Comcast Corp. and Starz Encore Group LLC have settled their legal wrangling
and reached a new distribution pact for Starz programming services.
Comcast sued Starz Encore seeking to break the pay service's distribution
deal with AT&T Broadband, which Comcast acquired last year.
Under Starz Encore's old AT&T Broadband deal, the MSO paid an
above-market flat fee and also absorbed some programming costs for Starz
Encore's pricey Hollywood-movie packages.
That was a holdover from a sweetheart deal Starz Encore had with former MSO
Tele-Communications Inc., which owned Starz Encore's parent company, Liberty
Media Corp., and which was acquired by AT&T Broadband.
AT&T Broadband had sued to get out of the deal and, back in 2001, Starz
Encore initiated litigation to enforce the deal.
Under the new carriage deal between Comcast and Starz Encore, the operator
will pay a per-subscriber fee for the Starz! and Encore channels for all Comcast
systems, including former AT&T Broadband systems. And the deal eliminates
Comcast picking up any incremental programming costs.
Earlier this month, Liberty said programming costs at Starz Encore were
rising -- with license fees for theatricals surging $175 million-$225 million
next year -- and would infringe on its profits.
Merrill Lynch & Co. media analyst Jessica Reif Cohen called the deal
"essentially a big win for Comcast." Under the new pact, Comcast should save "an
estimated $100 million in 2003 and $200 million in 2004, relative the
pre-existing AT&T Broadband deal," she said in a report.
For Liberty, the resolution was a "slight win," Bear Stearns Cos. Inc.
analyst Gloria Radeff said in a report, since it resolves litigation that could
have dragged on for years.
Also as part of the new deal, Comcast will roll out Starz Encore's on-demand
and high-definition services in markets where Comcast offers the services. The
programmer will also develop an Encore on-demand product, which Comcast will
As Comcast does with its other on-demand and HD programming, the Starz and
Encore services will be available at no additional cost to digital subscribers
who also subscribe to the pay channels.