jeff. Thanks for the question. We think that we have seen in the past, when we were in the international business before, that the U.K. market is an incredible market for all of our shows. And over time, that has actually expanded in France as well. And so we think there is a real big appetite for our content in some of the biggest international markets. We have had a great relationship with Sky. We have licensed Amadeus from them. We have licensed Sweet Pea from them. And so we have an ongoing relationship with them.

I think they are very interested in what we have in production, and I think there are others that will be as well. And so, I think the slate that we have designed, we have obviously designed it with international revenue in mind. And I expect that to continue to grow as we get more ownership back onto the network and own our own library.

Vikram Kesavabhotla: Okay. That is helpful. And then, you know, you referenced the pricing strategy a few times in your previous answers. Can you just elaborate more on your plan there? I mean, do you think there is runway for you to raise price on your subscriptions over time? And how do you plan to manage the cadence of that going forward?

Jeffrey Hirsch: Yeah. So as we have said and will continue to say, we are a complementary service. We have always wanted to be underpriced—way underpriced—relative to the broad-based streamers out there. And so as they continue to raise rate, it gives us room to raise rate. You have seen the broad-based streamers raise anywhere from $1 to $3 over the last couple of years. So it has created a lot of room for us to have some pricing power against the broad-based streamers, and we will continue to look at that—right time, right place, right slate—to determine whether that is right for our consumers.

So we will watch the industry, watch the broad-based streamers, then we will make decisions based on where we think is right to drop that in.

Nilay Shah: Thanks, Vikram. Operator, could we get the next question, please?

Operator: Thank you. Our next question comes from David Karnovsky with J.P. Morgan. You may proceed.

Douglas Samuel Wardlaw: Hi. Doug Wardlaw on for David. I just want to get an idea of how you guys think about relying on spin-off shows like Power and Outlander versus new originals. Obviously, each piece of content kind of plays a large part in what sub growth looks like in the quarter. So I guess long term, how do you weigh starting a new show versus a spin-off of a sure thing? Thanks.

Alison Hoffman: Thanks for the question. Franchising here at Starz Entertainment Corp. is a real kind of power of ours. As you know, we have successfully franchised Power into three successful spin-offs and one currently in production. And these are really reliable drivers of engagement, drivers of acquisition for the business. Same with Outlander. You know, Outlander has been on the air since 2014 and still drives a huge engaged fan base. And we successfully launched Blood of My Blood last season. But what they also provide is a real platform or lead-in for new shows.

And so, what you will see is you will see us using these reliable franchises to launch new IP and establish new IPs with audiences so that we can bring, thread audiences from one show to the next as we are marketing and expanding our TAM with new audiences. So it is a real part of our programming strategy, and it is something that we think a lot about in terms of how we make investments and how we schedule.

Douglas Samuel Wardlaw: Great. Thank you.

Nilay Shah: Thanks, Doug. Operator, could we get the next question, please?

Operator: Thank you. And the last question will come from Matthew Harrigan with Benchmark. You may proceed.

Matthew Harrigan: Thank you. I should probably apologize for belaboring you with this one. But what is your reaction to C Dance? It caused a lot of volatility in the markets. Are there benefits for—I guess, speaking more broadly, do you see more benefits from you on the AI side as far as development? And I guess secondly, how is the development process differing from when you were under Lionsgate’s weighing? I mean, what parameters are you emphasizing or maybe a little bit different in terms of moving faster or adapting to your demographic even more precisely? Thanks.

Jeffrey Hirsch: Hey, it is Jeff. Thanks for the question. I think on the first one, AI is going to be a very powerful tool to enhance the business. I think there are three or four areas that we are using it today, obviously with content and reducing costs. We used it with Spartacus for some of the large scenes in Spartacus, I think very successfully. On the boring side, I think you can do a lot of internal training with AI that you would have to do, you know, and waste hours of employees.

Again, for us, with a large-scale DTC business that has over ten years of acquisition data, retention data, pricing data, that coupled with all of the content we have and how to schedule that content to best align around lifetime value and customer churn and marrying all those key KPIs together with hundreds of millions of datasets, I think the AI tools can really help us be efficient and continue to drive profitability for our business. I do believe it will be an additional tool for the industry, and this is still more art than it is science, and I think the creative process will continue to be that way.

And we are excited to use it as a tool, but the business is really grown on the success of the uniqueness of our originals. I think that is hard to replicate, and we are excited about that. For the second question, Lionsgate is a tremendous producer of television. We have had a great nine-year run with Kevin and team, and I think that will continue based on the Power Universe that we are still locked at the hip on. And so I do not expect that relationship to change.

I think as we go out and start to rebuild our own library again, it gives us the ability to control front-end costs a little better, direct line to the producing partner that way. It also allows us to really get that incremental revenue stream from international that we were not getting as part of being owned by a studio. And so those are probably the two biggest components—that we have a little more control with our team and a little more revenue on the other side. But, again, we are still pretty much locked at the hip with Lionsgate on a lot of our big shows. As I said, they are our sales agent internationally.

They are over in London today, I think. PACCAR continues to do a great job maximizing revenue for us there. So I expect that relationship to continue for a long time, and we are excited about that.

Matthew Harrigan: Thanks, Jeff. Be interesting to see what your stock does now. Thanks.

Jeffrey Hirsch: Thank you.

Operator: I would now like to turn the call back over to Nilay for any closing remarks.

Nilay Shah: Thank you, operator, and thank you, everyone. Please refer to the News and Events tab under the Investor Relations section of our website for a discussion of certain non-GAAP forward-looking measures discussed on this call. Thanks, everyone.

Operator: Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.

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