Lions Gate Entertainment Corp (NYSE: LGF.A) Q4 2020 Earnings Call Transcript

Lions Gate Entertainment Corp (LGF.A) Q4 2020 earnings call dated May 21, 2020

Corporate Participants:

James Marsh — Head of Investor Relations

Jon Feltheimer — Chief Executive Officer

James W. Barge — Chief Financial Officer

Joe Drake — Chairman of Lionsgate Motion Picture Group

Kevin Beggs — Chairman of Lionsgate Television Group

Jeffrey A. Hirsch — President and Chief Executive Officer of Starz

Analysts:

David Miller — Imperial Capital LLC — Analyst

Ben Swinburne — Morgan Stanley — Analyst

Alexia Quadrani — JP Morgan — Analyst

Steven Cahall — Wells Fargo Securities — Analyst

Matthew Thornton — SunTrust Robinson Humphrey — Analyst

Alan Gould — Loop Capital Markets — Analyst

Doug Creutz — Cowen and Company — Analyst

Robert Routh — FBN Securities — Analyst

Todd Juenger — Sanford Bernstein — Analyst

Jim Goss — Barrington Research — Analyst

Presentation:

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Lions Gate Entertainment Fourth Quarter 2020 Earnings Call. [Operator Instructions]

I would now like to turn the conference over to James Marsh, Head of Investor Relations. Please go ahead.

James Marsh — Head of Investor Relations

Good afternoon. Thank you for joining us for the Lions Gate fiscal ’20 fourth 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. And from Starz, we have President and CEO, Jeff Hirsch; CFO, Scott MacDonald; and EVP of International, Superna Kalle.

The matters discussed on this call today 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. These include the risk factors set forth in Lions Gate’s most recent Annual Report on Form 10-K. The Company undertakes no obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect any future events or circumstances.

With that, I’ll turn it over to Jon. Jon?

Jon Feltheimer — Chief Executive Officer

Good afternoon. Thank you, James, and thank you all for joining us in these extraordinary times. I hope you’re staying safe and healthy. A few months ago, I could never have imagined some of the things we’d be talking about on this call. Our employees working from home, film and television production suspended, movie theaters closed, and all of the other emergency adjustments we’ve made due to the pandemic. But as we report a strong quarter to end the fiscal year in line with our forecast, I’m also struck by how much we’re continuing to accomplish moving the Company forward on all fronts despite all of the challenges around it and generating a lot of momentum heading into our new fiscal year.

Let me share a few recent highlights, and then I’ll drill down on each of our businesses and talk about how we’re transforming them to continue to operate successfully in this new normal. Starz streaming business is thriving in the at-home environment, as we reached 6.8 million paid domestic over-the-top subscribers in the quarter, well in excess of our projections and it has continued its strong growth since then. Our STARZPLAY International platform has shown strong gains as well, with viewership of 20% since the pandemic began, driving international subscribers including the STARZPLAY Arabia platform and Canada passed the 5 million mark at fiscal year-end.

PANTAYA more than doubled its subscriber base from 315,000 to nearly 700,000 paid subs in the fiscal year, as it continues to deliver on its promises the premium over-the-top destination for Spanish language movies and original programming. We extended some of our biggest franchises announcing the big screen adaptation of Suzanne Collins’ Hunger Games prequel The Ballad of Songbirds and Snakes to be directed by Francis Lawrence. The new book is already driving triple-digit sales growth of the Hunger Games titles in our catalog.

American Hustle’s Eric Warren Singer is writing Now You See Me 3, and we’re preparing to begin production on John Wick 4. Spiral, a re-imagining of Saw, teaming Chris Rock and Samuel L. Jackson, opens next May. And in television, we remain a supplier of choice for new buyers with the romantic comedy, Love Life, starring Anna Kendrick debuting on HBO Max next week. They’ve already announced that this series will be a centerpiece of their first Emmy campaign.

As the global pandemic accelerates secular changes already in progress, our businesses are already well positioned to weather the current disruption and emerge stronger than ever in the new normal. To start, we have a great subscription platform at Starz that is profitable, growing and a major contributor to earnings. In this current environment, our content that has already been produced is more valuable than ever, with library revenue hitting a record $600 million in the fiscal year and our key brands generating higher licensees as we continue to extend them. We have full film and television pipelines poised to resume production and a slate of movies ready to distribute when theaters reopen and we have plenty of financial flexibility and liquidity with over $300 million in available cash at the end of the quarter and an undrawn revolver of $1.5 billion.

The goal of combining Lions Gate and Starz was to build a premium global subscription platform backed by the full resources of our Company. Today, that effort is achieving results. Our global streaming business reached more than 10 million worldwide over-the-top subs at the end of the quarter, and will continue to grow to between 13 million and 15 million paid subs by the end of the fiscal year.

In a world where the value of making great content is matched only by the importance of determining how it’s monetized, we’re increasingly able to control our destiny through the continued rapid growth of the direct-to-consumer Starz app, which is now our third largest distribution platform in the United States. We continue to apply a consumer facing data-driven strategy to the benefit of our over-the-top and MVPD partners alike.

Our success in transitioning our shared Comcast customers to a la carte efficiently and effectively in the quarter allows us to continue to build on our longstanding partnership. On the programming front, we’ve established ourselves domestically as a premium destination for women and diverse audiences with a mix of proven hits like Outlander, which completed its fifth season, outperforming Season 4 and earning rave reviews; returning favorites such as Steven Soderbergh’s The Girlfriend Experience, and a second installment of The Spanish Princess; and exciting new series like the recently debuted crime drama Hightown from producer Jerry Bruckheimer that is resonating with our subscribers.

These will be followed by the sexy and spirited comedy series, Run The World from Dear White People’s Yvette Lee Bowser and Leigh Davenpor; the family drama, Heels, set in the world of small town wrestling; and the next two highly anticipated series in our expanding power universe, franchise Ghost and Raising Kanan.

As we end the first full year of our international expansion, I’m pleased to report that we have launched in 50 countries ahead of schedule and exceeding our subscriber targets. That growth has driven by a slate of Starz originals, first running library features and best-in-class acquisitions that make up an attractively priced best-of-global SVOD content offering for consumers positions us as the complimentary premium tier to other OTT services and allows us to align ourselves with top distributors from Amazon to Apple, Roku to Orange, Airtel to Total Play, augmented by the STARZPLAY app already live in eight countries, as we continue our march towards our target of 15 million to 25 million international subscribers by 2025.

