Starz Q4 Earnings Hit by Higher Programming Costs

Starz took an earnings hit in the fourth quarter due to higher programming costs and a dip in revenue at its core network business.

In the fourth quarter earnings released Thursday, Starz cited the higher costs and greater volume of programming in the quarter versus the same period in 2014 for the 54% decline in adjusted operating income, which came in it $68 million. Total revenue for the quarter inched up 0.5% to $427.6 million. At the Starz Networks unit, revenue fell 1% to $327.8 million for the quarter.

For the full year, revenue increased 2% to $1.7 billion while adjusted operating income fell 8% to $461.6 million. Net income fell to $236.1 million for the full year, compared to $271.3 million in 2014.

Earlier this month Starz disclosed that it was in merger talks with Lionsgate. Starz CEO Chris Albrecht didn’t say much about the state of those talks during a conference call with investors. “We believe in consolidation and are open-minded about a deal” that would benefit shareholders and offer strategic benefits to Starz on the programming front, Albrecht said.

Albrecht emphasized that the company was focused on beefing up its original programming offerings and expanding distribution of its networks to new platforms beyond cable. In fourth-quarter 2015, Starz offered new episodes of “Blunt Talk,” “Da Vinci’s Demons,” “Ash vs. Evil Dead,” “Flesh and Bone” and “Survivor’s Remorse,” compared to just two lower-cost series, “The Chair” and “The Missing,” in the year-ago quarter.

Starz took the first step toward alternative distribution in inking a deal with Amazon to be offered as part of Amazon Prime’s a la carte menu of streaming channel options. Albrecht also said Starz was putting the finishing touches on an app that would give it greater flexibility to offer authenticated access to existing subscribers as well as in marketing the pay cabler as a stand-alone option.

“We think our app is state of the art and will have all of the functions and features consumers are looking for and will be excited about,” Albrecht said. “We’re really jazzed about it here. It opens up a whole new world for us.”

Shares were down 6.3% to $66.32 at the close of trading Thursday.

(Pictured: “Ash vs. Evil Dead”)

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