Starz Adds 300,000 Subscribers in Q3 But Whiffs on Earnings

Likely future Lionsgate subsidiary grows both revenue and costs at the networks

Last Updated: October 27, 2016 @ 3:57 PM

Starz’s third-quarter 2016 sales figures were right where media analysts anticipated — and even a few mill higher — but the soon-to-be Lionsgate subsidiary’s bottom line didn’t come all that close to profitability forecasts.

Wall Street estimated that Starz would report 52 cents in earnings per share (EPS) on $404.47 million in revenue this afternoon, according to a Yahoo Finance consensus. Starz actually ended up with $407.8 million in revenue (good) but just 34 cents in EPS (bad.)

While overall revenue ticked up 1 percent versus the comparable quarter last year, an increase in programming and advertising costs at the networks ultimately took their toll on net income. Earnings per share were 23 cents higher during the same 90 days last year.

Costs associated with the merger increased the publicly-traded corporation’s operating loss from $3.4 million to $3.9 million.

The company added 300,000 subscribers in Q3, bringing its running total up to 24.5 million as of Sept. 30, 2016. President and CEO Chris Albrecht credited Season 3 o “Power” for some of that.

Add in Encore, and the networks’ subs sum jumps to 56 million flat.

“Starz continued its solid operational performance in the third quarter, delivering 6 percent year-over-year revenue growth at Starz Networks, which is the largest increase since the second quarter of 2013,” Albrecht stated in a media release. “Third quarter performance also saw year-over-year subscriber growth of 1.2 million customers.”

“The third season of ‘Power’ established a Starz record for viewership, surpassing 7.3 million multiplatform viewers per episode, and helping nearly drive OTT subscriptions close to the 1 million mark,” he continued. “The strong performance of our Amazon and Starz app initiatives complements the Starz Networks business with core distributors.”

Finally, “The planned merger with Lionsgate continues to progress, and we are readying for the content opportunities that will come with being a robust combined company,” Albrecht concluded.

This summer and after much flirtation, Lionsgate finally announced plans to acquire Starz for $4.4 billion, though that acquisition still needs to clear the customary regulatory hurdles.

STRZA stock closed Thursday at $31 per share, down 26 cents from the prior afternoon.

Albrecht and other company executives will host a conference call at 5 p.m. ET to discuss their financial results in further detail, and surely to field several calls re: the Lionsgate takeover.