Recent additions like Tony McNamara’s The Great, starring Elle Fanning and Nicholas Hoult; Normal People based on the bestselling book; and the award-winning anthology series, The Act, combined with an anticipated ramp-up of our local production, will continue to diversify our slate and differentiate our platform. We’ve charted this course, funded it out of our own free cash flow. Our growth is on schedule and outside value creation is within our sight.

Turning to our Motion Picture Group, we pivoted quickly during the quarter showing the kind of strength and agility that has transformed us into a Top 5 domestic box office market share leader. When theater shut down two days into the release of the Erwin Brothers’ I Still Believe, we immediately repositioned the film to launch in an exclusive premium video-on-demand window with structured price points, including a special Easter promotion followed by an early debut on package media, electronic sell-through and traditional video-on-demand to mitigate its lost theatrical revenue.

When theaters reopen, we will be ready. Our slate has stocked with big brands and properties like Spiral, the Hitman’s Bodyguard 2, starring Ryan Reynolds, Samuel L. Jackson and Salma Hayek; and John Wick 4. It is deep in comedies like The Unbearable Weight of Massive Talent, starring Nicolas Cage, and Barb and Star Go to Vista Del Mar starring Kristen Wiig. It includes the horror thriller, Antebellum, starring Janelle Monae; the Dean Taylor-directed Hilary Swank thriller, Fatale; and the Neil Burger-directed sci-fi feature Voyagers. And it has uplifting stories for our times, like the Erwin Brothers’ inspiring American Underdog: The Kurt Warner Story.

And though our feature film production operations have been paused, the process of refilling our pipeline with exciting blue-chip properties has not. During the quarter, we launched — landed, excuse me, the movie rights, the Judy Blume’s iconic best seller, Are You There God? It’s Me, Margaret. The first time, one of her books has been brought to the screen, and a two-time Academy award winner, Cate Blanchett to the cast of Borderlands, and won an auction for 16 States, the zombie thriller to be directed by Evil Dead’s Fede Alvarez.

Obviously, our theatrical production and release schedules are caveated by the uncertainties in the movie business right now. Questions about when production will resume, what kind of protocols will we need to put in place, when theaters will reopen, and how movie moviegoer habits will change. But we address all of these issues with an agile data-driven and forward-looking film business that continues to extend and expand our biggest franchises, collaborates with our talent to create bold original new properties and bring it to all of our distributors to uniquely diverse and flexible slate.

Turning to Television. We shut down nearly 20 series and pilots virtually overnight when the pandemic hit. But we repositioned ourselves quickly, keeping casts and crews safe, shifting our focus from production to development and setting up over a dozen virtual writer’s rooms to keep talent engaged. We’ve already seen a significant uptick in backup script orders for pilots and current series paving the way for our productions to shift into high gear when it’s time to restart. The resonance of our premium content continues to open doors with new buyers.

On the heels of our partnership with HBO Max on Love Life, they will launch our docusoap, The House of Ho, on July 16; ordered two more production pilots and picked up the first television series from our Point Grey partnership, the Christmas-themed adult animated comedy, Santa Inc., featuring the voices of Seth Rogen and Sarah Silverman; and our Television Groups emphasis on creating great programming for Starz continues. A year ago, we had one Lionsgate television series on the aired Starz in foreign development. Today, we have over 20 Lionsgate television series, either in production, post-production, or development for our platform. Exciting properties like Heels, Dangerous Liaisons, Run the World and the next three Power-inspired series are just a few of the shows ready to resume or begin production, when production can resume safely.

Against the backdrop of economic disruption, we are the beneficiaries of diversification across our businesses and within each of our groups. In the TV Group, Pilgrim will be one of the first companies going on camera the competition reality series most likely in late June, Debmar-Mercury transitioned its long running hit daytime talk show, Wendy Williams, to a fully remote production, filming from her living room and 3 Arts executed a quarantine episode of Mythic Quest: Raven’s Banquet, filmed entirely on cast members’ iPhone that debuts tomorrow.

In closing, I want to say how proud I am of our employees for rising to the challenge of these unprecedented times with optimism, a can-do additive and the collaborative team spirit that is our trademark. We often talk about our culture being our secret sauce and during these past few months, it has driven our company forward. We responded to the global pandemic with a simple four-point plan.

First, protecting our clients by making sure that everyone was safe and could work effectively from home. Second, returning to the old normal by making plans to allow people to come back to the office and get our films and television shows up and running again under new protocols. Third, defining the new normal by reimagining our businesses in how they’ll operate going forward. And finally, identifying the opportunities that are emerging all around us. Everything in our plan is centered around our employees, our talent, and our production and distribution partners, as we continue to navigate unchartered waters with a view towards emerging from the current crisis even stronger than we were before.

And in this process, we’re guided by the same North Star principles that have always guided us, being financially and strategically diversified, creating and owning iconic intellectual properties with tremendous evergreen value, positioning ourselves where the puck is going, not where it’s already been, and reaping the benefits of our collaborative and entrepreneurial culture.

Thank you all very much. And now, I’ll turn things over to Jimmy.

James W. Barge — Chief Financial Officer

Thanks, Jon, and good afternoon, everyone. I’ll briefly discuss our fiscal fourth quarter financial results and update you on our fiscal 2021 outlook.

Fiscal fourth quarter adjusted OIBDA was $126 million, while revenue was up 3% to $944 million. Reported fully diluted earnings per share was a loss of $0.20 and fully diluted adjusted earnings per share came in at $0.21. Adjusted free cash flow for the quarter was $175 million; for the full year, adjusted free cash flow was $349 million.

Now, let me briefly discuss the fiscal fourth quarter performance of the underlying segments compared to the prior-year quarter. You can follow along in our trending schedules that have been posted to our website and show greater detail around our global Media Networks’ subscribers. Media Networks’ quarterly revenue of $358 million was relatively flat from last year and segment profit came in at $26 million. Globally, on a pro forma basis and including STARZPLAY Arabia, the company added 4.4 million subscribers year-over-year, up 22%, reaching 24.6 million global subscribers at the end of the quarter. Domestically, total subs were 18.9 million, which was up 2.1 million from the prior-year pro forma, which was adjusted for changes in distribution packaging. You can see more detail in the new sub disclosures included in our trending schedules.

Now, looking at sequential performance for fiscal fourth quarter, total global subs were up 2.3 million pro forma, driven by strong domestic OTT subscriber gains. Importantly, we now have over 10 million OTT subs including Starz, STARZPLAY International, STARZPLAY Arabia, and Pantaya. I should also note that our sub counts all represent paying subscribers.

