Starz Entertainment Corp President & CEO Jeffrey Hirsch Talks Streaming

Starz is fresh off its separation from Lionsgate and it's betting it can take on the likes of Netflix and HBO. The entertainment company added 530,000 streaming customers in the fourth quarter. STARZ President and CEO Jeffrey Hirsch joined Bloomberg Open Interest to talk about how he plans on transforming the company into a production powerhouse. He is joined by Bloomberg's Katie Greifeld and Matt Miller.

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Episode Transcript

Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news joining us now. I'm
pleased to say we have Jeffrey Hirsch. He is the
CEO of Stars. Jeffrey, great to see you in person, Thanks.

Speaker 2 (00:12):
For having me excited to be here this morning.

Speaker 1 (00:14):
And I have to imagine this is some validation, a
real proof of concept that Stars should be a standalone business. Yeah.

Speaker 2 (00:21):
Look, I think the corporation made the right decision to
separate the companies and put the value in both the
sides of the Lionsgate side and the Star side. I
think you're seeing the great decision by the board coming
to fruitions with the stock price on both sides, moving
and putting the value in the right place on both companies.

Speaker 3 (00:38):
So what is your target audience? I mean we were
just talking a little bit during the break about HBO.
Max has made a number of changes. You've worked there too,
So what are you doing at Stars? What's your focus?

Speaker 2 (00:52):
Yeah, we're really focused on really two core demos, women
and underrepresented audiences. When we launched our OTT product in
April of two thousand and six, what we saw was
driving our business was women, and so we leaned into
that very significantly, and our programming mandate now is a
narratives for buying about women and other represented audiences. So
shows like Outlander, shows like p Valley, the Power Franchise

(01:15):
really leans into that. It's very adult, very are rated.
We don't have any advertising and so we'll continue to
really focus on that and that makes us a very
complimentary bundling partner to most of the broad bay streamers
out there that you see today. So we think we're
really uniquely positioned in a very competitive space today.

Speaker 1 (01:31):
So our rated content not something that you would pop on.

Speaker 3 (01:34):
I used to call it skinmax, but that's that's what
you are now, right.

Speaker 2 (01:39):
No, I think we're a little more elevated in terms
of scripted too, but I appreciate the reference. No, look,
I think there was a time in the place that
Cinemax had it's run back in the day. But you know,
we've got some of the biggest shows on television with Outlander,
we have the prequel coming this summer on August eighth,
We premiere BMF this weekend, and these you know, it's
really more of where the story goes, naturally we go there, right,

(02:01):
and so we don't black them off your family, Yes,
fifty cent show, really big show for us. We're excited
to have it come back on the service. But for us,
you know the tour, when the natural story goes to
certain places, we allow our creators to go there, whereas
other services kind of pull them back because they want
to put ads against it.

Speaker 1 (02:18):
So there's plot, of course. And I mean, you think
about Game of Thrones the best television show of all
time in my opinion.

Speaker 3 (02:23):
Obviously I hear people in this office saying that about Outlander.

Speaker 2 (02:27):
I mean they evolve it true, true. I mean, Outlander
is one of the biggest shows on TV. And you know,
we have a prequel coming which takes us back to
seventeen hundred Scotland, and it's the love story for how
each of the leads from Outlanders parents met and fell
in love. So there's a little bit of a Romeo
and Juliette story on one side where it's forbidden clans
and they fall in love, and the other side is
a World War One story, and so we're really excited

(02:49):
about it. But I think all of our shows are.
You know, we have five shows that do between nine
and twelve million eyeballs a week. Those are some of
the biggest shows on TV, and so we're really excited
about our content strategy in the place that we play
in the whole ecosystem.

Speaker 1 (03:03):
Let's say to my next question. We heard from your
chief financial officer recently on your conference call with analysts
saying that you see roughly seven hundred million dollars of
content spending in twenty twenty six.

Speaker 2 (03:15):
Can you give us more detail on that.

Speaker 1 (03:17):
Is that for some of your existing franchises, your existing shows,
or you also are you putting that towards developing new content?

Speaker 2 (03:24):
So what's in that number is a combination of our
big originals. There's a lions Gate Pay one, which is
the first movie windows that come to that in a
universal pay too, and we think that the portfolio of
content really makes us a very compelling service at our
eleven dollars price point. And you saw that in the
first quarter numbers. We actually grew the US subscriber based
total by almost two percent in the first quarter, which
is a really really great accomplishment in a very competitive space.

(03:47):
But we're always we have a you know, a programming group.
We have got forty to fifty shows in development at
any given time, and as we talked about on the call.
We want to go from a fifteen percent profit margin
to a twenty percent profit margin by twenty twenty and
twenty twenty eight. One of the ways that we get
there is actually by turning the slate over and putting
new shows on the air that we can own. As
we separated from Lionsgate and so ownership economics is really

(04:09):
important because season ones are much cheaper than seasons five, six,
and seven. And we can also put international sales back
into the business, which is another way to net down
the cost of a show. And so as we separate,
we just announced that we open four writers rooms in
the last couple of weeks on some really compelling shows
that I'm excited about. As we start to move into
twenty seven, you'll start to see more of our own

(04:30):
shows come on the slate. I imagine.

Speaker 3 (04:32):
You know, with something like Outlander, you can get people
to come and pay four dollars a month, which is
what your special offer is right now? Can you grow
that over time as you have these massive competitors like Netflix,
like HBO or do you have to hold it at
a lower level.

Speaker 2 (04:52):
So one, we don't see them as competitors, We see
them as complementary services. If you think about the old
traditional world, Stars was always set up as a cherry
on top or an additive to broad based services. So
Comcast for a long time sold Stars on top of
expanded basic television. We think that world gets replicated to
the digital world, and so we've always positioned ourselves as

(05:12):
being a complementary add on to the broad services like Netflix,
like Amazon, like Hulu, and so we will always be
priced well below the broad based services so that we
are viewed in the consumer's mind, is complementary and not competitive.

Speaker 1 (05:25):
Before we let you go, I do want to talk
a little bit about your business because I believe you
derive about seventy percent of your revenue from streaming. That
leaves about thirty percent of your company exposed to, you know,
cord cutting. So how do you plan to deal with
that over time? Is that something that you're trying to
whittle down that thirty percent?

Speaker 2 (05:44):
We really follow the consumer, right, and so as the
consumer has shifted from linear to digital, we kind of
followed the consumer there. But I think there's a real
value in still the linear business today. You know what's
interesting about all of our customers. Eighty percent of all
of our customers are either added on or all the art,
which means customers chose stars. It wasn't. We're in a bundle,
and so that we see the cord cutting and we're

(06:05):
just the natural evolution of cord cutting people who actually
pick stars because the content is working. And what it
also means is that we actually are a revenue generator
for our partners. And so I actually think that there's
a lot of opportunities still in the old traditional world
for us as the content continues to roll out, that
there's opportunities to grow that business. And actually what we
saw at the end of the first quarter was a
lessening of the cord cutting loss. Now it's a little

(06:28):
bit of time. I wouldn't claim victory on that yet.
Or hope is that that law starts to slow and
that's added into the long term health of the business.