Lionsgate, Starz Sign Carriage Deals With AT&T

Outlander S02E13 Still 1 - Publicity - H 2016
Steffan Hill/Starz

Outlander S02E13 Still 1 - Publicity - H 2016

The new affiliation agreement for Starz comes as Lionsgate signs its own multiyear deal to provide VOD, pay per view and EST to DirecTV/AT&T.

DirecTV and AT&T U-verse subscribers who get Starz will continue to be able to watch Outlander, Power and other popular Starz and Encore programming after the premium TV company on Thursday said it reached a new distribution agreement with telecom giant AT&T.

Starz in an SEC filing reported a Sept. 17 deal that follows long-running negotiations with AT&T on a new agreement for its Starz and Encore channels and VOD services that includes boarding DirecTV Now. As part of the deal, AT&T/DirecTV also is taking a small equity stake in Lionsgate, which has agreed in principle to pay AT&T three annual installments of $16.67 million in stock or cash after its $4.4 billion merger with Starz is completed, subject to reaching its own definitive agreement with the telecom player.

Lionsgate also confirmed it recently signed its own new multiyear agreement to cover transactional VOD, pay-per-view and electronic sell-through (EST) with DirecTV and AT&T. Financial details of the Starz-AT&T deal and the separate agreement with Lionsgate weren't disclosed.

But AT&T in a statement said the deal extension with Starz "is a win for our customers who will now be able to watch Starz content across all AT&T platforms, including DirecTV NOW. With the Starz and Lionsgate announcements, we continue to build a robust programming lineup for our new DirecTV NOW platform that includes such premium brands as Disney, HBO, Discovery Networks, NBCU Turner and Scripps Networks."

FBR & Co. analyst Barton Crockett in an investors note Thursday said Starz gave AT&T a "big double-digit step-down" to renew its affiliate deal, adding that was a "jarring outlier" when compared to other deal extensions negotiated by AT&T. Starz in the 8-K filing revealed its network revenues would have been down $46 million in 2015 had the new DirecTV/AT&T deal been in place, and $20 million lower in the first half of 2016. 

Barton added the "tough" step-down in rates for Starz is expected to be offset by over-the-top revenues. "This makes the online growth in the new Amazon/Starz deal sound impressive," he wrote in the note. 

Starz and Lionsgate are the latest media players to extend multiyear carriage agreements with AT&T after the telecom giant struck separate deals with Disney, NBCUniversal, Turner, HBO and Scripps Networks Interactive. The renewals come as AT&T is set to launch three streaming video services, led by DirecTV Now with around 100 channels to target around 20 million U.S. homes without pay TV subscriptions.

HBO's all-platform deal with AT&T announced last month calls for its premium content to be available to DirecTV and U-verse subscribers on any screen, and for HBO and Cinemax to be part of the DirecTV Now streaming service.

Sept. 22, 12:45 p.m. Updated with analyst commentary on the distribution agreement renewal by Starz with AT&T/DirecTV, and a statement from AT&T.