Now, turning to Motion Picture Group, revenue increased 10% in the quarter to $393 million and segment profit came in at $101 million. Motion Picture Group turned in a very strong year, improving segment profits by more than 60% to $209 million. In the quarter, the performance in our film group was largely due to strong and solid performance and lower P&A spend that more than offset box office underperformance related to theater closures.

And finally, TV production revenue came in at $258 million, while segment profit was $22 million. Segment profit increased 10% year-over-year, as the strength of library titles and G&A savings more than offset the prior-year quarter tough comp for Orange Is The New Black.

Now, I’d like to provide an update on our fiscal 2021 outlook as well as our balance sheet. As everyone on this call is aware, the impact of the COVID-19 pandemic and the governmental response to the pandemic has been unprecedented. Accordingly, we have a limited framework, with which to assess the ultimate impact on our business model and forecast. We believe we have a diversified and a resilient business model that is well-positioned to benefit from the shift to in-home consumption. So, there could be disruptions to our business as we navigate workplace safety, government regulation and evolving consumer trends.

Accordingly, due to the heightened uncertainty and limited visibility related to the COVID-19 situation, we don’t believe it is prudent to provide specific forecast for adjusted OIBDA at this time. Rather, we will be providing some inputs to help you build your models.

So, let me provide some color for fiscal 2021 by segment, as we did on our last call. First, in Media Networks, as you know, it’s our largest contributor to segment profits. Recall this is a subscription-based business with heavy in-home consumption, so we have pretty good visibility. And we like what we see with significant increases in viewership and over-the-top subscribers on both our domestic and international services. That said, we have potential disruptions to content deliveries or cycling through a new distribution deal and are fully investing in our international opportunity. So, our previous flattish segment profit view is largely on track. As Jon mentioned, we expect Media Networks over-the-top global subscribers of between 13 million to 15 million for fiscal 2021 with the midpoint representing 30%-plus growth.

Now, looking at Motion Picture and TV. Recall, our pre-COVID commentary on Motion Picture Group segment profit for fiscal 2021 was down due to difficult comparisons and timing of the slate, and that the TV would also see significant profit growth in the year, in part driven by the licensing of preexisting IP. That year-over-year comparison is largely intact, but production delays and theatrical disruptions will result in some uncertainty and a shift in business to the right as some revenue and profit move from fiscal 2021 into fiscal 2022. Now on the balance sheet. Our leverage ended the year at 5.2 times adjusted OIBDA, or 3.9 times, excluding our investment in STARZPLAY International. During the year, net debt decreased over $300 million ending at $2.4 billion. We were opportunistic in the quarter and purchased some term-loan B bonds and a modest amount of stock during the market dislocation, and we will continue to allocate capital in a thoughtful manner. We ended the year with ample liquidity with well over $300 million of cash on hand and a $1.5 billion undrawn revolver. In addition, we have no maturities until the very end of fiscal ’23. We’ll remain committed to paying down debt with the bulk of our excess free cash flow.

Lastly, we remain comfortable with our maintenance covenants based on our revised forecast and having further stress-tested them for longer production and theatrical delays, as well as the potential negative impact of the recession.

Now, I’d like to turn the call over to James for Q& A.

James Marsh — Head of Investor Relations

Okay. Thanks Jimmy. We’re ready to go with Q&A at this stage.

Questions and Answers:

Operator

[Operator Instructions]

Dave Miller, your line is open.

David Miller — Imperial Capital LLC — Analyst

Yeah. Sorry about that, some technical issues over here. Hey, guys, congratulations on the stellar results. Jimmy, a couple of questions for you; and then, Joe Drake, if you’re on, I have a couple of questions for you. So, Jimmy, on the free cash flow number, just outstanding. Even for a fourth quarter, it looked like there were some negative working capital effects going on in the quarter, particularly with receivables. Do you think that that contributed or was it more amortization? Just love to get your comment there. And then, Jimmy, could you also comment, as it applies to fiscal 2021, what should we be modeling for corporate costs as it applies to the legal spat you guys have with MGM Holdings? I couldn’t tell whether you had your legal counsel on or not. If you’re willing to chime in on that, I would appreciate it. And then, I have a follow-up for Joe. Thank you.

James W. Barge — Chief Financial Officer

Well, first of all, with regard to any legal costs, I’m not going to really comment on that. Likely to be a one-time item and obviously, not going to speak to that. But with regards to the free cash flow in the quarter, thanks, it was a strong quarter, but I’d also point to a strong year, right. We finished right around $350 million of free cash flow for fiscal 2020. No particular changes in the monetization program. They were relatively small and we always have swings in working capital, but we absolutely feel that our reduced working capital needs are sustainable and will continue to benefit us into the future.

David Miller — Imperial Capital LLC — Analyst

Okay, great. And then, Joe Drake, if you’re on, once these theaters reopen, whether it’s late June, early July, whatever the date is, what do you think this thing is going to look like? And I assume you’ve been in touch with the theaters, fairly regularly over the last two or three months. I mean, who’s going to show up? Is it going to be millennials, is it going to be couples without children, is it going to be, call it, soccer moms from the suburbs that will show up with children? I’m particularly worried about the animated films and/or children’s films and will families take children in a COVID-19 environment. And so, that’s kind of the first part of the question.

The second part of the question is we’ve heard from some of the theaters that certain old films will be licensed for sort of this late, — call it mid- to late-June, early July time period, films from the ’80s, ’90s, what have you, maybe they would charge $5 just to get people in the door, just to get revenue in the door. Given your extensive library, are you involved in that at all with the theaters? Thanks so much.

Joe Drake — Chairman of Lionsgate Motion Picture Group

You bet. Thank you, David. That’s a lot of question, but I will attempt to cover it.

David Miller — Imperial Capital LLC — Analyst

Sorry.

Joe Drake — Chairman of Lionsgate Motion Picture Group

No, it’s good. I’m glad you asked it. On the first part of it, yes, we are in touch with our exhibitor partners literally daily and weekly. And so, working very closely with them. We believe that people are anxious to get out of their house and do things. We’re bullish on people coming back to theaters, but we’re not naive about the environment we’re entering and that we’re in a fluid situation and there’s a lot of things that have to happen for audiences to feel safe and comfortable in theaters. We, the exhibitors, everybody’s doing a great job of preparing for that and making sure safety protocols and that people feel safe going back into that environment. I was on with one of the exhibitors this morning and they’re going to extraordinary lengths to make sure that it’s a great and safe experience.

