Affiliation Agreements With DirecTV, AT&T Mean Reductions In Revenue For Starz

Starz STRZA has agreed to multi-year extensions of its affiliation with both DIRECTV DTV and AT&T Inc. T. In case Starz had been operating under the new agreement in the first half of 2016, revenue would be less than the reported numbers, FBN Securities’ Robert G. Routh said in a report.

Analyst Routh has no rating on Starz due to its pending merger with Lions Gate Entertainment Corp. (USA) LGF.

Revenue May Be Less Than Reported

The SEC filing for the agreement renewal indicated that in case Starz had been operating under the new agreement for all of 2015, revenue from Starz Networks would have been an estimated $1,287.5 million, while Starz consolidated revenue would have been $1,654.2 million. Both figures represent a reduction of $45.88 million from the reported 2015 numbers, Routh noted.

Moreover, in case Starz had been operating under the new agreement for the first half of 2016, revenue from Starz Networks would have been $662.7 million, while Starz consolidated revenue would have been $814.2 million. Both these figures represent a reduction of $20.3 million from the reported numbers.

“Starz expects other revenue sources to offset the financial impact of the aforementioned extensions and the impact on Starz earnings under these extensions is expected to decrease annually after the first year of the renewal period,” the analyst wrote.

Payments From Lions Gate

In relation to these extensions, Lions Gate has agreed in principle to issue three annual instalments of $16.67 million each to AT&T. This may be in equity or cash, as per Lions Gate’s preference. These payments are subject to the completion of the merger with Starz.

“If the LGF / STRZ merger is not completed the aforementioned payments will terminate and DirecTV and AT&T will have the option to terminate and renegotiate the multi-year extension arrangements with Starz,” Routh noted.

Do you have ideas for articles/interviews you'd like to see more of on Benzinga? Please email feedback@benzinga.com with your best article ideas. One person will be randomly selected to win a $20 Amazon gift card!