Starz First-Quarter Earnings Decline, Subscribers Rise
Starz on Thursday reported lower first-quarter financials, but said subscriber numbers hit new records.
The premium TV company, led by CEO Chris Albrecht, said quarterly revenue dropped 1 percent to $399.3 million from $405.0 million. Earnings fell to $58.2 million from $79.2 million.
Wall Street analysts had on average projected earnings of $60.3 million on revenue of $404.6 million. Starz separated from John Malone's Liberty Media on Jan. 11.
The company cited "the non-renewal of the Netflix [digital distribution] agreement and the renewal of affiliation agreements with two distributors in the fourth quarter of 2012 on less favorable financial terms," which Starz had previously disclosed, as drags on its financials. "Starz Animation also contributed to the decrease in revenue due to fewer projects in production at the company's Film Roman studio," it said.
That was partially offset by an increase in revenue at Starz Distribution thanks to "the strong performance of the company's original series Spartacus and various titles from The Weinstein Company."
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Subscription units increased at its flagship Starz network to a record 21.6 million and at Encore to a record 35.1 million. The company had ended 2012 with 21.2 million and 34.8 million subscribers, respectively.
"Starz delivered solid operational performance in the first quarter with record subscriber totals at Starz and Encore," said Albrecht. "We continue to execute our strategy to grow the Starz Original series programming portfolio with quality dramatic series. Coupled with the conclusion of Spartacus, which aired on the same night, Starz had the biggest weekend viewing for an original series in the company's history and we are happy to have renewed Da Vinci's Demons for a second season."
He added: "In addition, anticipation is building for Magic City, The White Queen, Black Sails and the recently greenlit Fortitude, which we will co-produce with BSkyB's Sky Atlantic. We are confident that over time our approach to original programming will deliver strong shareholder value."
On a conference call with analysts, Albrecht said Da Vinci is drawing an average viewership of 6 million per episode, better than other originals, such as Boss, and on par with Spartacus.
With a Disney studio output deal coming to an end in the coming years, Starz will be evaluating the number of and spending on originals, analysts have said. The company will go from offering films a few years ago and offering some originals now to "a much more balanced portfolio," Albrecht said when asked about the content mix after the Disney deal. While Starz has been ramping up its originals, he didn't detail any new number of originals or a new budget for originals that the company could end up targeting.
Asked about what kind of deals with pay TV operators are coming up this year and their potential effect on revenue, he said this year's deal carriage renewals would have "significantly less" revenue attached than last year's.