As it relates to audiences, I can tell you how we’re handling it, which is we have dated some films as early as August as you’ve probably seen and September and October. We’re very specific about the films we put in there, from our perspective. You have to operate now in a very flexible, agile way and we’ve put a lot of plans in place to do that in the way we’re approaching our business. And so, if you look at the first few films, they are specifically chosen and dated. We think they’re great dates for the movies in general, but they’re dated also because they’re targeted audiences that don’t require that and they’re targeted movies that aren’t going to require us long lead of a media spend. And so, they’re actually set, so that we can get a lot of data before we actually trigger expenditure and have the ability to move quickly if things aren’t opening quite as aggressively as we hope they will, and have places to put them if we have to shift.

So, as I say, I think that we’re going to — I think that the audience is coming back and we’ve certainly done our share to try to keep that theatrical experience at top of mind. I know that you’re aware of Lionsgate Live, which is a program we ran in conjunction with our exhibitor partners and in conjunction with YouTube and Fandango and a whole bunch of partners to keep alive the idea of that theatrical experience. And it was a huge success and it helped raise some money for the furloughed workers. So, lots of good work going there. As it relates to — I hope that answers the first part of your question. I’m happy to answer more, if there’s more there.

On the second part, yes, theaters are going to be playing legacy movies. We have a whole program of those. We’re very much a part of that and we had put that together with them a couple of months ago actually to start to kind of plan that lineup. And that’s supposed to get people comfortable back going into theaters as well as to make sure that the protocols are in place. And there’s obviously a lot of training of theater workers and a lot to do to get this right. And that’ll give a — that’ll kind of provide — it’s a better question for an exhibitor, but I know that the idea is to provide a soft launch to work out the kinks and really create a great experience.

David Miller — Imperial Capital LLC — Analyst

Hey, wonderful. Thank you very much.

Joe Drake — Chairman of Lionsgate Motion Picture Group

You bet, Dave.

Operator

Thank you.

[Operator Instructions]

Our next question will come from Ben Swinburne. Please go ahead.

Ben Swinburne — Morgan Stanley — Analyst

Thanks. Good afternoon, everybody. I have a couple of questions. But I just wanted to come back, Joe, on those comments you were just — the conversation with David. I thought it was really interesting. How do you decide whether you’re ready, it’s time to release the films that you’ve dated. I mean, you mentioned you’ve put movies in place that don’t require a long lead time for media it’s a give-yourself flexibility, makes a ton of sense. But what are you looking for, to say, two weeks out, it’s a go?

Joe Drake — Chairman of Lionsgate Motion Picture Group

So, we’re obviously digging as deep into data as we can about consumer habits and what sort of proxies we can use for appetites coming back to theater. But additionally, you’ll notice that currently on the schedule, we’re about six weeks out from the first big wide release movie and that will give us an opportunity to see how audiences are reacting leading up to that and on that opening weekend, and sort of triangulate all of those data points and anything else we can get our hands on, as well as we’re obviously monitoring — we’ll be monitoring as those soft launches happen, what kind of capacities and how audiences are showing up to those theaters. That’s a part of it.

Obviously, we’re also running — we’re always running our own tracking studies and the like on our material itself and how it’s working in the level of interest. And we’ll be doing some extra polling to understand audiences’ willingness as we’re tracking. As our movies are starting to track, we’ll start to monitor, in unique ways, audiences’ willingness to come back to theater.

Ben Swinburne — Morgan Stanley — Analyst

Got it. And then, maybe for, Jon, when you step back from all of the sort of volatility and anxiety over the last few months and look at changes to the business, what do you think the long-term implications are for Lions Gate and how it operates its strategy and how the business runs as a result of this. What have you guys learned that you think will last beyond what we’re going through right now as you sort of think about the business?

Jon Feltheimer — Chief Executive Officer

Yeah. Just from the way our employees work, I think we certainly have learned that we can operate in a more modern fashion using technology. I can tell you I’ve never been busier in my life, I’m too busy. I have about 10 conference WebExs; I have a one start every single day, that’s a crisis group that we have together; and then, we communicate with the employees all during the day. So, just from the overall way we operate, looking at how much money we spend on travel, looking at the conferences we go to that we have to be there. From an expense perspective, I can tell you we’re pulling money out of our business constantly and we’re up to over $1.5 million a month, just run rate on things that we normally would’ve considered normal expense.

In terms of sort of all of our operations, our businesses, number one, again, in this environment going forward, super happy to be diversified. Diversified again financially, that’s important from year to year. Sometimes, one group outperforms, the others might not. But at the end of the day, strategically, the way that our three core businesses operate together, the priority that Starz has for Lionsgate Television, Lionsgate Television has for Starz, the ability to build our business on a global basis such as to be able to provide our first run movies to STARZPLAY International in the U.K. and India and some other territories we’re looking at, including obviously the U.S. I think that diversification, both financially strategically, will put us in a very, very good place.

Clearly, having Starz turns out to being, I think, a really smart investment that we made a couple of years ago. And in this at-home environment, I think that we’re going to continue to build that business. It’s doing exactly what we hoped it would do. And great partnerships, we create them every single day with partners that understand the value of it. And so, that’s working out really well.

In terms of television, it’s going to be interesting. The buyers are all now becoming sort of — they’re all looking a little different. If you look at NBC, right now, I think you have to look at NBC and Peacock together. If you look at Hulu, — you’re looking at Hulu and FX and ABC together. So TV, we’re going to have to have some new kinds of deals, new calculus that makes sense for the buyers and for us, as we look at the back-end value of those businesses, whether we need to take more money upfront and give up some of the back-end. So, I think pretty much every business is going to be a little bit different. I think certainly the experiment that we did, Joe and his team did a fantastic job pivoting on. I still believe, I mean, we’re out in the marketplace for three or four days and all the theaters shut down and we’re going to pretty much get back to even on that and making up a huge hole in our ’20 financials and the rollover in ’21 that we expected.

So, what we found obviously is there’s an at-home audience for movies as well. We still believe entirely in the partnership with exhibition, but we do see that these models could potentially change, and hopefully, we can find a smart way to do that with all of the various constituencies. And the last thing I would say is the one thing for sure that this whole thing proves is that library has incredible value, growing value, it’s something we’ve talked about a lot, we call it here a creep, which is every time we do an ultimate, it goes up in value the next time we do the ultimate. And you’ve seen spectacular increases in the value of evergreen library content that I believe having so many distribution outlets, having so many, basically, audiences watching more and more content than ever before with a better technology that allows them to view it in a better way. So I think, overall, we’re pretty well-positioned for this new world, but look, we’re watching it every day and we’re trying to adapt with it.

