Starz’s Standalone Broadband Service Draws Nearly 1 Million Subscribers
Starz has garnered nearly 1 million subscribers for its standalone broadband service that launched in April, the company said Thursday as it released third quarter earnings that were hard hit by higher programming and marketing costs.
The pay cable group is in the midst of finalizing its $4.4 billion sale to Lionsgate. Starz’s net income for the quarter fell 43% to 34.3 million from the year-ago quarter. Revenue was up 6% to $348.6 million. Adjusted operating income fell 22% to $89.9 million because of marketing costs, including advertising for the Starz standalone app, and because the cabler has more original series in production than ever before. Cash laid out for programming costs for the quarter rose by $27.7 million to $76.3 million.
During a conference call with analysts, Albrecht talked up the fast start for the Starz app, which has been sold in partnership with Amazon Prime for an $8.99 monthly fee, and the ratings success of Starz drama “Power” and “Outlander.”
The subscriber gains for the standalone app help offset subscriber losses for the channel group from the AT&T realm. Starz chalked those up to the continued integration of AT&T’s U-verse and the DirecTV satellite service, which AT&T acquired in July 2015. AT&T has been encouraging U-verse subscribers to migrate to DirecTV as the company focuses its video efforts on the enhancing the larger DirecTV serivce.
For the quarter, Starz added a total of 300,000 subscribers.
“The drag on our subscriber numbers from the merging of those two platforms was significant,” Albrecht said. “It goes to blunt a lot of what would have been a different story when it came to Amazon and the Starz app numbers,” Albrecht said. He was blunt about AT&T facing subscriber losses amid the effort to integrate DirecTV and U-verse. “They’re losing a fair amount of people in this transition. We’re looking forward to the time when it’s over,” he said.
Of course, as Albrecht navigates his own merger with Lionsgate, he was asked for his thoughts on AT&T’s next mega deal, the $85.4 billion acquisition of Time Warner unveiled Oct. 22. Albrecht, an alum of Time Warner’s HBO, was measured in his observations.
“It’s a massive deal, it’s at the beginning of the process. It’s going to be a long process and it’s anyone’s guess what happens,” Albrecht said. He noted that he endured the upheaval of Time Warner’s 2001 merger with AOL, or as he called it “another company that starts with ‘A’,” which famously went south within two years. But he gave a shout-out to his old boss, Time Warner CEO (and former HBO CEO) Jeff Bewkes. “These things are extremely difficult but there’s no one smarter than Jeff Bewkes,” he said.
Fundamentally, the high price AT&T is paying for Time Warner is good for Starz and its ilk. “We think it highlights the value of content and of companies that create their own content,” he said.
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