Starz Misses Q3 Revenue Mark Despite Record Subscription Numbers; EPS on Target

CEO Chris Albrecht touts high of 22.5 million subscribers as company basks in acclaim and performances of Original Series

Starz reported its third-quarter 2014 financials on Thursday, hitting one forecast on the head and missing the mark by another measurement.

Whether one chooses to focus on the former positive or the latter negative, the company itself is pretty jazzed to have hit a subscriber-high of 22.5 million homes — up 500,000 from 2013’s third quarter.

Wall Street anticipated Starz would report earnings per share at about $0.50 to $0.51 on $430 million to $434.41 million in revenue. On Thursday, the company reported diluted EPS of $0.51 on $408.2 million in revenue, nailing the first estimate and missing on the second.

Total revenue decreased from the comparable quarter in 2013, but EPS rose.

Also read: Hollywood’s Streaming Pile-Up: Should Netflix Be Running Scared From HBO, CBS, Starz?

For just the Starz Networks arm, revenue in Q3 2014 increased 2 percent year-over-year to $327.2 million, thanks mostly to rate increases from various distributors. That said, the Starz Distribution leg saw its revenue decrease $44.0 million to $73.5 million “in large part as a result of no significant new releases from The Weinstein Company or of any Starz Original series,” per the earnings release.

A large share repurchase went down this quarter and through present-day: From Aug. 1, 2014 through Oct. 31, 2014, 3.0 million shares of Series A common stock were purchased at an average cost per share of $31.04 for total cash consideration of $93.6 million, the company reported.

See video: Starz Pirate Drama ‘Black Sails’ Gets Early Season 3 Order, Releases Season 2 Trailer

In the accompanying earnings release, Starz CEO Chris Albrecht touted his originals and expressed excitement about future direct-to-consumer streaming SVOD service, Starz Play.

“Our business continued to perform nicely in the third quarter as Starz Networks reported solid revenue, earnings growth and we reached a new high in Starz subscriptions of 22.5 million,” Starz CEO Chris Albrecht said in the release. “We are pleased with the traction of our original programs. ‘Outlander’ had a strong debut, viewership for ‘Power’ finished up with great momentum and grew its viewership throughout the first season, and ‘Survivor’s Remorse’ continues to receive significant critical acclaim.

“We are very enthusiastic about our 2015 slate of original programming, which is the deepest to-date and launches with the second season of ‘Black Sails’ in January,” Albrecht continued. “As demand for our content increases worldwide, we are providing subscribers multiple options. Recently, we confirmed details of a new partnership to offer Starz Play as a direct-to-consumer streaming SVOD service in select international markets and featuring Starz Original series.”

Also read: Starz Puts Itself Up For Acquisition, Meets With Fox for Potential Bid

During an earnings conference call, Albrecht declined to comment on which territories Starz is exploring for the SVOD service “because we want to preserve the ability to compete competitively.”

The company’s chief financial officer, Scott Macdonald, said that the investment in the SVOD service will be “less than $20 million,” and that the ongoing costs will be “insignificant” and part of that initial investment.

“To us this is a no-brainer,” Albrecht added, saying that the move toward streaming is “a tide that has to turn.”

While Albrecht touted the “more than 60 hours of original programming” that Starz has planned in the coming year, he shot down the notion that Starz would “ramp up” for even more original programming.  “We’re exactly whee we said we would be; we had a great second half of 2014,” Albrecht said. “At this point, we don’t have any plans to ramp up beyond what we said we were going to do.”

Albrecht also addressed Starz’s decision not to renew its pay-TV distribution deal with Disney, which will expire after 2016. Noting that, if the upcoming new “Star Wars” movie “is released on the current schedule” Starz will have the rights to it (the movie is currently slated for a Dec. 18, 2015 premiere date), Albrecht nonetheless added, “We do not rely at all on the Disney product going forward.”

 

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