Ben Swinburne — Morgan Stanley — Analyst

Thanks for your thoughts.

Operator

Thank you. And our next question will come from Alexia Quadrani. Please go ahead.

Alexia Quadrani — JP Morgan — Analyst

Thank you. Just a couple of questions. So, first one on just if you could provide a bit more color on the reopening of production. I know you talked about it a little bit in your opening comments. But in terms of how you prioritize, what gets go-green again, in terms of where do you start, and then do you have flexibility in locations, and new current system, states open up before the others, can you kind of pull those levers there to kind of get everything in process all over again and get going again.

And my second question is really just on the Comcast relationship with Starz. Any comments you’d give in terms of how the unbundling is going, moving from the bundle to a la carte. How that transition sort of going? Thank you.

Jon Feltheimer — Chief Executive Officer

Great. On production, I’m going to have Kevin and Joe start, and then, Jeff can answer your second question.

Kevin Beggs — Chairman of Lionsgate Television Group

Hi, Alexia. Kevin speaking. Yeah, just speaking to our — starting the series [Phonetic], kind of plant their flags somewhere and then stay there for years and years. Happily, our portfolio is pretty regionally spread around with New York, Atlanta, North Carolina, LA, Vancouver right now and several in the U.K. So, we’re looking closely at the rural states that steam like they’re going to open first and have developed plans, and several of those are in common with Starz and Jeff’s team, and we’re kind of holding hands and working with the local officials and local film commissions and the various skilled unions to have a countdown to production, which we see happening in terms of camera work in mid- to late-August in earliest and prepping in late June and July. Pretty excited about the places that we think are opening up and are feeling good about what we can do there.

Joe Drake — Chairman of Lionsgate Motion Picture Group

And on the Motion Picture side, the team got actually ahead of it before the shutdown in anticipation of this. I think, did a great job of both hiatusing and by protecting those productions, so that they can ramp quickly. Across Lionsgate and Starz together, there’s been an incredible collaboration to figure out the protocol, so that we can all move quickly back into production, and it’s everything from safety protocols required on set and housing, feeding meals and everything travel down to looking for alternative locations, so that as things open up, we’re in a position to move productions to the places that we can operate safely, but quickly. And so, we’re really well poised as soon as locations open up to get back to it.

Jeffrey A. Hirsch — President and Chief Executive Officer of Starz

In terms of the Comcast transition, just to level that everybody [Phonetic], we transitioned to an a la carte model with Comcast on February 11 at the end of Power, but heading into the premier of Outlander. We work very closely with Comcast almost every day to put plans in place to grow the business. And I’m happy to report that in the first six weeks of the transition, we grew to well over a million subs, both on the traditional platform and on their Flex product, which has been a really — we’ve seen great growth on Flex and we feel really strong, great about that. That was really pre, before the in-home stay hit and then, since then we’ve seen great engagement on our services. So, linear viewership is up 33%, app viewership is up 44%. And so, we’ve continued to see that transition to this revenue share a la carte model grow.

Alexia Quadrani — JP Morgan — Analyst

Thank you very much.

Jon Feltheimer — Chief Executive Officer

Thanks, Alexia.

Operator

Thank you. Our next question will come from Steven Cahall.

Steven Cahall — Wells Fargo Securities — Analyst

Thanks. Maybe, first Jimmy, so you said the covenants, you don’t really foresee any issues. Could you just remind us where you are on that? And if you expect to be free cash flow positive in 2021 because I expect you do? And did you benefit at all in the fourth quarter from just not having any theatrical releases in the P&A related? And I have a quick follow-up on production costs. Thanks.

James W. Barge — Chief Financial Officer

Sure. Yeah, first of all, we would expect to be positive on free cash flow, but we are investing substantially in our ramp up of content as well as the opportunities at STARZPLAY International. in terms of covenants, as you know, they differ significantly in a favorable way from headline, leverage if you will, in particular they exclude all of the STARZPLAY International investment losses there. And likewise, in light of COVID-19 as I mentioned in my remarks, we have stress-tested these covenants over and over, and we don’t see significant risks there. We still have plenty of room.

And to give you an idea, where we came in is that our first lean ratio came in at 2.2 times under the covenant calculation, which is well below the 4.5 times threshold. The interest coverage came in at 3.95 times, which is well exceeding the 2.5 times threshold. So, we’re in good shape there.

Steven Cahall — Wells Fargo Securities — Analyst

Great. And then, just on the production side, I think in the release, it looked like that was about $50 million in opex just related to COVID-19. I’ve seen a press article that productions could have like a 20% cost increase in order to keep everybody safe on set. So, I was wondering maybe if Kevin or Joe, if you could comment on what sort of cost increase or margin pressure might be impacted by when you are ready to reshoot? And if that really starts to change the way that you think about the business in any meaningful way?Thank you.

James W. Barge — Chief Financial Officer

Yeah. Look, we factored into our plan what we think our operations called Starz. This charge, the $50 million that you referenced is these are direct costs, okay. And it’s primarily related to the delayed productions, the theatrical release schedules that Joe mentioned as well as development projects. A large majority of this, as you would expect, is related to theatrical product, where development cycles are longer, and projects tend to be more material. As you can imagine, we’re working on mitigating this cost, everything from production insurance where we have coverage, negotiating contracts, and overall cost containment. So, in terms of looking ahead, we expect any remaining costs will be substantially smaller, certainly less than half that would be weighted to the first half of fiscal ’21, and will be further meaningfully mitigated through insurance proceeds and cost savings.

Jon Feltheimer — Chief Executive Officer

Maybe Joe and Kevin could speak to the other part of that question in terms of future production costs increases [Phonetic].

Joe Drake — Chairman of Lionsgate Motion Picture Group

So, this is Joe, Steven. On the production costs, still a little bit to be figured out, but it is not anywhere near 20%. We have gone very deeply into what is going to be required in some [Phonetic] and a thesis around how you would run a safe production. And frankly, it’s a little bit different production to production depending on the movies and locations and the moves and how much talent and crowds and the likes. So, it’s going to vary, but it’s nowhere near that level as well as it’s very early days. There are a lot of ideas around how we go about mitigating a lot of those costs. So, I think it’s going to have an impact, but I don’t think it’s anywhere in that range.

Steven Cahall — Wells Fargo Securities — Analyst

Thank you very much.

Operator

Thank you. Our next question will come from Matthew Thornton.

