Starz is finally in its own orbit.
The premium channel that had been owned by Lionsgate since 2016 formally completed its long-awaited separation from the studio on May 7. Starz CEO Jeffrey Hirsch has been preparing for the separation for more than three years.
After a long haul, he’s ready to grow the company through a strategy of targeting subscribers in the U.S. and Canada with shows aimed largely at women and viewers from underrepresented demographics. The “Power” urban drama franchise is a pillar of the strategy, so is the time-traveling romantic drama “Outlander” and its spinoffs.
Hirsch spoke with Variety about the company’s plans for the future, what it gained from Lionsgate over nearly nine years and how Starz’s “We’re All Adults Here” marketing campaign is honing the brand.
This feels like it has been world’s longest separation process. How do you feel at the end of the long road?
We announced we were going to separate November of 2021 so it is a pretty long process, but the timing has worked out. It was the right time and a good time to separate. And we’re excited to be able to chart our own direction and solely focus on what we do well and to grow our business and so well. It’s like renovating a house. It always takes longer than you think, but once you’re in it, you forget about the process of getting there.
Can you sketch out what the scope of Starz is today? Give me a sense of your subscriber base, and give me a sense of the scope of the company.
We’ve got about $1 billion in revenue — 70% of that revenue is digital already. 65% of all of our subscribers are digital. So we’ve really made the transition away from linear, and we’ve been profitable the whole time. So we’re sitting at with a 15% profit margin. Of that profit margin, we convert about 70% of it to unlevered free cash flow. So very good cash flow generating business. We will have $600 million of debt on the business. So we’re about three times leveraged. So very good balance sheet, very strong consumer base. We’ve got about 530 employees. Our biggest office is Denver. We have a wonderful tech team and a great financial team, but who’ve built the Starz app homegrown and all of our data, which has been a really, I think, a great capability that others don’t have, and has allowed us to make the transition as we have.
We think we can grow revenue 1% to 3% in the coming years. We think we can get our profit margin from 15% to 20% and we feel very good about the organic path of the business. And we also think there’s a lot of opportunity with our tech platform and our ability to transition our business from linear to digital, to do something similar for other networks as well.
You are focused on the U.S. and Canada. Will that change? Does that limit your growth potential?
We pulled back from international a year ago. And so I would say majority of our business is in the United States with this very small piece in Canada. We look at the opportunity in the U.S. and Canada as being around 80 million households. We’re sitting at 20 million households today, so we think there’s a lot of opportunity to grow our business by focusing on the U.S. and Canada,
Give me a sense of the profile of the network. Who’s watching Starz?
As you know, our program and strategy is relentlessly focused on narratives for, by and about women and underrepresented audiences, and we continue to lean into that in a big way. So right now, two-thirds of the subscriber base are women, half of them are white women, half Black women, and that’s really been kind of the cornerstone of the business, and we’ll continue to lean into that in a big way. Shows like “Power” and “Outlander” really were the foundation of this programming strategy, and we’ll continue to lean into that. You saw the announcement that we were lucky enough to win the Miranda July rights that produced the book “All Fours,” which was a huge get for us, which really sits heavily into our into our narrative and programming strategy. And we’ve got 40 to 50 projects in development that Starz will own going forward that really aligned to exactly what we do. And so we think the pipeline of content is great. We have five shows on the air today that do somewhere between 9 and 12 million viewers a week.
What are your production capabilities now that you’re separated from Lionsgate?
We’ve had a great relationship with Lionsgate. I think that will continue to be a great relationship. We’ve got a production services agreement. They produce a bunch of our shows. The “Power” shows are owned by Lionsgate. We’ve got a great new couple stories coming in that universe. We’ve announced “Origins,” which is the origin story of “Power.” We have another one coming that we haven’t announced that we feel great about.
