Lionsgate’s Jon Feltheimer

Over the course of his 30-year career, Jon Feltheimer has had a front-row seat to significant changes in the media business. First at New World Entertainment, then at Sony Pictures Entertainment, and since 2000 as CEO of Lionsgate, he has witnessed the encroachment of basic- and premium-cable channels on broadcast networks, the development of the international TV market, the rise and then fall of the DVD market, the emergence of movie franchises and, most recently, the meteoric growth of streaming services.

But Feltheimer views change as more of an opportunity than a disruption. Knowing that the media business will continue to evolve, he has positioned Lionsgate, which reported revenues of $4.13 billion for fiscal year 2018, as a content company that can serve all platforms and audiences. A 17,000-title library fuels many of the company’s businesses.

Lionsgate’s motion picture group releases more than 40 feature films a year and has generated an average of $2 billion at the global box office each of the past five years. It’s the studio behind such movies as La La Land, Manchester by the Sea, The Hurt Locker and the Hunger Games franchise. Lionsgate also serves African American and Hispanic moviegoers with the labels Codeblack Films and Pantelion Films.

The television group supplies programming to streaming platforms and cable and broadcast networks, and has 90 series on 40 networks in the U.S. Current and upcoming shows include Dear White People and Orange Is the New Black for Netflix, The Kingkiller Chronicle for Showtime, American Lion for HBO and Get Christie Love for ABC. Lionsgate distributes shows it produces and third-party product to linear and nonlinear outlets around the world.

In December 2016, Lionsgate acquired the premium pay service Starz, home to Power, Black Sails and soon The Rook and The Continental. Starz is part of a bouquet of channels, which includes partnerships in Pop and Celestial Tiger Entertainment.

Like other media players, Lionsgate is reaching out directly to consumers, not only with streaming services—such as Starz’s OTT offerings, Laugh Out Loud! and Pantaya—but also with theme-park attractions and live events like the La La Land in Concert world tour.

Feltheimer talks to World Screen about creating content with Starz and transforming the premium service into a global brand. He also discusses Lionsgate’s investments and partnerships with talent, and his strategies for the movie, television and direct-to-consumer businesses.

WS: It’s been nearly two years since Lionsgate acquired Starz. In what ways has the merger benefited both Lionsgate and Starz?
FELTHEIMER: We couldn’t be happier with everything we’ve accomplished together since the merger. First, the combination of our Lionsgate, Starz and library content makes us a great launch partner for the top distributors in nearly every major territory and for global streaming platforms expanding their services around the world.

In the past year alone, we’ve generated tremendous momentum in rolling out Starz internationally. Our partnership with Bell Media to launch the Starz brand in Canada is off to a great start, with Starz programming already available on Bell Media’s TMN Encore platform and CraveTV over-the-top offering. Full rollouts are expected early next year. We launched on the Amazon Prime platform in the U.K. and Germany, where our mix of Lionsgate and Starz content is already resonating with consumers. And we’ve announced plans to bring the Starz brand to Italy, France and Spain, with additional territories and partners to follow in the coming months.

Second, the combination of our two companies gives us broader shoulders in the creative community and allows us to offer unique opportunities to talent across all of our Lionsgate and Starz platforms.  The creative community is responding enthusiastically to our “no silos,” cross-platform strategy that includes our first-of-its-kind partnership with the 3 Arts Entertainment talent management and production company.

Third, our combined worldwide television and digital distribution operation under the leadership of Jim Packer has done a great job of monetizing rights to several of Starz’s biggest series. The syndication of Power, Black Sails and Ash vs. Evil Dead has generated well over $100 million in incremental high-margin revenue.

And finally, one of the most exciting opportunities to come out of the merger is Lionsgate and Starz’s ability to create great content together. Working with our partners at Liberty Global, we’ve just finished shooting our first Lionsgate television series for Starz since the acquisition, The Rook. Following in its footsteps is the John Wick television spin-off The Continental, with more exciting properties in the works as Kevin Beggs [chairman of the television group] and his team ramp up our slate of series for Starz.

WS: What do the Disney-Fox and AT&T-Time Warner mergers say about scale in the media business today? How big is big enough?
FELTHEIMER: There’s no single right answer. Our industry is changing faster than ever before, and every company has to decide for itself how it wants to be positioned in today’s media landscape. Our goal will never be to add scale for the sake of adding scale but instead will be to make sure we have it in the right places.

WS: Both deals are driven in part by the need to bulk up to compete with Netflix. What is Lionsgate’s relationship with Netflix?
FELTHEIMER: Netflix is a formidable competitor in some areas and a terrific partner in others. We have great respect for Reed [Hastings, CEO], Ted [Sarandos, chief content officer], Cindy [Holland, VP of original programming] and the rest of the Netflix team, and we do a lot of business together. We continue to collaborate on long-running scripted series like Orange Is the New Black and Dear White People while also adding new shows to their lineup of unscripted series. They’ve achieved incredible growth over the past few years, but they’ve remained an innovative, entrepreneurial and game-changing company at the same time. There are valuable lessons to be learned from that.