Matthew Thornton — SunTrust Robinson Humphrey — Analyst

Hey, good afternoon, everyone. Thanks for your question. Maybe a couple, if I could. First, you talked a little bit about the value of library content earlier. I think you’ve got Mad Men and Weeds, both up for relicensing, any update there? I would assume that networks are fairly hungry for content. Do those end up on Starz? Do those end up elsewhere? Any thoughts there?

Secondly, trials, obviously kind of COVID really kicked off late March. So, a lot of the impact has been since March. So, I’m just curious if there’s any framework you could give us our size and you can give us in terms of what the trial base looked like versus a normal quarter, or kind of where we are right now versus the end of March. Any color there would be helpful.

And then thirdly, Jimmy, you talked a little bit about insurance. I’m just curious, when you think you’d have line of sight into what that might look like and how material that could be hypothetically. Just any color there would be great. Thanks, guys.

Jon Feltheimer — Chief Executive Officer

All right. Kevin first, and then Jeff.

Kevin Beggs — Chairman of Lionsgate Television Group

Sure. So, on Mad Men, we’ve been — Jim packer and his team have been in kind of a four-month sales process, which has gone really well, exceeded our expectations, and probably benefited from the COVID suspension and the lack of fresh originals coming. So, nothing to comment on officially yet, but coming together nicely. And we think we’re going to have very good news to report. In all those processes, we work closely with Jeff and his team evaluating in a market — in a free market fashion, what may be good for Starz versus other buyers and getting the top dollar for our participants and our shareholders.

So, we’ll — again, we’ll have more to say about that when we can announce where it’s wound up domestically and internationally. We just go another year out, but again, as we’ve seen, and Jon alluded to, the value of library continues to go up and up and up. We’re encouraged by what we’re seeing with Mad Men and looking forward to monetizing weeds further on its fourth cycle.

Jeffrey A. Hirsch — President and Chief Executive Officer of Starz

Okay. In terms of trials, we had guided the end of the year to be about 6 million OTT subs domestically. We were well past that number through the first two months of the quarter, and then it accelerated as we got into March. Unlike some of the peers — our peers in the industry, we’ve stayed away from long free trials. We’ve never really liked 30-day free trial. The data shows that the conversion is lower, the lifetime value is lower. And so, we looked at the pandemic and said, this is going to be a little more elongated than just 30 days, and we went out with $5 offers for three months or $25 upfront for six months to try to give some economic breaks this people they are in challenging times. What we’ve seen historically from those two offers that we’ve used in our normal business is great conversion to full pay and we expect that to be the same.

James W. Barge — Chief Financial Officer

And Matthew, with regards to your questions, with regards to production insurance, look, it’s still early stages, but we absolutely have coverage there. Would expect it to be really meaningful, and we’ll focus on that. We’re already focused on it.

Operator

Thank you. Our next question will come from Alan Gould. Please go ahead.

Alan Gould — Loop Capital Markets — Analyst

Thank you. I’ve got a few. First Jimmy, with no production, is it fair to — obviously, revenue is going to be low, but I would assume any video or any library product will be coming in at a very high profit margin. You typically lose, typically cost money upfront for your new production. Is that fair to assume?

James W. Barge — Chief Financial Officer

Yes.

Alan Gould — Loop Capital Markets — Analyst

Okay. In the last three years, Jimmy, you’ve invested about a $1.5 billion a year in film and TV. Any idea how much you’re going to spend this year, or is that all function of when you start up again?

James W. Barge — Chief Financial Officer

Well, I think, we’re expecting even with the delays, it will be increasing our content spent probably $200 million plus relative to this year going into the year. So, we’re clearly investing in content and our growth in the future.

Alan Gould — Loop Capital Markets — Analyst

Okay. And the last thing, do you typically have completion bonds on all of your production? I assume completion bonds are different than business disruption insurance. Do they cover pandemics?

James W. Barge — Chief Financial Officer

We do have production bonds and we plan on finishing all our productions, and that’s not being a factor.

Alan Gould — Loop Capital Markets — Analyst

Okay. Thank you.

Operator

Thank you. Our next question will come from Doug Creutz. Please go ahead.

Doug Creutz — Cowen and Company — Analyst

Thanks. Can you talk about the — you’ve had a lot of OTT ads, obviously since shelter-in-place started. As you looked at the data, particularly from your direct-to-consumer app, is there anything about those cohorts that looks different to you than the cohorts that you’d added before that point or their usage patterns and what they’re watching look pretty similar?

Jon Feltheimer — Chief Executive Officer

Great question. What we’ve really seen is actually more new customers coming into franchises. So, while we had a record season on Outlander for Season 5, we continue to have record viewership on the end of Power in the first quarter. We actually saw a large spike in people finding those franchises for the first time. So, we saw binging of Season 1 and 2 of Outlander spike almost 38%, the same on Power as well.

And so, the value of people being stuck at home, they’re finding our big shows and they’re continuing to reach into the content in a big way. And so, we expect that to continue. We expect those customers to stay with us that they continue to get up to speed on seasons 5 and 6, and both of those shows. And so, we’ve seen a lot more customers coming to the franchise than we had before.

Doug Creutz — Cowen and Company — Analyst

Great. Thank you.

Operator

Thank you. Our next question will come from Robert Routh. Please go ahead.

Robert Routh — FBN Securities — Analyst

Yes. Good afternoon. Thanks for taking my questions. How are you? Yes, it’s been awhile.

Jon Feltheimer — Chief Executive Officer

Welcome back.

Robert Routh — FBN Securities — Analyst

Yes. Thanks. First question is given the change, it seems as though eventually theatrical releases may not be theatrical. They may be direct-to-home, kind of like we’re seeing Amazon already doing with a few things with their premier cinema, where you can rent a movie for $20, although it’s limited. I was curious, is there any way that you guys could do that and just take a release to this low budget, low risk and save the P&A and release it directly to the consumer at home, where they can enjoy it, given we don’t know how long it’ll be before theaters get back to what they were, and such and no one’s done it yet that way, but I would think it’s — it’d be kind of cool and eventually someone will. Is that something you thought about kind of a direct-to-home literally, where people rent it from Lions Gate and pay you for movies, feature films?

Jon Feltheimer — Chief Executive Officer

Sure. Look, they’re all kind of models that we look at. One of the things that this country — this Company prides itself on is being flexible and agile. As we still believe that theatrical is a big driver of our business and are going to continue to play aggressively in that space and yet when we see opportunity for direct-to-home and if there’s an opportunity there, I don’t think any company has done a better job of exploiting niches and opportunities with audiences, and we’ll continue to do that. So, it’s certainly a possibility in the future.

