Updated with AT&T statement: Starz and Lionsgate have new deals with AT&T, the nation’s top TV provider, that contributed to a 1.5% increase in the premium networks company’s stock price in early trading Thursday and a 3.1% increase for the studio.
Starz reports that it has “agreed in principle to multi-year extensions” of its affiliation agreements with DirecTV and AT&T, which also owns U-verse. In addition, Lionsgate has a new multi-year agreement to offer transactional VOD, pay-per-view and electronic-sell-through via DirecTV and AT&T.
But the terms include price cuts for Starz as well as an arrangement that could make AT&T a shareholder in Lionsgate when it closes its Starz acquisition, expected by year’s end.
Had the new terms with AT&T been in place at the beginning of 2015, Starz’s corporate revenues would have come in 2.7% lower (at $1.65 billion instead of $1.7 billion), while the networks operation would have been down 3.5% (to $1.32 billion), according to data in the filing.
For the first half of this year, Starz’s corporate revenues would have come in 2.4% lower (at $814.2 million) with the networks’ revenues down 3% (to $662.7 million).
The hit from of the new deal will “decrease annually,” Starz says, adding that it expects “other revenue sources including OTT revenue trends to offset the financial impact of the extensions.”
On top of the rate cut, Lionsgate agreed to give AT&T either three annual bundles of stock each worth $16.67 million or, if the studio wants, the equivalent amount in cash. These will be accounted for as decreases in Starz’s revenues.
But it all goes away if Lionsgate’s deal with Starz collapses. AT&T then would “have the option to terminate and renegotiate the multi-year extension arrangements with Starz,” the filing says.
The Starz announcement “should provide relief for those fearful of worst-case scenarios that carriage could have been dropped, or that the revenue decline (from a shift in revenue-sharing economics) would be as great as 10%,” said Evercore ISI’s David Joyce.
AT&T says that the agreement with Starz is “a win for our customers who will now be able to watch Starz content across all AT&T platforms.” With content from the premium networks company and Lionsgate “we continue to build a robust programming line-up for our new DirecTV Now platform that includes such premium brands as Disney, HBO, Discovery Networks, NBCU, Turner and Scripps Networks.”