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Albrecht Says Starz Needs to Ramp Up Originals

Standalone company is expected to be acquired

Starz CEO Chris Albrecht didn’t talk and wasn’t asked about his company getting bought but said it has lots of cash, a strong balance sheet and will itself be prowling for partners to ramp up originals before Disney product disappears in three to four years.

Starz split from Liberty Media in mid-January and Wall Streeters and industryites expect it to be acquired in an ecosystem dominated by big congloms. Albrecht thanked Liberty and Starz’ new board during the pay-TV group’s first earnings call as a standalone public company.

Revenue dipped 2% to $422 million last quarter. Starz cited lower distribution sales on fewer titles available from The Weinstein Company and lower revenue at the core network on non-renewal of a deal with Netflix.

Operating income dipped to $85.6 million to $87.2 million.

Starz said it paid Liberty $1.8 billion in cash between July and January in connection with the spinoff. But now it happily gets to keep all its cash to itself.

Starz ended the year with 21.2 million subscribers, up 8% for the year; sister network Encore closed 2012 with 34.8 million subs, up 5%.

Starz’ debut as an indie was fraught with drama. In December, it bowed out of a bidding war for Disney films, failing to secure one of its two main output deals. This month, it clinched a pact with its other big partner Sony until 2021, with content through 2023.

Albrecht stressed Disney provides product through 2016-2017 although Starz “needs to ramp up in originals to be ready” after that and is looking for partnerships “that could let us dramatically accelerate the number of hours without dramatically impacting our operations.”

That’s possible because unlike larger rivals HBO and Showtime, Starz is less picky about rights.

“It’s important we control the rights so that we can secure active distribution of our channels and we would like as much control over our branded product as possible. So some rights we need to retain. International is an opportunity. But it’s less important to own all of these all the time. HBO and Showtime may have a different threshold. Starz is willing to be more flexible,” he said.

Wall Street had fretted that Starz overpaid Sony to ensure a pipeline. But Albrecht, without giving figures, assured analysts that the deal economics were in line with other recent studio-premium TV pacts, as well as with the Starz-Sony deal piece in 2012. The renewal pact also adjusts for the number of films and box office performance.

“Sony distributes a lot of movies, which gives us bulk, but many come from Sony Classics and Screen Gems. Not all films are created equal,” he said. Starz will have plenty of cash to both meet its original programming requirements, and pay its ouput partner, he promised.

Starz will have 36 hours of original programming this year. The “Spartacus” finale will segue into “Da Vinci’s Demon’s” in April, followed by the second season of “Magic City” and the premiere of “White Queen” based on the best-selling historical novel by Philippa Gregory.

Michael Bay’s “Black Sails” is set for 2014. Upcoming projects include two dance dramas, one about ballroom dancing announced this week called “Blackpool,” another exploring the dysfunctional underbelly of ballet.

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