Scaled-Up Starz a Winner in Lionsgate Marriage

Gets better equipped to take on HBO, Showtime in premium cable space
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Will Lionsgate’s acquisition of Starz poise the premium cable net to truly compete for buzz, for Emmys, for top projects from elite producers, with HBO and Showtime? Starz is just ahead of Showtime in terms of subscribers, at 23.6 million, according to SNL Kagan. But Starz has some work to do before it can boast the must-have series of the other premium players.

The $4.4 billion deal marries up a pay cable network and a film and television studio. Starz’s original series include Outlander, Black Sails and The Girlfriend Experience. Next month, it goes head to head with the big boys on Sundays, when Power and Survivor’s Remorse debut July 17. (Power has Curtis Jackson, a.k.a. 50 Cent, on board, while Survivor’s Remorse counts LeBron James in its exec producer ranks.) Lionsgate properties include the Hunger Games and Divergent franchises on the theatrical side, and Orange Is the New Black, The Royals, Casual and Nashville, among others, on the TV side.

The pact gives Starz an inside track on original projects at Lionsgate. “This seems potentially huge for the legitimation of Starz, which has never had the cultural cachet of HBO and Showtime,” said Christine Becker, Notre Dame associate professor of television and film. “It has finally developed a few buzzy shows, like Outlander, so it’s on the premium channel radar now, but it’s not yet to the HBO/Showtime level of Emmys contender. If Lionsgate can bring Starz the next Orange is the New Black instead of offering it to Netflix, that could put it there.”

Starz grabbed a lot of respect for its originals strategy when it was nominated for six Golden Globes late last year, involving Outlander, Flesh & Bone and Blunt Talk, though none won.

It’s been a busy time at Starz. Earlier in the week, CEO Chris Albrecht added president to his title and four more years to his contract, giving the network some ballast at a time when president Glenn Curtis is retiring and chief revenue officer Michael Thornton gave notice. Albrecht cited “similar entrepreneurial cultures and shared vision of the future” as factors in making Starz and Lionsgate compatible siblings.

Albrecht swung by the offices of our pals at Multichannel News March 30, where sale rumors came up right off the bat. “I can tell you very directly there’s never been a formal sales process,” said Albrecht, who also took a shot at the press for “irresponsibly” reporting rumors and speculation.

Albrecht described Starz as “an undervalued asset”—a stable channel with strong programming and a new direct-to-consumer offering that positioned it well for the present and future.

Liberty Media chief John Malone is Starz’s largest voting shareholder and owns a 3% piece of Lionsgate too, according to the Wall Street Journal. The Journal notes that the deal may impact Epix, the fourth player in the premium cable space, and the subject of my new cover story: “The next move for Lionsgate could be to seek a new strategic partner interested in a company with assets spanning movie and TV production and pay cable, people familiar with the situation said. Potential partners could come from the telecom, cable or digital business, as well as China…A possible vehicle for such a deal would be Lionsgate’s 31% stake in the No. 4 pay cable channel Epix, which it will seek to sell as part of its deal to buy Starz.”

Lionsgate-Starz needs shareholder approval but is expected to close by year end. Lionsgate CEO Jon Feltheimer and vice chairman Michael Burns referred to Starz as a “world-class platform and programming leader”; we’ll see how the channel can leverage its newly enhanced resources.

Dom Caristi, Ball State telecommunications professor, calls Starz “the big winner” in the merger. “In a multichannel world where audiences are drawn to the next big hit, Starz needs some buzzworthy content to compete with the bigger, more recognized premium services,” he said. “Starz will likely get the first look at a lot of content now.”   

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