STRZA

Starz (STRZA)

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Starz (STRZA)

Q4 2012 Earnings Call

February 27, 2013 4:00 pm ET

Executives

Courtnee Ulrich

Christopher Albrecht - Chief Executive Officer, Director and Member of Executive Committee

Scott MacDonald - Chief Financial Officer, Executive Vice President and Treasurer

Analysts

Vasily Karasyov - Susquehanna Financial Group, LLLP, Research Division

David Carl Joyce - ISI Group Inc., Research Division

John Tinker - Maxim Group LLC, Research Division

Jason B. Bazinet - Citigroup Inc, Research Division

Amy Yong - Macquarie Research

Christopher Merwin - Barclays Capital, Research Division

Robert G. Routh - Phoenix Partners Group, LP, Research Division

Ryan Fiftal - Morgan Stanley, Research Division

Peter Lee - Evercore Partners Inc., Research Division

Douglas D. Mitchelson - Deutsche Bank AG, Research Division

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Starz Incorporated Fourth Quarter 2012 Earnings Conference Call. As a reminder, today's call is being recorded. At this time, I'd like to turn the conference over to Ms. Courtnee Ulrich, Vice President of Investor Relations. Please go ahead, ma'am.

Courtnee Ulrich

Hi, good afternoon. Before this call starts, we'd like to remind everyone that this call includes certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements of our financial guidance, business strategies, market potential, future financial performance, new service and product launches and other matters that are not historical facts. These forward-looking statements involve many risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements, including, without limitation, possible changes in market acceptance of new products or services, competitive issues, regulatory issues and continued access to capital on terms acceptable to Starz. These forward-looking statements speak only as of the date of this call, and Starz expressly disclaims any obligation or undertaking to disseminate any updates or revisions to any forward-looking statement contained herein to reflect any change in Starz expectations with regards thereto or any change in events, condition or circumstances, on which any such statement is based. On today's call, we will discuss certain non-GAAP financial measures, including adjusted OIBDA. The required definitions and reconciliations, preliminary notes and Schedules 1 through 3 can be found at the end of this presentation.

Now I'd like to introduce, Chris Albrecht, CEO of Starz.

Christopher Albrecht

Thank you, Courtnee. Welcome to the first Starz's earnings call, following our successful spin-off transaction from Liberty last month. I'm very pleased to be leading the newly independent publicly-traded Starz. We're truly excited about the opportunities our recent spin affords, and think we have a strong foundation and a solid plan to build on our success and create a new Starz. We're focus on delivering long-term shareholder value, and I believe we have an effective and prudent strategy to do this. We have the customer -- consumer and distributor relationships and the financial wherewithal to invest in our businesses in a disciplined way that can make Starz stand out in the premium category.

Now I'll take you through some of the highlights. At Starz networks, we were very pleased to extend our first-run output relationship with Sony Pictures Entertainment through 2021, allowing us to offer world-class theatrical movies from Sony into 2023. And while I will not be able to get into the financial specifics, we will believe the deal is consistent with other recent agreements between traditional premium TV networks and major Hollywood Studios and is comparable to our current economics for Sony's 2012 theatrical releases. We'll continue to benefit for several more years from our exclusive Disney products, including new Marvel and Lucasfilm titles, which will continue to air on our networks and digital play services, the first-run window product available into 2017. We're confident that we have ample quality products to fulfill our programming needs.

Since our last earnings call, Starz extended 2 additional distribution agreements with key multichannel providers on terms that are consistent with their prior agreements, which include annual contractual increases. These multiyear, multiplatform extensions close out the 30% of revenue that was up for renegotiation in 2012, providing us with further distribution stability and opportunities for growth. Our TV Everywhere PLAY services continue to make strong inroads, with recent launches of STARZ PLAY and ENCORE PLAY by DIRECTV, AT&T U-verse and most recently, Verizon FiOS. AT&T also launched our third TV Everywhere service, MOVIEPLEX PLAY, this quarter. The PLAY services give us further flexibility to help bolster our key distributor's video platforms and provide our subscribers with the benefit of convenient multiple device viewing options. We hope new PLAY distribution agreements with additional support devices and features are all expected to launch this year. Original programming, however, is the key to fortifying the Starz brand, expanding our global content portfolio and ultimately growing our already healthy business.

For 2013, we're already well underway with the final season of the worldwide hit series, Spartacus, which is currently licensed in approximately 200 territories worldwide. Following the series finale of Spartacus on April 12, we'll showcase the world premiere of the next new STARZ Original Series, Da Vinci's Demons, from David Goyer, co-writer of the Dark Knight movie trilogy. Audiences across the globe will get a fresh take on a young Leonardo Da Vinci. Starz owns full multi-platform rights for the series in the U.S. and English-speaking Canada, and the series will also have a global premiere on 120 countries, including distribution through the Fox international channels. Following Da Vinci's Demons, our wholly-owned series, Magic City, will premiere its second season. This compelling show stars Jeffrey Dean Morgan; Olga Kurylenko; Golden Globe nominee, Danny Huston; and Academy Award nominee, James Caan joins the cast. Our final premiere for 2013 will be the limited series, The White Queen, based on the international best-selling novels by Philippa Gregory. Starz owns key global multiplatform rights for this series, and they will be bringing it to the international marketplace for the first time at NDTV in April.

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