We also have a great relationship with Sony. We’ve announced “Outlander” prequel, this summer, [premiering] in August. It is spectacular. It’s back in Scotland. I think it’s as good as anything there will be on TV this summer. And we’re excited about that. we will develop self develop as we have in the past, and we’ll continue, and we’ll use either Lionsgate to produce those shows that we own or we’ll continue to use other third parties. So I don’t think there’s a problem with production services for us to really kind of lean in and develop the shows that we own.
So your message to the town’s development execs and agents is: Bring us your pitches.
Yes, we are fully open for business. “All Fours” is a great example of the content that we’re looking for. The “Power” universe. We’ve got a show called “Fightland” that we’ve announced with [“Power” executive producer] 50 Cent. It’s in development still – it’s a U.K. boxing show that we feel great about. So we are buying.
I’d imagine that since you are focusing on U.S. and Canada, that’s pretty attractive to your studio partners because you allow them to sell international rights, correct?
Yes. And we’ve got a great relationship with Sky, where we actually become the U.S. destination for some of their content as well. And so we can obviously do acquisitions of international properties into the U.S. as well.
Can you give us a ballpark of what you’ll spend on content this year or next year?
You can look in our financials and see that there’s been a range historically. We’re not going to increase our content spend. We think we have the right amount in the financial portfolio to maintain that 15% profit margin and get up to 20% so we think we’re the right size between our originals, our acquisitions, the Lionsgate pay one deal and the Universal pay-two plus library deal. We think we have a great portfolio with the financial spending that we have.
You raised the suggestion of potential acquisitions. Do you want to bolt on more channels to the Starz platform?
We think there’s a real opportunity to use our tech platform and take the playbook that we did with transitioning Starz from 100% linear when I started in 2015 to 70% digital today, within the focus of women and underrepresented audiences, we think there’s an opportunity to either work commercially with networks to help launch something into the digital world for them, or through combining companies. We do think there’s an opportunity build and ad-supported revenue base for Starz that is complementary to our subscription base.
Sounds like a FAST [free, ad-supported television] channel is in the works?
I’m not sold on FAST. I think it’s much more of an AVOD [ad-supported video on demand] business within our SVOD [subscription video on demand[ business. I do believe that there is still great opportunity for us and with our linear partners. And so we have to be careful about putting too much on fast to really hurt that side of the business. And so we will be very cautious about what that looks like. But we do think it’s much more of an AVOD-SVOD combination than anything else.
There are some linear channels are about to hit the marketplace from NBCUniversal, and we expect more to follow. But you’re not in the market for linear channels?
I actually don’t look at them as linear channels, so to speak. I look at them as ad-supported content wrapped with linear cost. So I do think that if they do fit our programming mandate and we like the content, I think it’s that there could be a good home for us.
You rolled out the “We’re All Adults Here” branding campaign last year to signal that Starz’s programming is envelope-pushing and not terribly family friendly. Is that something you’re going to amplify?
I think that that campaign really kind of in both embodies exactly what we are doing on the content side. We’re unapologetic, we’re bold, we’re adults. We go to places that other networks don’t, and I think that was a really that the marketing team did a great job of coming up with that as a creative way of talking about what we do and what we do differently. So we will lean into that. I think it’s a good message to the community, the town, of what kind of programming we’re looking for and what we’re willing to do. So we’ll step into that much, much in a bigger way as we go forward.
Jeffrey, you have been with Starz before the Lionsgate acquisition and you have since been promoted to the top job. What would you say were the benefits of coming together with Lionsgate when you did? And then the second half of that question is, what can you do now that you couldn’t do a week ago?
At the time of 2016-2017, it was the right deal to do to put the companies together. We’ve been able to grow all of our businesses together. We’ve learned a lot from Lionsgate TV and how to produce television. Having the ability to get movies from Lionsgate as we have, has been really impactful for the business. And I think overall, having multiple different lines of businesses as the industry changed was a good way to continue to grow a business, a public entity in a protected way. But now that we’re separate, I think the world is changed again, and there’s opportunities for us to go scale our business around women and underrepresented audiences that I think of being owned by studio we just weren’t going to be able to do.
