Liberty Media’s Malone on future of Starz

Chairman predicts what's next for pay cable net

Liberty Media chairman John Malone sees Starz marrying a big media company after he cuts the pay cable net loose by year end.

“I think everybody can use a big brother,” he said at Liberty’s annual investor meet in Gotham on Wednesday. “I think there are substantial synergies for Starz working together with various potential media partners. So, certainly one of the opportunities that we’re creating is for Chris and the board to explore other relationships,” he said, referring to Starz CEO Chris Albrecht.

Malone told Wall Street that Liberty sees itself more or less as a hedge fund short term and “can’t provide Starz with operational synergies in (the showbiz) space in the U.S.”

Albrecht said that since 2009, Starz revenue has grown about 2% annually, slower than the competition. As a standalone, it lacks market power and retrans muscle like CBS, which can bundle its stations with Showtime, and Time Warner, which has Turner Broadcasting plus HBO.

Wall Streeters see all of big media, as well as upstarts like Amazon and players like Netflix and Google, as potential suitors. Comcast may be a particularly good fit.

Albrecht also said he’ll boost revenue by partnering with a premium digital service after a deal with Netflix died. “I believe that there will be a premium digital service that doesn’t exist today that will be compatible. A new entry in a true over-the-top space,” he said.

“I think there are also pockets where our traditional distributors enter the digital space with new products and new pricing opportunities.”

Starz rolled out its new StarzPlay authenticated system with Cox earlier this week. It’s in talks with other operators to add additional subs.

Liberty announced plans to spin Starz off in August. It should be filing details with the SEC shortly, said CEO Greg Maffei.

Meanwhile, Albrecht said Starz would focus on original series and on strengthening its relationships with traditional distributors.

Starz and Encore together have 55 million subscribers and 1.1 million viewers at any given time. The net is working up to 50 hours or exclusive original programming by 2015.

It airs over 1,000 movies a month and has long-term deals with Walt Disney (through 2015) and Sony (through 2016).

“Liberty is spinning away from us. We’ll miss them. They are great owners. But instead of feeling left alone, we are actually really energized with this decision. We supported it. We think the timing is great,” Albrecht said.

Liberty’s holdings also include a nearly 50% stake in Sirius XM, and it is trying to take control of the satellite radio giant. That’s caused some tension with Sirius chief Mel Karmazin. Presenting Wednesday, Karmazin touted the service’s financial health and fast growth. It added 446,000 subs in the third quarter, up 34%, setting it up to hit 1.8 million subs this year.

He stuck to business and didn’t discuss a Liberty takeover. Malone didn’t mention anything about Karmazin ultimately leaving. He said he wanted to avoid “a hell of a fight with Mel” over some ideas on Liberty’s wishlist, but not the takeover.

Live Nation CEO Michael Rapino said the company is focused on electronic music, expanding its festival circuit in North America and revamping Ticketmaster.

And Barnes & Noble, which controls 64% of the nation’s shelf space for books after the demise of Borders, has big plans for the Nook reader this holiday season, execs said.