WS: What is Lionsgate’s acquisitions strategy, and what acquisitions or investments has it made recently?
FELTHEIMER: Our criteria for acquisitions is that they be strategic and accretive, add a new strength or capability to our content platform and create a whole that is greater than the sum of its parts. Over the past two years, our Starz, Pilgrim Media and 3 Arts deals have checked off all these boxes. Each of these deals makes both partners a little stronger and will create incremental value for Lionsgate as a whole. I would add that we apply these same criteria to every major film and television property that we add to our slate, not just to the companies we’re buying.

WS: Is Lionsgate a possible acquisition target?
FELTHEIMER: That’s a question for other companies to answer and our shareholders to decide. We’re focused on continuing to grow our business with strategic and accretive acquisitions, deepening our content pipelines, rolling out Starz around the world and extending our properties into next-generation direct-to-consumer businesses. In the process, we’re creating a compelling value proposition for consumers, talent and partners alike—a nimble, entrepreneurial, content-rich digital-age company that is a unique and essential part of our media ecosystem.

WS: Talent is a precious commodity in today’s media business. What first-look deals or investments in talent has Lionsgate made?
FELTHEIMER: Let’s start with the value proposition we offer to talent.  We not only provide them with the opportunity to create projects across our full palette of film, television, Starz, digital studio, interactive game and streaming platforms, but we take a uniquely integrated approach to operating these businesses. John Wick, Step Up, Dear White People and The Kingkiller Chronicle are just a few of the many multiplatform properties we’ve created.

And talent is responding—in recent months we’ve continued to expand our multifaceted relationship with global superstar Kevin Hart, formed an exciting new partnership with Seth Rogen and Evan Goldberg, and announced new agreements with Eugenio Derbez, Salma Hayek, Dear White People’s Justin Simien and Yvette Lee Bowser, Common and the Erwin Brothers, producers of the faith-based hit I Can Only Imagine. These deals all followed specific projects on which we had recently collaborated.

Our overall talent strategy also drives our partnership with 3 Arts, enabling us to offer their clients an opportunity to do something a little different.

WS: How has Starz been increasing its international distribution?
FELTHEIMER: We’ve taken a bespoke approach to each territory. In the Middle East and North Africa, we’re part of the Starz Play Arabia venture that has become the leading SVOD service in the region in terms of revenue and subscribers. In Canada, we’re partnered with the leading distributor in the territory. And in the U.K. and Germany, we’ve teamed with a global strategic partner rolling out its service around the world. As Starz continues to expand internationally, we’ll continue to employ all of these different strategies, but the common denominator will be the robust combination of Starz programming, Lionsgate films and television series and the 17,000-title library that we bring to each of our partnerships.

WS: A central focus of Lionsgate has been to cater to underserved audiences. How is it continuing to do so in film, television and OTT services?
FELTHEIMER: Latinx and African American consumers over-index in every part of our business—at the box office, as traditional television viewers and as next-generation consumers of streaming and mobile-first content. But they’ve been consistently underserved by Hollywood studios.

Pantelion Films is the only major studio label to bring Latinx audiences a diverse slate of Spanish-language movies every year. We’ve released nearly 50 Spanish-language and bilingual films over the past seven years, the overwhelming majority of them profitable.

Last year we launched Pantaya with our partners at Hemisphere Media, and it’s already fulfilling its promise as the leading premium streaming movie service for Latinx consumers in the U.S.

We’re similarly focused on super-serving African American audiences with Codeblack Films and critically acclaimed television series like Dear White People. And we launched the Laugh Out Loud! comedy platform with Kevin Hart last year with a growing slate of original series.

This same emphasis on underserved audiences drives our programming strategy at Starz. The series Vida is generating tremendous buzz in the Latinx and LGBTQ communities and has already been picked up for a second season. Starz continues to build its leadership among women with hits like Outlander, the new series Sweetbitter and the upcoming The Spanish Princess. And Power has been the highest-rated premium cable series this year as it continues to grow into a major brand, not only for African American audiences but across all demos.

The bottom line is that our strong Latinx and African American verticals are working company-wide. Pantelion is generating box office successes, Pantaya and Laugh Out Loud! are successfully engaging an increasingly diverse audience, and Starz had one of its best years ever. In fact, the combination of great programming and an expanding distribution footprint led to growth in both over-the-top and traditional Starz subscribers last quarter, with OTT subs recently breaking the 3-million mark.

WS: What challenges has the film industry been facing? What is Lionsgate’s film strategy?
FELTHEIMER: The pace of change in the film business has been incredible, and the domestic box office has never been more competitive. But demand for movies worldwide continues to grow, and a terrific summer at the box office has the industry headed toward a great year.