Robert Routh — FBN Securities — Analyst

It just seems like eventually someone will, like that will be the theatrical release, and you’ll pay a lot of money and watch from your house and how technologically people [Phonetic] work, I don’t know, and platform-wise, but it would seem you guys are the perfect ones to try that and it just kind of makes sense. Second question is, given what’s happened, when theatrical does open up again, do you plan to spend the same amount in P&A as you were going to before the pandemic, because do you really think that that’s going make a difference? It would seem people want to go to movies are going to go. People that don’t, aren’t. So, it would seem you could save a lot of money by cutting back material on P&A spend in the future with theatricals just because of this situation, which would really help your cash flow. Does that make sense? Or do you think you still need to spend the same amount as you would have had the coronavirus never happened?

Joe Drake — Chairman of Lionsgate Motion Picture Group

So, I think what you’ll see I think, you may notice that we’re — we delivered a really strong margin this year. And that’s a result of a lot of decision, very strategic decisions that were made by a leadership team that is special and hitting on all cylinders. And those — that was driven a lot by data-driven decision making. We brought that in to the equation. And in addition to restructuring the organization and a content strategy that really identifies specific movies for audiences, it continually informed how we geared our spend, and we’ll continue to do so. We think that — we think that’s part of the secret sauce.

Robert Routh — FBN Securities — Analyst

Yes, I agree. And I know the management team very well, trust me on that one. The question is more a matter of, do you think you need to spend that much? Because I think people wonder what [Phonetic] movies are going to be doing anything to get out of their house as soon as they can, they’re going to do it. And others, it doesn’t matter what you spend, they ain’t going to do it. So, I think that’s an opportunity for you, but I don’t know what data you have or if it could be something that could really help you or not. That’s kind of the angle I was looking at. Does the incremental dollar after a certain amount make a difference like it would have previously? And that’s I guess we don’t know.

And the last question I have is, do you see any opportunity for doing things like American Express just announced that they’re giving $20 a month till the end of the year for anybody for screening services? So, you sign up for any of it, they’ll credit your account if you have a Gold Card Platinum or Centurion. And I was thinking that fits perfectly with what you guys do. Is there any opportunity for partnering with someone like an Amex or Visa, MasterCard, where they’re basically paying it anyway for anyone who signs up for it from now till the end of the year to really grow subs and also penetrate and partner with someone solid. It seems you guys could do that with Starz better than HBO or Showtime could, given the independent nature of Starz relative to the other two in their sizes. Is that an opportunity for you or no?

Jeffrey A. Hirsch — President and Chief Executive Officer of Starz

Yes. It’s a great question. We think it’s a really big opportunity for us. We are in talks with Amex. We are in talks with credit card — other credit card companies. We are in talks with our billing platform to expand in terms of whether it’s prepaid or an in-store couponing. We also have a program going right now with Redbox. We think some of that consumer base overlaps, we think there’s a great partnership there and we will continue to talk to almost every — whether it’s insurance companies that have large subscription basis that we can or airlines that we have a program with United where we can be in their loyalty program, as ways for consumers in economically-challenged times to get our service and enjoy our service. So, I think it’s a great opportunity and we continue to lean into those in a big way.

Robert Routh — FBN Securities — Analyst

Right. Yes. The last thing I’ll say, what I’ve heard, not to be curious myself, is people now are getting frustrated, not only because they’re home, but they’re running out of things to watch. It doesn’t matter how fast Amazon can put or Netflix can throw things up there. They’re really running out of things to watch and a lot of people have never experienced Starz. So, we seem to have a real opportunity there, given people seem just about everything that’s out there now, given this situation.

Jeffrey A. Hirsch — President and Chief Executive Officer of Starz

We’ve had a great benefit of having Outlander on and then bringing Vida on and then coming in and just premiering a Hightown. So, we’ve got a lot of fresh content coming on, coupled with the Sony Pay 1 movies. So, Once Upon a Time in Hollywood came on and Zombieland. We also have 4,000 titles in our library at a very economically set price for the value.

So, that’s part of what we’re seeing. And then internationally, I think it’s the same kind of point of view, where we’ve got great Starz originals coupled with best-in-global SVOD that we’re seeing. And so, we’re also seeing viewership expanding in the international markets and to the point where the value, the partners are seeing the value of our services. And so, we’re now getting inbound calls in different countries like U.K. and Germany to start to bundle our services with other partners to even expand our reach even further.

Robert Routh — FBN Securities — Analyst

Right. That’s what I think. It makes sense. It makes perfect sense. You guys are perfectly positioned to that. So that’s great. Thank you very much. I really appreciate it.

Jon Feltheimer — Chief Executive Officer

All right. Thanks, Robert.

Operator

And our next question will come from Todd Juenger. Please go ahead.

Todd Juenger — Sanford Bernstein — Analyst

Thank you. Hello everybody. Jeff — so Jeff, if you don’t mind, we’d love to explore just a little bit on the team’s definition of Starz subscribers. I just want to make sure I understand it correctly. So, it looks like latest we have at end of December under your new definition of what counts as a reported Starz domestic subscriber, we lost about a 11 million subs — 11.5 million subs under the new definition. We can read that. I think we understand those were the fixed deal bundle subs we get it. My question is can you help us understand at all what the direct economic benefit to Starz was from those 11.5 million subscribers was, or is, and how that trails?

And then on the other side, since I don’t think we can calculate it, can you help us understand what the ARPU is of your now direct linear and OTT subs, so, we can sort of understand that — the breakeven there? And then the final add-on, I promise it’s the last part is I wonder what data or information you’ve been had about those 11-or-so million subs in terms of how much they use to start a service and your expectations that how many of them based on that you expect might come back and actually start paying for it. Thanks.

Jeffrey A. Hirsch — President and Chief Executive Officer of Starz

Great question. We think it was actually about 6.8 million subscribers that pivoted off of a bundle — I’m sorry, 6.2 million subscribers that pivoted off a bundle through the change in that deal. As I said earlier, we’ve pivot — we’ve now captured back about 1 million of those subscribers in the first six weeks. But those subscribers were heavily bundled, very low ARPU subscribers. So, the breakeven is about I think a third on those subscribers. I think the interesting piece that we’ve seen is, as the business has transitioned from this traditional linear business to the kind of digital side of the world, our customers become more profitable as we transition and we’ve captured that base really significantly by the end of this fiscal year, a little over 70% of our subscriber base will be revenue share a la carte customers, which are much more profitable customer for us.

