Starz CEO: Recent Carriage Deals Have 'Less Favorable' Terms
Premium TV company Starz has recently agreed on carriage deal extensions with two distributors, but they came at "less favorable" terms for the company, CEO Chris Albrecht said Tuesday.
John Malone's Liberty Media is in the process of spinning off Starz as an independent company by year's end.
Albrecht had said on a previous Liberty earnings call that independent programmers were facing challenges in their carriage renewal talks with distributors. On Tuesday, he said Starz recently struck a key multi-year, multi-platform extension with one partner. "We also have agreement on the substantive financial terms for a multi-year extension with another distributor," he added. "The extended agreements, however, are generally on less favorable economic terms than the previous agreements."
He didn't disclose which distributors he was referring to, but observers said one was likely to be Cox Communications. He didn't detail the financial arrangements or their likely revenue impact. The two extensions will provide Starz stability over the next few years. "After an initial reduction in revenue," they will provide for increases starting with first anniversary of renewal date, Albrecht said.
He said the two deals account for around 19 percent of Starz's revenue and take care of the company's near-term carriage renewals.
Albrecht didn't comment on analyst questions about how the new deals may affect future renewal terms with other distributors and how the planned Starz spin-off could affect future deals. The spin will provide an opportunity "to help navigate our business with a little bit more flexibility than we have had in the past," Albrecht said. "I think that will aid us."
Asked if the new carriage deals tie revenue to subscriber growth, Albrecht would only say that Starz has some fixed-rate deals with built-in increases, but it also has consignment deals.
Also on Tuesday's call, Albrecht said that Starz original Spartacus would launch its final season on Jan. 25. Other upcoming original shows include the second season of Magic City, which is currently in production as the show has gained "considerable" traction overseas. a potential third season of Boss, gritty sci-fi drama Incursion, Da Vinci's Demons and The White Queen.
Next year will also see the start of production of Michael Bay's Black Sails, which is currently in pre-production in South Africa.
And Albrecht announced a new project from Sony TV on Tuesday's call. He described the show, called Outlander, as a historical series based on Diana Gabaldon’s fantasy book franchise.
Albrecht said that his team is looking forward to the planned spin-off. "We believe that as an independent company we are in a strong position to capitalize on opportunities and potential alliances in the marketplace," he said. "We feel good about our strong programming lineup and our ability to grow our services."
Asked if stronger recent box office performances from Starz output deal partners Disney and Sony will boost Starz's cost in 2013, Albrecht said he couldn't provide a movie cost forecast.
"We are in discussions with our studio partners all the time," and topics such as prices and rights also come up, but movie costs can be difficult to forecast, he added. The Sony output deal runs through 2016, and the Disney deal through 2017.
Also on the earnings call, Liberty Media CEO Greg Maffei said Tuesday that a three-member board committee that he is chairing, is starting the process of looking for a new CEO of Sirius XM Radio following the recent news that Mel Karmazin will set down early next year.
He said "we are just beginning hiring search firm," predicting that the search would take a while to ensure a smart hire, but he said he expects it to wrap in six months or less. In the meantime, Sirius has a deep executive bench to sustain its business momentum, he said.
"We will be heavily involved in choosing the next CEO there and continuing the success," Maffei said.
Liberty, which currently owns slightly less than 50 percent of Sirius, has asked the FCC to allow it to take formal control of the company. Only one individual filed a comment opposing that move with the FCC, he said without commenting on the situation any further.