Starz, QVC Lift Third Quarter for Liberty Media

Pay TV subscriber units, programming expenses rise; decision on future of Spartacus to come by year's end

NEW YORK - John Malone's Liberty Media reported mostly improved third-quarter financials for its key operating businesses Starz Entertainment and home shopping network QVC on Friday.

Starz management said it is still considering recasting show Spartacus: Blood and Sand given star Andy Whitfield's health issue, but will make a decision on how to proceed before year's end depending on what the team feels is best for the show and cast.

The Liberty Starz group posted a 5% revenue increase to $319 million, and operating income increased 15%. But adjusted operating income before depreciation and amortization decreased 3% to $89 million due to higher operating expenses at the core Starz Entertainment business. Expenses increased 9% as a result of higher programming costs associated with original programming and stronger box office performance of output titles it aired, including Up.

Starz subscription units rose 1%, and Encore subscriptions increased 4% over the year-ago period.

"Starz Entertainment enjoyed another solid quarter with continued positive revenue growth and the third consecutive quarter of sequential subscriber gains at Starz and Encore," said Starz LLC president and CEO Chris Albrecht.

The Liberty Capital segment also reported higher revenue for the quarter, and operating losses decreased. Key drivers were revenue growth at Starz Media related to theatrical and home video releases from recently sold Overture Films, as well as the number and timing of releases and their marketing expenses.

"We continue to make significant progress in realigning and focusing the core Starz Media companies through the recent attribution of the Starz Media assets to the Liberty Starz group and the pending sale of the Film Roman animation studio," said Albrecht. "Though not complete, we are pleased with the progress achieved so far and the cleaner financial and operating structures of the combined businesses of Starz Entertainment and Starz Media."

Meanwhile, the Liberty Interactive group's revenue and OIBDA increased 8% each to $2 billion and $373 million, respectively, driven by better results at QVC. Operating profit jumped 13% to $220 million.

QVC's revenue climbed 7% to $1.8 billion and adjusted OIBDA rose 8% to $369 million, with operating income up 13% to $235 million.

On a conference call with Wall Street analysts, Liberty CEO Greg Maffei said Live Nation is facing challenges amid weak consumer spending and technology issues, but said it is well-positioned, citing "interesting long-term characteristics."
Buying Barry Diller's stake means that Liberty now holds a 15.8% stake in Live Nation, management said.

On the call, Albrecht said Starz continues talks with Netflix about a potential continuation of a content deal that expires next year. And Maffei said there remains some financial "lumpiness" in original content, but he feels good about Starz's positioning.