Starz CEO Targets 75 Hours of Originals Per Year Over Time
Starz CEO Chris Albrecht told a Goldman Sachs investor conference on Tuesday that while his firm has been mentioned as a possible acquisition target or acquirer, his team has so far mostly focused on its business plan as a standalone business.
Asked how many hours of originals Starz was likely to have in three to five years, he said that after 50 hours of original programs in 2014, Starz could have 75 hours within a few years, similar to what competitors Showtime and HBO are offering in terms of scripted programming. "We would like to be in that competitive category of 75 or so [hours] within the time frame that you mentioned," he said. "How soon we can get there depends a lot on the state of our business and the way we deliver."
Spending on originals will rise in the coming years, but he said he couldn't say by how much since that depends on the type of shows and financing arrangement and the firm's plans have various levers that can be pulled "to either go forward or to press pause."
Appearing at the 22nd annual Goldman Sachs Communacopia Conference in New York in a session that was webcast, Albrecht also cited "a lot of speculation" about Starz as a possible acquisition target for a big entertainment conglomerate since John Malone's Liberty Media spun it off in January. Asked about possible deals – with it remaining undefined whether Starz would be buyer or seller, he said: "Investment bankers have told us about their best ideas. There hasn't been anything yet that seems to make sense to us."
Said Albrecht: "In the meantime, we are investing in our business and using cash to strengthen that business." Among other things, Starz is focused on rolling out its authenticated platform, he said. But international is also "an interesting frontier to investigate," he said. Albrecht didn't specify if he was considering making acquisitions or investing to build Starz's business outside the U.S.
He said that Starz plans to keep investment in films stable or reduce it, while raising originals spending. The end of a Disney output deal allows that. This winter, the company will roll out Black Sails, followed by season two of Da Vinci's Demons and Outlander, which he quipped is based on a best-selling fantasy series like another premium TV network he said he has heard about. It was a reference to his former employer HBO and its hit show Game of Thrones.
Albrecht said that people are giving out series orders without seeing an episode in the age when Netflix has built its originals offering. That increases the competition for top talent and ideas, he said.
Asked about Starz's biggest opportunities in the coming years, Albrecht said that "we are migrating Starz from an almost entirely movie-based service" to a more balanced approach, including a focus on original programs. Starz also wants to "cement Encore as the real place for movie lovers to go," Albrecht said.
Given pay TV operators' good margins with Starz, there is no reason not to help his firm build its business. "They only get paid if we get paid," he explained the rationale behind enticements in some content carriage agreements.
New online video players that may emerge over time, from Intel to Sony, Albrecht said Starz would be interested in licensing content to them if they offered a premium tear and allowed Starz to be priced accordingly.
Could Starz end up looking to offer its content to consumers directly via broadband? Albrecht said Starz's current deals don't prohibit it from doing that, but there would be too many problems and issues right now.
He described his team's approach to originals as "pragmatic and cost-effective." And he said that he follows a portfolio approach to originals, with The White Queen and other originals allowing the firm to reach certain under-served demographics.
He also said that "the distribution business can be a high-margin business," meaning Starz is looking to acquire international rights to shows that can be monetized abroad. For BBC co-production White Queen, the firm also has distribution rights in many countries, he said.
Albrecht also emphasized his focus on building revenue and earnings. "We are pretty well positioned to be a good story for our distributors," concluded Albrecht nine months after Starz's spin-off from Liberty Media.
Through early 2017, Starz will have Disney films until its end of an output deal. A renewed Sony output deal gives Starz a good basis, he said. Movies are still a key part of the overall content mix for Starz and create a "big foundation," but "originals are a way for the audience to connect with the brand and build a real stickiness," Albrecht said. Movies are staple items, while originals are headline items that pay TV partners can promote, he said.
A show that is a critical darling would have to be cheap because it doesn't help build business, he said.