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STRZA - Starz

orion

By orion
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orion Newbie

orion

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After the Spin-Off from Liberty Media, I think Starz deserves it's own thread.

 

I ended up with some shares after the spin-off myself and after reading the sumzero write-up on Starz and researching this a bit, I would like to hear other opinions about Starz. Especially some contrarian views because I can't really judge the quality of the content offering and the channel.

 

I also don't understand exactly on how many levels netflix is a competitor? Just a battle for content deals or is this hole streaming sector a treat to the cable systems and the premium channels in the long term?

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Yours Truly Newbie

Yours Truly

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Netflix is both a competitor to content providers and pay-tv operators due to their discounted model...  They recently signed with Disney which allowed them to air all their library on netflix but luckily, Starz was able to retain the rights to publish Sony's library on their premium channels..

 

I feel that this will be a likely take over within the next 2 years especially with John Malone behind the scenes and holding the largest position in the company.. Possible candidates most likely include Viacom, Comcast, News Corp

 

The company needs to focus on original content now to get on par with the likes of HBO and Showtime, and recently, Netflix to attract and retain customers to their channels..  I have faith in their CEO which will bring his experience from HBO in creation of original content and hopefully they will utilize the share buyback to gobble up shares while their remain undervalued compared to their peers

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orion Newbie

orion

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Just found this interview with John Malone and his take on Starz

 

MCN: John, what about the other side of the coin: programming? Liberty is about to spin Starz into its own public stock. It makes me wonder: Is Starz a buyer or a seller now?

 

JM: Starz can go either way. It can get bigger through acquisition or it can get merged into somebody who can drive 'em better. My view is Starz needs to be part of something bigger. They need a currency to get there. And so this gives them a stock and a currency. If somebody wants to come and make a proposal after it's spun for why it would be a great combination, you know, we'll be all ears at that point. We've got [starz president] Chris [Albrecht], we've got a flow of original series now ...

The business is performing well, series are performing well.

 

http://www.accessmylibrary.com/article-1G1-310740787/unleashing-liberty-john-malone.html

 

The rest of the interview is also very interesting.

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boilermaker75 Newbie

boilermaker75

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I have been writing the June 22.5-strike STRZA puts, which would lower my cost basis on the shares I acquire if I get put to. The premiums are really good. The bid at close on Friday was $0.70. I have gotten on average about $0.85. So I either lower my cost basis by over 3%, or I make over 3% on one month.

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merkhet Newbie

merkhet

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I suspect that the spin-off was tax-free. Can anyone confirm?

 

I also seem to recall that with most tax-free spin-offs, there is a 2-year moratorium on a change of control otherwise the tax-free characteristic of the spin-off goes away -- so that might indicate that the floodgates for an acquisition should be opening right about now...

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merkhet Newbie

merkhet

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Down over 13%.

 

"Starz is considering alternatives to a sale after reaching out to potential bidders who passed on making an offer"

 

That's rather surprising. I wonder if they're waiting to see whether Starz will be able to develop original content that's meaningful before taking them out.

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Phaceliacapital Newbie

Phaceliacapital

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Wilson-TPC, would you mind sharing your case? Your URL seems to be broken.

 

Last couple of days I have been digging into the entire media & entertainment industry so I am relatively new to the sector (+ I have an european point of view).

 

Personally, I do not understand why anyone would buy Starz?

 

1. Isn't the company too US centric? For instance, they lost the Disney rights to Netflix. I think they wanted the rights but couldn't cough up the same amount that Netflix could, so, why could Netflix outbid them? Probably because Netflix can leverage a much wider, international user base.. BTW, Starz was not only constrained from a user base side, but also because it wanted to develop new original content itself (which costs money and lowers the amount of money available to bid for the Disney rights). I don't think losing Disney was a good thing, because subscribers seem to care about movies (don't forget, Netflix was built based on movies).

 

2. Expanding from my first point, for a subscription based service you need to make sure that you provide the content the customer wants. If you don't people will not think paying a monthly subscription fee is worthwhile. It's hard to tell how fast the industry will undergo its changes (when will we arrive at a mostly direct to consumer approach?), but if Starz does not have the right content offering (and thus the brand name associated with this offering) when that time comes, I don't think any party will pay up (significantly) for the company in the mean time..

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Jurgis Newbie

Jurgis

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Non quantitative thoughts.

 

Disclosure: I hold STRZA, DISCA on content side. In the past I have shifted STRZA to DISCA to improve "quality".

 

As I said on other threads - and I think this is somewhat common thought - it seems we have overcapacity in content, especially with Netflix, Amazon, etc. piling into the area too.

 

Consolidation might help, however we haven't seen much so far. STRZA was supposed to be acquired 2 years ago - no progress. We might get LGF/STRZA merger, which would be positive a bit, but what next? Is that enough for long term performance?

 

A bunch of content stocks are cheap and getting cheaper. I wonder if what Picasso wrote about other CoBF-motel stocks could apply to content companies too. I.e. they are cheap for a reason and might not do as well as people expect. Even after the drops so far.

 

 

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scorpioncapital Newbie

scorpioncapital

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I would imagine any evaluation of content stocks involves evaluating the quality and value of the actual content. If this is hard to do, you know what Malone has said, that every time they get into content they get burned..but he keeps trying it! I applaud the cold hard truth in the first part of the statement but disagree with the 2nd part unless you are so wealthy you want to play around with it for fun. There is also a Buffett quote from when he owned Cap Cities that entertainment and leisure businesses are lucrative because people rather be entertained than educated. He was referring at the time to their purchase of World Book encyclopaedias. Discovery looks interesting as it combines education with entertainment. Not a bad combination.

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