Starz CEO Chris Albrecht Defends End of Netflix Deal, Cites Talks With Others

10:32 AM PST 11/17/2011 by Georg Szalai
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UPDATED: At an investor event, he also quipped about the combination of the Liberty Starz and Liberty Capital tracking stocks and said the firm would launch an authenticated online platform similar to HBO Go next year as Liberty's CEO warns of less profit momentum next year.

NEW YORK - Starz CEO Chris Albrecht said here Thursday at parent company Liberty Media's annual investor day that the premium TV firm is scaling up to 50 hours of originals a year by 2014 and will launch an authenticated TV Everywhere online platform, similar to HBO Go, next year.

He also defended Starz's recent decision not to renew a digital distribution relationship with Netflix, arguing that a renewal would have been a drag on Starz's earnings in two to three years. Albrecht said other online and new distribution deal opportunities will open up for Starz as a result of its getting out of its Netflix relationship soon.

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He opened his presentation Thursday with some jokes about news from earlier in the morning though.

Albrecht quipped that he was shocked to see a news release this morning saying that the Liberty Starz tracking stock would come to an end and be combined with Liberty Capital.

"Ok, it was a tracking ticker, but it was a ticker," meaning it elevated his stature, he said to laughs. He added that his new wife seemed to treat him with "a little less respect" before the conference as a result.

After apologizing for a head cold, he quipped that he nearly lost his voice "shouting down" BTIG analyst Richard Greenfield who is known for his often opinionated reports.

Discussing the end of Starz's Netflix deal, for which Starz has been criticized since it turned out to get too little money, Albrecht said his company "made the absolute right choice for its medium and long-term."

Saying that the deal was "a pricing and packaging issue," he said the cost of movies would have risen under a renewal, and the growing core business would have been eroded. Plus, it would have made it "nearly impossible" for anyone else to enter the online video distribution business, Albrecht argued.

"In two to three years, the Netflix deal would have been a drag on Starz earnings," he said, even though he expressed "tremendous respect" for Netflix. "They have their business model, and it just didn't line up with ours."

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Albrecht also said "we are in very active discussions" with a range of online video distributors, both known, such as Amazon and Google, and new ones.

Other new distribution and growth opportunities he mentioned included high-speed data-only premium packages ("We're all for it," Albrecht said), out-of-footprint MVPD offerings, TV Everywhere authenticated plays and "affordable, flexible funding with core distributors."

Discussing Starz's focus ahead, Albrecht said: "Grow we will, grow we must." Key here are original shows, in which Starz will invest, including money saved from reduced spending on movies, he said. Originals help differentiate Starz and get more support from TV distributors, he said. Starz has been looking to strengthen its relationships with them following a much-criticized deal with Netflix that is coming to an end soon. As an example that spending on originals can pay off, Albrecht said that Starz original series Spartacus is on track to be profitable.

Albrecht showed the investor conference clips from Magic City, the new season of Spartacus and Boss, which he said his team is "very proud" of and which he said sees Kelsey Grammer perform as well as anyone in any project Albrecht has ever been involved.

While Boss may not be emblematic of the developing brand that Starz is looking to develop, Albrecht said it is strong and he loved the script so much that he would love to find out what happens in season two if the show does well enough to return.

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Albrecht also said the his team is focusing on refining and expanding product offerings to distributors.

In that context, Starz will also continue to review "all potential new opportunities" as new digital video players come up. "We will be prudently aggressive," Albrecht vowed without mentioning any specific digital distributor.

With all that said, Liberty Media CEO Greg Maffei said at the meeting that Starz will focus on strengthening its brand, saying it has been "relatively muffled," adding originals, improving relations with traditional partners and looking for "compatible incremental digital distribution" opportunities.

Explaining why the Liberty Starz and Liberty Capital tracking stocks will be combined now, Maffei said investment opportunities for Starz have not materialized, but he said he sees "a host of opportunities" for deals at Liberty Capital.

Also, despite great Starz subscriber momentum, "we don't believe we get the valuation" deserved for Starz.

Liberty management said Thursday it could use its cash following the Starz-Capital combination to increase its stakes in existing investments or put it into new companies.

Plus, Maffei said the combination will give Liberty more flexibility for future spin-offs.

Mentioning investor questions about potential spins of Starz or Sirius XM, he said "flexibility increases with this." But he didn't show his hand, saying "who knows what our future holds."

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