And as Jon alluded to in his prepared remarks, our direct-to-consumer app, our retail app, where we control the own data, we pay some processing fees is now our third largest distributor. And that’s the most profitable of all the customers, because we are closer to the customer there. So, as we continue to kind of capture this transition, we become a much more profitable part of the overall company.

Todd Juenger — Sanford Bernstein — Analyst

On the ARPU question, you want MVPD versus OTT?

Jeffrey A. Hirsch — President and Chief Executive Officer of Starz

Yes. So on the ARPU question, again, if you look in the quarter, you’ll see — you’ll continue to see ARPU increase. That again is because of the transition from a traditional world to the digital world. There’s a little noise in the quarter, because of the Comcast transition. But we will continue to see our ARPU increase, as we continue to go into that digital side. Our own direct-to-consumer app is over 2 million subs right now. And so, that does a lot of great things for us. It throws up a ton of data. That’s part of the reason why we were slow to do wholesale when we launched it 4.5 years ago and we really have been able to collect a lot of data that makes us much more efficient in acquisition, much more efficient in retention. We’ve seen churn come down year-over-year 4%, because of the way we’re managing the business. We’ve seen post power churn from Season 6 to Season 5 come down 10%, which is one of our churn-ier pieces of content. And we’ve really been able to harness that data to make not only marketing decisions, but content decisions going forward as well.

Todd Juenger — Sanford Bernstein — Analyst

Great.

Jeffrey A. Hirsch — President and Chief Executive Officer of Starz

Thanks, Todd.

Operator

And the next question will come from Jim Goss.

Jim Goss — Barrington Research — Analyst

Hi, several questions. First, I’m wondering if the annual slate objective numbers have changed at all in the new environment. Also regarding some questions that came up a couple of callers ago regarding theatrical window and direct release, are you threatening your theatrical window access if you are too much one way or another in terms of what ones you’d like to be have a theatrical window and what ones do you move to a like a direct-to-video type access? And then lastly, I was wondering about prioritizing programming for Starz versus other considerations specifically say the Anna Kendrick series. Would you have more likely gone to Starz or did you think the returns were much better at going to HBO Max?

Joe Drake — Chairman of Lionsgate Motion Picture Group

Thanks, Jim. So, on the theatrical question, obviously, as a result of the theater shutdown, we’ve — our line-up or our slate pushed to the right. And so, we will have less films this year. We’ll also as a result of that have less expenditure this year and we’ll book less expense. And so, the impact on the year shouldn’t be significant other than revenue will be down, but so will expense, and yet we — in our planning are — as soon as this is over, plan to gear up. And as I said before, we’re still very bullish on the theatrical marketplace and just paying very close attention to how it’s going to open up and the data that gets us.

As it relates to the windowing question, we’re in contact with our exhibitors every single day. We believe in that business and we’re going to continue to make movies and participate in that business at the absolute highest level. And so, nothing’s changing there. As you talk about windowing for us, we’re obviously going to at the same time, if other opportunities direct-to-consumer open up, that could potentially be an extra leg of our business. That is a business that we’ve traditionally looked at as a segment to business. We today — today, we’re releasing 30 films a year out of that business that may not be the noisy films you hear about, but a very consistent, very high margin, very low-risk piece of our business that will continue to do great business, had a record year this year. And we certainly see opportunity to grow it going forward, but not at the expense of our theatrical business or our exhibition partners.

Jon Feltheimer — Chief Executive Officer

I’ll have Kevin answer that second question.

Kevin Beggs — Chairman of Lionsgate Television Group

Yes. I mean, basically that was Love Life, which we’re obviously super proud of and is coming to HBO Max as part of their launch. We’re very excited about, but sold and put into development almost two years ago. So, kind of a different era in the Lions Gate-Starz relationship, but we speak constantly with each other about what their needs may be, what we have in the line-up, how we can be helpful, what we can source and find for them. And the timing has to be right. And the creative fit has to be completely in line. I think Jeff is an amazing brand builder. And if it’s not right in line with the brand, they’re building no matter who it’s coming from, it’s not going to be something he moves on. So, we’re always focused on what is the exact right creative fit. And when it’s not, we’re obviously out in the larger marketplace.

Jon Feltheimer — Chief Executive Officer

I want to add one more thing, which is the fact that Lionsgate Television is so proactive and so prolific in the television business, supplying at any one-time 20, 30 shows that — and that’s not even including our Pilgrim shows that we attract a tremendous amount of talent. And as Kevin has said over and over is most important buyers obviously, Starz is a critical component of our Company, but the fact that he has such significant access to talent, because we have so many buyers gives actually Starz the opportunity to see things early, see a tremendous amount of things, and then buy the things that are right for their brand, right for their audience that is an incredibly focused and curated brand.

Jim Goss — Barrington Research — Analyst

Okay.

James Marsh — Head of Investor Relations

We have time for one more question here I think, operator.

Operator

Yes. And that one comes from Matt Thornton.

Matthew Thornton — SunTrust Robinson Humphrey — Analyst

Hey guys. Thanks for let me back in here. Just a one quick follow-up here. I don’t know, maybe this one’s for Jon, but you guys have talked a little bit in the past about maybe kicking the tires on some type of a capital raise transaction, maybe at the Starz level. But I think the intent there was really to maybe shine a light on valuation, as well as help you maybe accelerate deleveraging. Obviously, we had the Comcast issue late last year into early this year. And now, we’ve had the COVID pandemic, which is ongoing, but I’m just curious if that’s still something that you’re thinking about if there’s still opportunity there, or maybe, just kind of where your head is around that as we sit here now? Thanks, guys.

Jon Feltheimer — Chief Executive Officer

Yes. Great question. You kind of answered it, because there are two criteria to that raise, we’ve talked about before. One is clearly our emphasis on the leveraging, but the second is unlocking value. In any transaction that we do should do both of those things, and frankly, should be with great partners particularly, if they can be strategic partners. We are having a lot of really interesting conversations. I would say the COVID in terms of actually completing any transactions, probably from a timing perspective, does push things as we keep saying off to the right, but again, absolutely no urgency. We’re throwing off cash. We’re funding our own businesses, and we are continuing to look at a transaction or transactions that actually fulfil those three criteria.

James Marsh — Head of Investor Relations

Thanks, Matt. And Amy, I just have one final closing statement here. I just want to refer everyone to our press releases in Events tab under the Investor Relations section of our Company’s website for discussion of certain non-GAAP forward-looking measures discussed on this call. Thank you very much. See you next quarter.

Operator

[Operator Closing Remarks]