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Starz’s Chris Albrecht: OTT Distribution ‘Is a Tide That Has To Turn’

Starz CEO Chris Albrecht has come out strongly in favor of embracing over-the-top distribution options for the pay TV group in the U.S. and abroad.

“This is a tide that has to turn,” Albrecht told investors Thursday during Starz’s third-quarter earnings conference call. “I don’t think it cannibalizes the existing business. It is a way to innovate and create real value.”

HBO’s Oct. 15 announcement of plans to market an OTT service targeting broadband-only homes has opened up opportunities for other premium players, Albrecht said. Starz is planning to launch an SVOD service for its original series, mixed with other licensed TV shows and movies, in select international territories. Albrecht strongly indicated that the company is looking at its options at home as well.

“There is significant value in paid premium channels that is being constrained by current MVPD bundling,” he said.

At the same time he emphasized that Starz is looking to work with MVPDs in marketing alternatives to the traditional subscription TV bundle. As with HBO, the focus is on broadband-only homes and homes that don’t at present take any premium channels.

“Let’s get them in the tent. Let’s give them what they want,” Albrecht said. “The distributors have to decide they want to not just sell them broadband but they want them to be video customers as well. … To us this is a no-brainer.”

As for the international plans, Albrecht said Starz was talking with potential partners and expected to launch in selected territories next year. But he wouldn’t get more specific about regions, saying he wasn’t ready to tip his hand to competitors. He projected that the startup costs for an international SVOD offering would be under $20 million for Starz.

There was little talk on the earnings call about the sale rumors that have swirled around STarz since it became a stand-alone publicly traded company in 2013. Albrecht said the company’s focus on boosting original programming is proceeding as planned, and that 2015 should be a prosperous year as Starz will offer its broadest slate of new and returning programming.

Fantasy drama “Outlander” (pictured) was a big win for Starz, drawingn strong ratings and generating traction with women in particular. Starz is keenly focused on shows with appeal to African-American and Hispanic auds, which he sees as underserved by premium outlets in general. Two shows that premiered this year, drama “Power” and comedy “Survivor’s Remorse,” are raising Starz’s profile with African-American viewers, a demo that he also sees as a prime target for an OTT offering.

On the financial front, Starz delivered a profit of $55.8 million in its third quarter but revenue of $408.2 million came in below Wall Street estimates.

Overall, the Street had been expecting Starz to deliver Q3 revenue of around $434 million. The Q3 earnings per share of 51 cents were on target with estimates averaging 51 cents-52 cents per share.

Albrecht said Starz is seeing good traction for its new series, particularly fantasy epic “Outlander,” which bowed in August, and urban drama “Power.” Both have been renewed for a second season along with comedy “Survivor’s Remorse.”

Operating income at the Starz Networks unit climbed 4% to $99.2 million, but was offset by a $14.4 million jump in expenses for original series now in production. Subscribers have climbed by 500,000 during the last year to a new high of 22.5 million.

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