Starz digital network strategy is simple, says Senior Vice President of Marketing Mike Hale: provide value pricing and a great premium movie-programming service.
"What we did was really revolutionary in the industry," Hale says. "We've come out with Starz Super Pak: 12 channels for $12 dollars a month. It used to cost $12 for one channel, and it's not just time-shifting of one channel."
And Hale is quick to point out that the strategy is working for the network that is a relative newcomer compared with competitors like HBO and Showtime. Since the introduction of Starz Super Pak, the number of subscribers has jumped from about 58 million pay-subscription units at the end of 1999 to 88 million units at the end of 2000. Paying subscribers typically have access to three to 12 pay units.
There's no denying that HBO leads the way when it comes to offering original programming, including The Sopranos
and Oz, as well as music and sporting events. And Showtime has followed suit with such programming as The Chris Isaak Show, Stargate SG-1, Rude Awakenings, The Red Shoe Diaries and sporting events. "[Showtime] always followed HBO," Hale says. "They always had HBO envy."
Who wouldn't. But Hale and Starz saw a market opportunity as HBO and Showtime diversified beyond movies, making an offering of all-movie channels "a huge, wide-open position" in the market.
"We're taking advantage of the digital bandwidth to be able to offer greater choice, greater convenience and greater value at home," adds Hale, "and we're energizing the price/value category in the industry."
In addition to its premier movie channels Starz and Encore, it offers channels including Wam, a commercial-free channel for kids; real-life drama with True Stories; and Black Starz (formerly BET Movies), as well as action, mystery and westerns.
According to Starz, The Super Pak channels offer exclusive, first-run theatrical movies from studios including Touchstone Pictures, Hollywood Pictures, Miramax Films, Universal Studios, New Line Cinema, Revolution Studios and, coming Jan. 1, 2005, all theatrical releases from Sony Pictures. The focus is clearly on movies.
"We brought so many more hit movies," Hale says. "We play them more times in prime time than anyone else, and we put them on the appropriate channel."
With so many theatrical releases available for viewing, one would think Starz has no need for original movies, but it does produce two or three a year. "We do it with a purpose in mind," says Hale. "We only do it if it makes strategic sense. We want to be totally differentiated in the market and to be something that stands for quality with our viewers."
Starz also isn't standing pat. To further promote the new Starz Super Pak, the network launched a $40 million national advertising and campaign branded with the "#1 in New Hit Movies" message. The "#1 in New Hit Movies" claim is based on the year 2000's total number of prime time airings of first-run theatricals with at least $20 million in box-office receipts.
Hale says the strategy will most likely remain unchanged for the future. "Our digital strategy is to help operators to sell more digital boxes at home and to capture the public's imagination," Hale says.
For cable operators, offering larger digital cable packages results in more of a competitive advantage over DBS providers like DirecTV, which have built their business plans around the ability to provide hundreds of programming channels.
"Cable has the advantage over DBS," Hale says, adding that "14% of the of population has a dish, but cable can lose that dominant market share. You can't rest on your laurels."