Sie ankles Starz Encore as cabler faces hardship

Bauman also to assume CEO duties until replacement found

NEW YORK — Cable TV pioneer John J. Sie has retired as CEO of John Malone’s Starz Encore Group as the company grapples with shortfalls that could slash up to 45% of its earnings over the next two years.

Malone has asked Sie, 68, to stay on as chairman to help Starz Encore as it struggles with its financial problems; Mark Bauman, who has announced that he plans to retire soon as president-chief operating officer of the company, will assume the CEO duties until Malone finds a permanent replacement. Succeeding Bauman as prexy-COO is Robert Clasen, who gets a promotion from president of sales and marketing.

The reason Starz Encore has fallen on hard financial times is that its costs for exclusive pay TV rights to theatrical movies (particularly from Disney-owned Touchstone, Miramax, Walt Disney Pictures and Dimension) have shot up, while its sole source of revenue — license fees from cable ops — has lagged.

Malone has said publicly (Daily Variety, March 17) that he’s open to finding a buyer for the company. One possible candidate is Viacom, which could merge Starz Encore with wholly owned pay TV service Showtime. Another suitor could be News Corp., which would be able to ramp up video-on-demand applications for Starz Encore’s movie-output deals with Disney, Columbia Pictures and Revolution Studios and its rights deals for hundreds of older titles.

Showtime interest may perk up even more if, as rumored, Sony Pictures buys MGM for its 4,000-movie library, shutting down its production operation. Showtime has a long-term output deal with the Lion; the loss of fresh MGM product would be a serious problem for Showtime because the only other significant movie output it has under contract comes from sister company Paramount Pictures. A Sony/MGM merger could prod Showtime into buying Starz Encore in order to add Disney and Columbia titles to its theatrical mix.

Sie founded Starz Encore in 1991 after serving as senior VP of Tele-Communications Inc., the multisystem cable operator set up by Malone. Sie founded Showtime in the mid-’70s and was involved in early experimental work on digital technology.

In a talk last month at Harvard Business School, Sie predicted that within a few years the major studios will premiere their movies not in theaters but in the home on giant flat-screen TV sets equipped with digital high-def video-on-demand.