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Starz Q1 Home Entertainment Operating Income Up 388%

1 May, 2014 By: Erik Gruenwedel

The Weinstein Co. discs via Anchor Bay Home Entertainment continue to drive Starz Distribution’s bottom line

Packaged-media and electronic sellthrough of proprietary and third-party content helped Starz Distribution increase first-quarter (ended March 31) pre-tax operating income 388% to $12.7 million from $2.6 million during the previous-year period.

Starz Distribution, which is a unit of pay-TV operator Starz LLC, attributed the increase in large part to the distribution of discs from The Weinstein Co. and other third parties, in addition to original content via Anchor Bay Home Entertainment.

Indeed, Starz licensed all eight episodes to the first season of original pirate series “Black Sails” to Amazon Prime Instant Video in the United Kingdom.

Starz CEO Chris Albrecht told analysts the recent catalog agreement between Amazon Prime and HBO underscores a growing need by over-the-top video services for third party content.

"Amazon potentially is becoming a more important buyer, and we're thrilled with that relationship," Albrecht said, adding that Prime Instant Video in the U.K. affords Starz easier access to other foreign markets. "We have titles in our library that are potentially desirable on other platforms. We think the Amazon, HBO deal is a very encouraging sign."

Distribution revenue increased 14.5% to $87.3 million, from $76.2 million a year ago. Home video net sales increased nearly 14% to $56.7 million, from $49.8 million a year ago. Home video cost of sales declined $2.1 million to $13 million.

Notable releases in the quarter included Lee Daniels’ The Butler, Mandela: Long Walk to Freedom and Fruitvale Station. Upcoming releases include The Art of the Steal with Kurt Russell and Terence Stamp (May 6), and Django Unchained Blu-ray Steelbook (May 20).

CFO Scott Macdonald warned that Starz Distribution revenue is dependent on Weinstein's release schedules, which can vary quarter by quarter.

"We're not anticipating the same in the early part of the year [in revenue in 2014] as we saw last year on the Weinstein [slate]," Macdonald said.

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