Roku is reportedly exploring a 20% investment stake in Lionsgate Entertainment’s Starz premium movie and TV program service.

According to a Wall Street Journal report Wednesday, the smart TV ecosystem company could be preparing to team up with Apollo Global Management to take a minority ownership position in the cable and streaming channel, to garner a favorable content acquisition position for its The Roku Channel content offering available to owners of Roku devices and subscribers to the Roku Channel app.

Lionsgate acquired Starz for $4.4 billion in 2016, but that value reportedly has since declined to an estimated $3 billion. Last November, Lionsgate’s board approved exploring different options for the Starz operation, including a sale or spinoff.

Starz is a premium cable TV movie channel and SVOD streaming app known for some popular original TV series including “Outlander,” and “Power.” The Lionsgate/Starz library contains more than 6,000 monthly movies and series episodes from studio partners and access to major hit movie franchises including “The Hunger Games,” “Rambo,” the John Wick saga, “La La Land” and “Knives Out.”

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Starz recently announced a multi-year licensing agreement with Lionsgate for titles theatrically released in the U.S. starting in 2022.

According to a report on U.K.-based media business news site Advanced Television, an analysis report on the deal proposal was issued from investment bank Berenberg stating, the investment could work “if it helps Roku garner better deal terms and enhances access to Starz/Lionsgate’s content library. In turn, aiding to optimize content spend.”

Under the terms of the investment, Roku Channel would receive two separate windows for each film it streams. The first window will provide exclusive rights to Lionsgate’s film slate immediately following its window on Starz, the Berenberg assessment revealed.

If an arrangement is not worked out with Apollo Global Management, another possibility is that Roku could opt to use a $2 billion acquisitions budget to fund the move alone.

The Berenberg report said Roku’s options “may be driven by growing streaming competition and demand for continued investments. The launch of stand-alone streaming services from the likes of Disney and the continued rise in content spend from the likes of Netflix, Amazon, and Apple demands continued investments. Starz profits have continued to be under pressure with calendar 2021 operating profits of $166 million, down nearly 40% y-o-y.”

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By Greg Tarr

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