Chris Albrecht Talks Up Originals as Starz Earnings Underwhelm

Shares take a hit as earnings miss analysts' expectations

Starz’s stock took a hit Thursday morning after the newly spunoff cable channel group unveiled first quarter earnings that came in under analysts’ expectations.

Shares were down more than $1.50 after the ayem earnings release, which came in at 47 cents a share while the Street had been expecting 49 cents.

Revenue for the quarter came in at $399.3 million, down from $405 million in the year-ago quarter, with operating income at $104.9 million, compared to $120 million last year. Starz emphasized in its release that Starz has grown its subscriber base by 7%, to 21.6 million, while Encore channels are up 4% to 35. 1 million.

On a conference call with analysts, Starz CEO Chris Albrecht emphasized the company’s focus on ramping up its original series strategy, especially as it loses rights to Disney movies starting in 2017.

“Our development pipeline remains extremely robust,” he said. He cited the success of “Da Vinci’s Demons” and upcoming drama series including “The White Queen” and Michael Bay’s “Black Sails.”

Albrecht acknowledged that Starz is adjusting to the impact of carriage renewal deals with some distributors that are on “less than favorable terms” than past deals. Starz had a number of key carriage pacts that were renegotiated last year, most of which were on comparable terms as past pacts. And there’s a “significantly smaller amount” of deals in play this year, he said.

He also noted that Starz is deal with a “month to month” renewal situation with one major distrib — believed to be Time Warner Cable. That’s a sign of the tensions between major MVPDs and programmers.

Albrecht has previously said Starz’ goal is to get up to 50 hours a year of original series programming. But that number may grow as the company’s film slate shrinks with the loss of Disney titles. Sony Pictures is now the sole Hollywood major to have an output deal with Starz, which was renegotiated earlier this year.

International sales of Starz’ programming and homevid distribution through its Anchor Bay arm are also important revenue drivers, Albrecht said. He cited the distribution pact recently inked with AMC Networks that calls for Anchor Bay to handle homevid sales for AMC, IFC and Sundance Channel series, a deal that includes AMC’s global hit “The Walking Dead.”

Starz has been seen as an acquisition target since its spinoff from Liberty Media was completed in January. But its prospects for aligning with one of showbiz’s major congloms remain murky as logical contenders for the pay TV group, notably NBCUniversal and News Corp., have so far shied away. Albrecht made it clear on the call that the company’s focus in enhancing its original programming profile, which will help cement its relationships with key distribs and viewers.

Albrecht said he’s been encouraged by start for “Da Vinci’s Demons,” which has drawn an average of about 6 million viewers across all its weekly plays.

“Premium television as you probably know is an inexact science,” Albrecht said. “The quality of the feedback we got (on ‘Demons’) from all our key constituents … was extremely encouraging,” he said.

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