Our new motion picture leadership team under Joe Drake is refining our strategy to adapt to a changing business, but the bold, original films that have always been our trademark continue to resonate. Our global blockbuster Wonder is a great example. We’ll continue to execute a film strategy that allows us to push the envelope creatively by de-risking the business financially. Over 90 percent of our theatrical releases last year were profitable on an ultimate basis.

What many people don’t realize is how important movies have become for newer players like the SVOD platforms. SVOD customers have said that they spend as much time watching movies as original programming, and they recently cited “not enough movies” as one of the main reasons for canceling their subscriptions. We believe that this new source of demand is very healthy for our overall theatrical business.

WS: What is Lionsgate’s television strategy?
FELTHEIMER: We will continue executing a strategy that has turned our television group into a global IP machine with more than 50 television series currently in various stages of production in 12 territories around the world. This includes, first, selling to everyone. Without legacy constraints, we’ve become a leading supplier of premium series to streamers and cable and broadcast networks alike, with a unique ability to pivot quickly to follow our audience and adapt to our buyers. Second, we’ll continue to be a first mover: shows like Mad Men, Weeds, Nurse Jackie and Orange Is the New Black helped put their respective networks on the map, and we’ll continue to supply premium programming to streaming platforms like YouTube, Apple and Facebook, as well as more traditional platforms like Charter Spectrum who are launching original series for the first time. Third is supplying quality programming to Starz. One of the most exciting priorities for our television group is to contribute to Starz’s continued growth around the world, and the process of supplying them with exciting new series continues to gather momentum. And fourth is building on our partnership with 3 Arts, a leader in comedy programming with an incredible roster of world-class talent.

WS: What is the role of data and algorithms in the programming and television worlds? I’m hearing some producers say they are worried an over-reliance on data will overtake the importance of “gut instinct” in programming decisions. Do you agree?
FELTHEIMER: The combination of art and science actually makes our business stronger. Finding great content will always be an art, but, as the world moves closer to the consumer and customer acquisition becomes as important as an audience, data needs to be added to the “art” of picking the right content. Understanding issues like customer segmentation and churn is critical to how we allocate our resources.  One of the great things about transitioning our business into the direct-to-consumer world is how much we’re learning about our consumers, which allows us to be smarter and more efficient about how we operate.

WS: Are streaming services representing a more significant threat and disruption to linear channels than previous changes?
FELTHEIMER: Disruption has always been our friend, and it creates both challenges and opportunities. As a content supplier, we have a great opportunity to supply platform-defining programming to new and emerging services. As a content distributor, streamers have become major buyers for our films and television series. We deliver content to more than 200 streaming and traditional platforms around the world.  And at Starz we’re well positioned to be a launch partner of choice to global streaming services.

WS: Does the future of the film and programming business lie in direct-to-consumer services?
FELTHEIMER: Going directly to the consumer is an important part of everyone’s future, and we’re very pleased with the recent strong growth of our own direct-to-consumer businesses. I’ve already mentioned the success of our Starz OTT offering, the traction of our Lionsgate streaming services and the game-changing potential of our Atom Tickets app.

One area that has stayed a little under the radar has been the growth of our Lionsgate-branded location-based entertainment business. With the opening of the Lionsgate Zone at the Motiongate theme park in Dubai and the debut of the Saw Escape Room in Las Vegas last year; the successful La La Land in Concert world tour; the kickoff of the Now You See Me live magic show in Asia; this fall’s launch of the Hunger Games in Concert world tour in Switzerland; and the planned opening of Lionsgate-branded venues in the U.S., Spain, Germany and China, we’re quietly building a global direct-to-consumer business that has the potential to generate hundreds of millions of dollars of incremental high-margin revenue.

By the end of fiscal 2020, we expect over 25 million consumers to have visited more than a dozen live and location-based entertainment experiences around the world featuring Lionsgate properties.

WS: Where do you see the potential for growth for Lionsgate in the next 12 to 24 months?
FELTHEIMER: All of our businesses are positioned for continued growth. But there are three newer growth opportunities about which we’re particularly excited. One is Starz’s ongoing transformation into a global brand. We already have over a million international subs not yet included in our subscriber counts, with huge opportunities for continued and accelerating growth.

Our direct-to-consumer businesses, including location-based entertainment, interactive games, eSports and our own streaming services, are reaching critical mass and are poised to make meaningful contributions to our bottom line. Atom Tickets has the potential to be a game-changer for our theatrical exhibition partners and moviegoers alike. These are all areas in which we’re combining the content portfolio of a media company with the innovation and digital expertise of a tech company, and the results are exciting.

Our collaboration with 3 Arts is already sending a message to the creative community about the varied and diverse opportunities we offer talent. We’re very excited about its potential for growth and see it as an integral part of our business.