UPDATE, 12: 00 PM: No word from Starz execs about when they might announce a digital streaming deal to replace the one with Netflix, which expires in February. “There are a lot of conversations going on,” Starz CEO Chris Albrecht told analysts today. “It’s a road that needs to be evaluated almost on a weekly basis.” The company hopes to license programs from its premium channel to a premium-priced streaming service – meaning, one that charges more than Netflix. As more companies enter the online video market “they’ll begin to segment and differentiate,” says Liberty Media CEO Greg Maffei. “That’s something we would embrace.” Albrecht said that “we didn’t believe it was appropriate to have our products included in a low-cost service.” Do they really expect lots of consumers to pay high prices in this weak economy — especially with the anemic numbers cable and satellite companies are posting for premium channels? At Starz the 3Q sub figure was up vs last year’s 3Q but down slightly from this year’s 2Q. “We haven’t seen weak demand,” Maffei says. “This has been a question of marketing and focus” by the cable and satellite companies that promote the channels to subscribers. That contrasts with recent comments from some operators including Time Warner Cable and Dish Network who said that many consumers cancelled premium channels either to save money in a weak economy or to use the cash for online services such as Netflix or Hulu Plus. Meanwhile Starz told investors that marketing costs will rise in 4Q: It has promotion costs for the new series Boss, and had no new shows in last year’s 4Q.
PREVIOUS, 6:34 AM: John Malone loves complexity — that’s instantly apparent to anyone who tries to make sense of the 3Q earnings out today from the moving parts of his Liberty Media. But shares are down 1.3% in early trading for one of its pieces, the Liberty Starz Group. The operation reported revenues of $389M, down 2% from the same period last year. That’s short of the $395.53 that the Street expected. The company says that the revenue hit reflects Starz’s decision to get out of the theatrical film business. That was partially offset by an additional $7M from rate increases for the Starz channels and $5M from subscription growth. The premium channel had 19M subs at the end of September, up 9.2%, while Encore had 32.8M, up 2.5%. The company says that subs were affected by “a current lack of cooperative marketing campaigns” with some pay TV distributors. But Starz’s operating income was up 16.1%, to $101M, mostly because it no longer has to pay marketing costs for theatrical films. The earnings release says nothing about Starz’s deal with Netflix — we’ll have to see whether analysts raise the issue later this morning when the company holds its quarterly conference call with them.