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Starz Q1 Income Slips on Fewer License Deals

8 May, 2012 By: Erik Gruenwedel

Starz LLC May 8 reported first-quarter (ended March 31) pre-tax operating income of $127 million, down 3.1% from pre-tax operating income of $131 million during the previous-year period. Revenue increased 4% to $405 million, compared with revenue of $391 million last year.

The Pay-TV channel subsidiary of Liberty Media cited an undisclosed drop in Starz distribution business for the decline, which it said more than offset improved results by the Starz channels business.

Starz’ unit Starz Entertainment in February ended a four-year, $120 million distribution agreement with Netflix — a renewal analysts say could have fetched about $300 million annually for streaming rights to Disney and Sony Pictures movies, among other content.

The flagship Starz channel reached an all-time high of 20.1 million subscribers (up 7% year-over-year), while Encore (up 3.1%), which distributes repurposed studio movies, reached 33.6 million subs.

Meanwhile, Starz continues to ramp up original programming efforts, which include the “Spartacus” franchise, new series “Magic City,” and upcoming serials “Da Vinci’s Demons” and the Michael Bay-helmed “Black Sails.”

“We were very pleased to renew distribution agreements with DirecTV and Cox Communications, with both deals including TV Everywhere rights for multiplatform access to premium subscribers of our channels and services,” said CEO Chris Albrecht.

Albrecht said Starz Entertainment continues to do well with original series “Spartacus: Vengeance” and “Magic City,” with “Spartacus” exceeding expectations in home entertainment through Anchor Bay Home Entertainment.

“‘Spartacus: Vengeance’ is having tremendous success in home entertainment markets,” Albrecht said in a call with analysts.

“Magic City” is slated for home entertainment release later this year.

The CEO said Starz would continue to concentrate solidifying relaitionships with core distributors — including bowing authenticated TV Everywhere platforms by the end of the year — while also entertaining "conversations" with third parties interested in distributing Starz content directly to consumers. Albrecht said the opening weekend box office success of The Avengers underscores the value of Starz movie distribution going forward.

With the demise of the Netflix agreement, industry speculation revolves around Starz entering into other subscription video-on-demand deals or as a standalone business offering original content to consumers in tiered pricing models. Albrecht said that while industry chatter on the subject may be high, there are is nothing substantial in the immediate horizon.

"It is not out there, as far as we can see it," he said.



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