A new era for Starz: CEO Jeff Hirsch on the new media landscape, content spend & subscriber growth

Key Concepts:

• Spin-off strategy
• Content cost reduction
• Ownership economics
• Digital subscription base
• Debt reduction
• Target audience: women and underrepresented audiences
• Franchising core shows
• Adjusted EBITDA
• Addressable market
• Content de-aging

1. Starz's New Independent Strategy

• Spin-off: Starz has been spun off from Lionsgate and is now an independent, publicly traded company with a market cap of less than $400 million.
• Leaner Strategy: The company is embracing a leaner strategy focused on cutting content costs, owning more of its shows, and pursuing bundling deals.
• Digital Focus: Starz is heavily focused on its digital subscription base, with 70% of its $1.4 billion revenue coming from digital.
• Ownership Economics: A key part of the strategy is getting ownership economics back into the business to control costs and create new revenue streams. They announced four writers rooms of Starz owned IP.

2. Financial Goals and Debt Reduction

• Debt Target: Starz aims to reduce its debt to 2.5 times EBITDA quickly.
• Profitability: The company has been profitable and reported a record adjusted EBITDA of $92 million in the quarter.
• Operating Loss: Starz had an operating loss in the most recent quarter, but an adjusted EBITDA gain of $92 million.

3. Content Strategy and Spending

• Content is Key: Starz recognizes that content is the foundation of its business, with shows like Outlander and the Power universe being major drivers.
• Content Cost Reduction: The goal is to reduce content spending from $7 million per hour to $5.5 million per hour.
• De-aging Content: One strategy to reduce costs is to "de-age" content by focusing on new shows rather than shows in their fifth, sixth, or seventh season, which are more expensive.
• Franchising: Starz has a successful track record of franchising core shows into spinoffs, such as the Power universe, Raising Kanan, and Force. Outlander also has a prequel coming.
• International Sales: Being separated from Lionsgate allows Starz to pursue international sales, creating another revenue stream to offset costs.

4. Target Audience and Competitive Advantage

• Focused Strategy: Starz has a focused programming strategy around women and underrepresented audiences.
• Mission-Driven: The company positions itself as mission-driven, attracting creators who want to be part of that mission.
• Creator Value Prop: Starz offers creators the opportunity to do things differently than broad-based streamers focused on advertising, as Starz is mature, adult, and doesn't have advertising.
• Example: Miranda July chose Starz for her book adaptation All Fours because of the company's focus and mission.

5. Subscriber Growth and Market Potential

• Subscriber Base: Starz has 20 million subscribers.
• Addressable Market: The company estimates an addressable market of 80 million homes in the United States and Canada.
• Subscriber Growth: Starz experienced record subscriber growth in the quarter, with a net growth of a little less than 2% in the US and Canada, net of linear.

6. Acquisition and Scale

• Scale Misconception: Starz believes that scale is not the only important factor in the business.
• Acquirer or Acquiree: Starz is open to being part of the conversation as the industry changes, potentially acquiring linear networks that focus on similar demographics but lack a digital future.
• Platform: Starz has built its own tech and owns its own tech, creating a scaled platform that allows it to grow.

7. Technical Terms and Concepts

• Market Cap: Market capitalization, the total value of a company's outstanding shares.
• Ownership Economics: The financial benefits of owning the intellectual property of shows, including cost control and revenue generation.
• Adjusted EBITDA: Earnings Before Interest, Taxes, Depreciation, and Amortization, adjusted to exclude certain items.
• Linear Networks: Traditional television networks that broadcast content on a fixed schedule.
• Addressable Market: The total potential customer base for a product or service.
• De-age Content: To shift the focus from long-running, expensive shows to newer, less expensive shows.

8. Conclusion

Starz, as a newly independent company, is pursuing a focused strategy to reduce costs, increase ownership of its content, and grow its digital subscription base. By targeting women and underrepresented audiences, franchising successful shows, and controlling content spending, Starz aims to remain competitive in the evolving media landscape. The company is open to strategic opportunities, including potential acquisitions, as it seeks to scale its business and capitalize on its unique position in the market.