Starz, which was acquired in June by Lionsgate in what was a $4.4 billion cash and stock deal, today reported reported lower second-quarter earnings, specifically 54 cents per share compared with 59 center per share a year ago. There were no surprises in the report except Starz said the decline was due to fewer new releases from The Weinstein Co. Operating income for the premium cabler decreased about 5% to $105.4M.
In addition, revenue fell 4% to $402.6M and total subscriptions (for Starz and Starz Encore) were down a bit — at 56 million compared to 56.4M last quarter. It seems to be slowly declining as subscriptions tallied 56.8M last year in the second quarter. Starz Networks reported revenue of $343.1M and operating income of $121.1M.
The company said it ended June with 24.2M total subscriptions, a new company high that compared compared to 23.5M at the end of the second quarter of 2015. It reported that Starz subscriptions increased since March by 200K (the company pointed out it is “another record high for 3rd quarter in a row making us second most distributed premium”).
In a call with Wall Street analysts today, Starz president and CEO Chris Albrecht touted the Lionsgate deal as well as its coup film: Star Wars: The Force Awakens, which will bow on Starz on September 10. It also talked about TWC issue, saying cash paid for investment in films and TV programs decreased $50.9 million to $2.8 million due to timing of payments under its distribution agreement with TWC.
Asked about why Lionsgate and Starz merged and what the benefits were, Albrecht said: “One of the things that kinda baffles me is how many people don’t get (the Lionsgate deal) … there’s going to be a great team in the CEO suite starting with Jon Feltheimer and Michael [Burns at Lionsgate]. In a very simple basic way of thinking, we’re in the content IP creation business and the distributing and monetization of those rights that come along with that IP. We’re going to be a magnet for talent … we’re going to have the financial wherewithal to do many more things than we’ve done before. The merged companies are going to be far more effectively attract content. The Lionsgate guys — with the library they have — are going to do a better job monetizing that content than we are able to do as a stand-alone company. Lionsgate is also going to be a perfect partner for shows that may need partners and we won’t need to look elsewhere.” He also said that would carry over to new digital and international businesses.
They are currently working on the filing for the joint proxy statement for the combined company. “This is no doubt, the beginning of something terrific,” he added.
Execs also talked about ongoing litigation with a number of parties (shareholders sued at one point) saying that they have a few million dollars in exposure on that. “Dick Wolf is going to do a new show called Law & Starz,” joked CFO Scott MacDonald. “How many unfounded lawsuits can one company get hit with? A lot. Too much. A waste of time.”
In reporting numbers, Albrecht said in a prepared statement: “We performed very well in the second quarter, delivering strong financial results … Outlander and The Girlfriend Experience grew viewership across multiple platforms demonstrating that our original programming continues to make Starz a ‘must-have’ service for consumers. We are thrilled with the record-setting viewership for the third season premiere episode telecast of Power and look forward to a strong third season from the critically-acclaimed Survivor’s Remorse.”
Power is in its third season and the premiere episode, it noted, set a new record viewership for original series. It has been renewed for Season 4 and Season 5. Outlander has been renewed for Season 3 and Season 4.
Noting a very different environment with the AT&T/DirecTV merger and ongoing competition, Albrecht said he believed his company would fare well. “We believe the opportunities will outweigh the challenges.”