Comcast, Lionsgate Reach New Deal for Starz That Will Include Peacock Carriage

Power Still Episode 410 - Publicity - H 2018
Courtesy of Starz

The new agreement ends divisive renewal talks and ensures Xfinity subscribers will continue to access 'Power' and 'Outlander' episodes.

Comcast NBCUniversal and Lionsgate have agreed to terms on a new carriage deal for Starz that includes continuing access of Starz networks on Xfinity TV and future carriage on Comcast's Peacock streaming service.

Financial terms of the new deal were not disclosed, but the renewal agreement avoids a year-end blackout of Starz on the Comcast platform and will be watched by the industry as carriage renewal talks for premium cable networks like Starz become increasingly contentious as TV viewers continue to cut the cable cord and go online.

The current deal between Comcast and Lionsgate for Starz was set to end Dec. 31. The new agreement will see NBCUniversal license content from Lionsgate for Peacock, its upcoming streaming service set to launch in April. And Peacock will access movies and TV shows from Lionsgate to stream alongside already announced original series, TV shows and films from Universal and other major studios.

NBCUniversal will also license content to Starz for the U.S. market and on its international streaming service, Starzplay, now available in 49 countries.

Under the new pact, the Starz flagship premium channel, as well as the Starz Encore suite of channels — including Encore, Encore Westerns, Encore Black and Encore Action — and related VOD content will continue to be available to Xfinity customers and on the Comcast Flex platform. 

Significantly, both companies agreed to "a path for an orderly transition to an à la carte business," where Lionsgate would over time get a higher per-subscriber fee for Starz viewers, compared to the flat fee it receives from Comcast for its premium cable channel being part of the cable giant's main channel package.

Comcast in October first let its Xfinity subscribers know they may lose access to Starz in their main channel package, but opposition from politicians and anti-trust regulators in Washington led the cable giant to keep the premium channel in its Xfinity bundle until Dec. 31.

The short-term disruption from the Comcast dispute is expected to be offset by Lionsgate if Starz lands enough new à la carte subscribers who positively pay for the premium service and watch it. On the distribution front, Lionsgate has been betting on higher revenue for Starz from à la carte subscribers with better unit economics.

Over 2019, Lionsgate saw half of Starz’s revenue come from à la carte customers as the studio signed deals with traditional MVPD partners and new digital distributors.

A new Comcast carriage agreement for Starz also removes a major roadblock for Lionsgate as the premium channel pivots in the cord-cutting era to à la carte subscribers, online and international. The latest pact was preceded by Comcast warning its Xfinity customers they would lose access to new episodes of hit shows like Power, Outlander and Vida as the rival Epix service was swapped into its premium offerings.

That threat came as Comcast and Lionsgate issued competing statements blaming the other for dropped channels amid their escalating carriage dispute. News of the latest Starz deal lifted the stock for Lionsgate as shares in the studio jumped 56 cents, or nearly 6 percent, to $10.60 in early morning trading on Monday.

Wall Street watchers also greeted the new carriage deal with Comcast as allowing Lionsgate to now arrange equity financing and possibly a minority investor for Starz's much-vaunted international rollout, and even an outright buyer for Starz after an earlier reported informal bid from CBS before it merged with Viacom.

"[P]otential M&A suitors now also have visibility on the company's cash flows; while we do not expect any deal in the near term, we expect at least some M&A premium to return to the stock given that the company given that the company was in talks as recently as last spring (with CBS)," Cowen analyst Doug Creutz wrote Monday in an investors note.