Shares of Starz (Nasdaq: STRZA) were up nearly 9 percent in early trading this morning on word that the pay-TV channel recently spun off from Liberty Media had renewed its output deal with Sony Pictures through 2021. Chalk it up to an acknowledgment that the deal at least keeps Starz in the pay-TV game more than approval of the deal itself.
Financial terms were not disclosed. But “an executive with knowledge of the negotiations” told the New York Times the deal will cost Starz $2 billion over its five years (2016-2021). Janney Capital Markets analyst Tony Wible estimates that’s roughly twice what Starz is currently paying for Sony’s titles on an annual basis and almost certainly far more than the network hoped to be paying for studio movie rights that far into the future.
Starz hasn’t done itself a lot of favors recently in its dealings with the studios. It talked a big game late last year about expanding its investment in original productions, which sounded good in press releases but also sent an unmistakable message to Hollywood that its appetite for movie rights from the studios would likely shrink. Disney, which was the other major studio in the Starz stable, got the message loud and clear and struck a lucrative deal to move its future pay-TV rights from Starz to Netflix, just as Starz was in the process of being spun off from Liberty into a standalone company with a standalone stock price to worry about.
That left Starz with little choice but to do whatever it had to do to hold onto Sony. Even though movies are likely to play less of a role in Starz’ schedule come 2021, they’ll play a big role in its stock price for at least the next few years.