How The Lionsgate-Starz Merger Could Completely Change The Shape Of The Industry

It was announced last week that Lionsgate is going to spend $4.4 billion dollars to purchase the pay cable network Starz, which I thought was a good idea and made me wish that I had that kind of money, because it’s a purchase I might have made. I mean, sure, more and more people are cutting the cord and leaving cable behind, but the smart networks have their own streaming services already up and running, which gives them the escape route needed to insure continued viewership.

I’m referring to networks like Starz, in case that wasn’t clear, which has its own online service that goes for $8.99 per month. In fact, it’s these exact services that are helping to bring down Big Cable, because as more and more people realize that they can get what they need online for cumulatively less money than they pay on a monthly basis to the local programming behemoth, the more they walk away. It’s why ESPN, for one, is having real problems, and why companies like Comcast are diversifying so that they aren’t left completely behind.

Don’t forget, after all, that Comcast is still the largest media conglomerate on the planet, and it didn’t get there by being dumb and allowing itself to be pushed into obsolescence. In fact, just Wednesday, it made a pretty groundbreaking partnership with Netflix.

But I was talking about Lionsgate and Starz. It’s an interesting merger, for sure, partly because of all the questions it raises on both sides. Also, because of all the possibilities.

For starters, there is the question of content. Starz recently surpassed Showtime in total subscribers, behind only HBO (although the folks at Showtime insist that, when online subscription numbers are factored in, it is still well ahead of Starz in that area), and while it has some high quality programming — like Ash vs Evil Dead and Outlander, to name two — it can always use more, especially if it wants to keep up with its prime cable competitors, both of which are known for their Emmy Award-winning programs.

Lionsgate TV, after all, has also had a little success in this area. It was behind a couple shows you might have heard of, called Mad Men and Orange is the New Black.

On top of that, studio backing offers the added benefit of greater access to talent, raising its profile to that of the other players in the field, which also happens to include a few giants like Netflix, Hulu and Amazon Studios. It’s a crowded field and the only thing that really sets anyone apart these days is, yes, original programming. With Lionsgate’s purchase, Starz just got a big boost in that area.

From the Lionsgate side, there are a few things to take from it, aside from the obvious one of Starz’s streaming service, which could be a great outlet for Lionsgate content. Still, you don’t pay more than Disney paid for Lucasfilm or Marvel Entertainment for a streaming service. You also pay for insurance.

Being a small fish in a big pond is not a great way to be successful in Hollywood these days, and with its purchase of the cable net, it has now further diversified and covered its own backside. Suddenly, the company’s fortunes are not so closely tied to box office grosses.

One of the questions that was raised in the wake of this deal is the tax benefits, what with Lionsgate being a Canadian company, though the IRS is cracking down lately on tax inversions. Another involves the concept, as Lionsgate CEO Jon Feltheimer said, of the two companies creating something that will be “greater than the sum of its parts.”

I admit to knowing next to nothing about the first question, but the second one actually makes sense. As I discussed on Wednesday during the latest edition of our Studio Series, Lionsgate doesn’t have the resources to play the same game as the major studios do, so it plays a different one entirely, releasing more movies that cost less money to make. It doesn’t require a series of home runs to have a good year, because the way the slate is set up, it only really requires a few solid singles and doubles, and if there is a homer or two mixed in, all the better. Now, it has its own television network to play around with, which puts it into a different league altogether.

There’s another layer to this, as well, and it’s one that I hadn’t previously considered, but am now reasonably convinced could actually happen. David Lieberman wrote an interesting piece in Deadline Hollywood last week that this could be the first step in Liberty Media Chairman John Malone’s plan to eventually buy Sony Pictures. Malone controls Starz and now has a small stake in Lionsgate and sits on its board. He also has a stake in Discovery Global and, at the very least, all this would allow him to further consolidate his assets into one larger operation. That would put him in line with the likes of Comcast, 21st Century Fox, Disney, Time Warner, CBS and Viacom as the biggest of the big players. If he suddenly is able to spin this into a shot to buy Sony’s struggling film division (which is not necessarily for sale, but certainly could be if the right offer was made), then we’ll all be able to look back at this deal as the first in a line of dominoes that changed the shape of the entire industry.

One other interesting thing to point out here is that, with this deal, the concept of smaller media companies being meaningfully involved in the entertainment business is slowly but surely going the way of the Dodo, as each one gets swallowed up by a progressively larger concern. Starz was the last major pay cable net that wasn’t owned by one of the above-listed megacorporations, and just as a behemoth like Time Warner Cable is acquired by Charter Communications (and, again, Netflix and Comcast set aside their differences to get into bed together), so are the options for programming — both on television and movie screens — increasingly controlled by a select few.

I don’t know that we need to be increasingly worried about this, because it’s the age in which we live, but it does, admittedly, give a little bit of pause, knowing that so few oversee the entertainment of so many. Now, a little bit more so.

Neil Turitz is a filmmaker and journalist who has spent close to two decades in the independent film world and writing about Hollywood. Aside from being a screenwriter/director and Tracking Board columnist, he is also a senior editor at SSN Insider.