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Starz renews deal to get Sony movies through 2021
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By The Associated Press
| 02/11/2013 |
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LOS ANGELES (AP) -- Premium pay TV channel Starz said Monday that it has renewed its agreement to carry movies from Sony Pictures through films hitting theaters in 2021. The deal, which was seen as a must-win for the channel, comes two months after Netflix snatched future Disney movies from Starz.
The deal will extend Sony's relationship with Starz by five years, giving the channel access to major Hollywood releases into the future. Disney movies released in 2016 and beyond will play on Netflix's streaming service instead of Starz.
Analysts speculated that Starz is paying anywhere from $250 million to $400 million per year, an increase from the estimated $200 million it is paying Sony currently.
Starz CEO Chris Albrecht said in a securities filing, "we believe the terms are consistent with other recent agreements between traditional premium TV networks and major Hollywood studios," without elaborating.
The wording suggested Starz was paying more than $200 million annually, but less than $350 million a year, which is what Netflix is estimated to pay Disney.
Netflix isn't considered a "traditional" pay TV network, but its service, at $8 a month, is seen as increasingly competing with premium pay TV channels such as HBO, Showtime and Starz, which cost $15 a month.
Starz had 21 million subscribers as of the end of September. Netflix has 27 million subscribers at year-end.
Both Netflix and Showtime were bidders for the movies, according to a person familiar with the matter who wasn't authorized to comment publicly and spoke on condition of anonymity.
Last month, Netflix Inc. CEO Reed Hastings told analysts on a conference call he was interested in going after Sony movies. "Our appetite is just like it was for Disney, it's strong," he said. However, he added that "there is no specific piece of content that we must have."
Disney content was seen as more important for Netflix, which is raising the profile of its children's programming and has a devoted kids audience.
In comparison, Sony has put big-budget, popular movies in theaters including "The Amazing Spider Man," "Zero Dark Thirty" and "Men in Black 3," and has a stronger focus on movies rated PG-13.
The possibility of losing Sony movies was a "major risk," according to a research note by Barclays analyst Chris Merwin.
"This new agreement firms up the theatrical content pipeline and represents a modest positive for shares," he wrote. He raised his target price in Starz shares to $16 from $15 but kept an "equal weight" rating on the shares.
Janney analyst Tony Wible upgraded Starz to "Neutral" from "Sell" and bumped his fair value estimate on shares to $16 from $10.50. It remains to be seen how much Starz can offset the higher costs of the deal by raising prices on TV distributors, he noted.
Starz shares rose $1,34, or 8 percent, to $18.01 in midday trading. Netflix shares fell $4.47, or 2.5 percent, percent to $176.50. Sony Corp. shares rose 7 cents, or 0.5 percent, to $14.99.
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©Madison Daily Leader 2013
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