Lions Gate (NYSE: LGF) is demonstrating why most entertainment companies are a lousy investment. The ailing movie studio is trying to expand its “reach” by buying an ailing cable TV network – Starz (NASDAQ: STRZB).

Starz (NASDAQ: STRZA) is a sort of bargain basement HBO clone; that shows such cult series as Outlander and second runs of Hollywood movies. Lions Gate is a second-string studio that has been struggling to find new sources of revenue. That includes a major push into television based around such questionable projects as a reboot of the cheesy 1980s actions series McGyver, scheduled to premiere on CBS (NYSE: CBS) next season.

Now Lions Gate has made the questionable move of agreeing to purchase Starz for $4.4 billion in cash and stock. That’s a smart move for Liberty Media (NYSE: LSXMB) billionaire John Malone; who owns Starz, but a lousy deal for Lions Gate shareholders.

Lions Gate Takes on a Mountain of Debt

The deal is terrible for Lions Gate; because the studio had an enterprise value of just $4.522 billion and a market cap of $2.897 billion on July 1, 2016. That’s right the cost of purchasing Starz exceeds the market cap and approaches the enterprise value.

If that was not bad enough; the cost of Starz is nearly twice the revenues Lions Gate reported on March 31, which were $2.347 billion. One has to wonder what Lions Gate will use to pay for the acquisition with; it reported a net income of $50.21 million and a negative cash from operations figure of -$19.01 million at the end of first quarter 2016.

What is worse is that the only way Lions Gate can afford the purchase is to take on a lot of debt. It reported cash and short-term investments of $57.74 million and assets of $3.856 billion on March 31. That means the debt is going to be very costly.

It also puts the company in a far worse position because it already has $1.601 billion in long term debt and $3.005 billion in liabilities. Judging by what ycharts has to say about Lions Gate’s financials this deal stinks.

So what will Lions Gate get for $4.4Billion?

The only way this deal might make sense if Lions Gate is getting a bargain at Starz. The financial numbers show that Starz might be a real lemon.

Here is what Lions Gate will get when it takes over Starz:

• $1.681 billion in revenue
• A net income of $218.5 million which is better than Lions Gate.

• A free cash flow of $3.2 million

• A market cap of $2.927 billion which means it’ll have to buy or exchange $2.927 billion worth of stock.

• Cash and short term investments of $9.8 million.

• Total liabilities of $1.444 billion

• $261.8 million in cash from operations.

• $1.12 billion in long term debt.

For all that, Lions Gate gets a network that had 1.46 million viewers for the season premiere of its hit series Outlander in April 2016, Variety reported. That marked a 40% increase over the standard audience for Outlander which is around 613,200 viewers.

This seems like a pretty poor return on $4.4 billion, especially at a time where cable TV viewership is declining. Around 17.1% American household lacked pay TV in 2015, a percentage that is expected to increase to 22.6% by 2019, eMarketer reported.

The trend is accelerating with younger viewers including 19% of 18 to 29 year olds who cut the cord and 16% who never had cable in the first place, The Chicago Tribune reported.

Cable TV is Not Dead Yet

The deal has some advantages because Lions Gate still gets increased access to the 77.4% of US households with cable or satellite TV. It also gets a library of popular shows; Outlander, that can be distributed through digital outlets like Netflix, Amazon Prime, Sling and Hulu.

Another possibility facing Lions Gate will be to launch its own digital channel. Or to buy or join forces with an existing digital distribution venue like Sling or Hulu.

An interesting possibility is that Malone might add video content to his successful digital audio distribution channel Sirius XM (NASDAQ: SIRI). Unlike Lions Gate and Starz, Sirius generates float in the form of $1.296 billion in cash from operations on March 31, 2016.

Sirius also did well in the revenue department with $4.69 billion, free cash flow with $332.02 million and $575.37 million in net income. That gave the company $101.95 million in cash and short-term investments. It was also able to afford some high profile entertainment content including our friend Howard Stern.

The Starz-Lions Gate deal shows that cable TV is not dead yet, despite its cloudy future. Played correctly this deal might give Lions Gate a future by providing  the resources needed to create a digital content channel, or digital content it can sell elsewhere.

Still it’s a lousy proposition for Lions Gate and Starz shareholders. I would recommend that investors stay away. Lions Gate and Starz have once again proved the old adage that you cannot make money in show business.