Starz Ends Deal with Universal to Focus on Content Costs, CEO Highlights Popular Films on Amazon
Starz CEO Jeff Hirsch announced the company’s exit from its output agreement with Universal, marking a strategic shift as Starz reassesses its content costs following its first year as an independent entity.
“Today, we are announcing that we have exited our Pay 2 agreement with Universal. The Universal titles, which we originally planned to air through calendar 28, are incredibly popular and bring with them tremendous box office strength,” Hirsch stated during a call after the earnings report. He added that significant subscriber overlap between Amazon and Starz has led to increased viewership of these titles before they reach Starz’s Pay 2 window.
Universal distributes its pay-1 licensing through Amazon and Peacock.
Hirsch explained that the synergy with Amazon has resulted in lower viewership figures than anticipated. “In order to replace the revenue component of the Pay 2, we will reinvest and acquire high-performing titles at superior economics. We are thankful to our partners at Universal for working with us to find a mutually beneficial solution,” he noted.
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Starz has set a target of achieving a 20% margin, which Hirsch indicated would involve “right-sizing” the company’s content cost structure. The decision to exit the Universal agreement accelerates this goal, moving the target date to the latter half of 2027, rather than the end of 2028.
CFO Scott MacDonald mentioned that the company will incur a restructuring charge for the second quarter, though the specifics were not disclosed. He added that the revised terms of the agreement would significantly improve Starz’s cash payment obligations, resulting in a notable reduction in cash content spending starting in 2027.
In the first quarter, Starz reported a charge of $139 million as part of its efforts to optimize content costs.
During the call, Hirsch also discussed potential mergers and acquisitions, an area he has addressed previously but with more clarity this time.
“We continue to see two paths for value creation for the STARZ business. First, our focus has been growing the core business to achieve the 20% margin guide. Second, we believe there is an additional path to growth through potential M&A opportunities,” Hirsch stated.
He emphasized a disciplined approach to M&A, ensuring that any strategic initiative would complement the core audience and adhere to acceptable leverage ratios while delivering value for shareholders. “But given the strength and the profitability of our core business, we do not need M&A to maximize shareholder value,” he added.
Starz separated from Lionsgate a year ago, transitioning into a standalone public company. Speculation regarding potential mergers involving both companies continues to circulate.
