STRZA Starz - Series A

Liberty Media Corp. (LMCA) has completed the spin-off of its Starz Entertainment segment as a separate entity. According to management, the spin-off of Starz will unlock the latter’s value by optimizing its capital structure and enabling Starz to find several alternative ways and partnerships for both content creation and distribution. At the end of the third quarter, total subscribers base of Starz increased 9% to 20.8 million while its sister TV channel Encore had 34.3 million subscribers, up 5% year over year. Together, these two channels command 55.1 million subscribers.

Starz is currently trading at NASDAQ as Starz Inc. (STRZA). The company is famous for its premium movie channels and competes primarily with HBO of Time Warner Inc. (TWX) and Showtime of CBS Corp. (CBS). At present, HBO has about 39.5 million subscribers whereas Showtime has nearly 21.3 million subscribers.

Last October, Starz launched its two TV Everywhere services with Cox Communications Inc. The two online authenticated services are known as STARZ PLAY and ENCORE PLAY. Later, the company also launched its third streaming services called MOVIEPLEX PLAY with Cox. All these three services collectively offer 1,500 premium movies and TV programs every month.

Initially, STARZ PLAY and ENCORE PLAY will be accessible through Internet and iPhone, iPAD, and iPod through Wi-Fi and wired broadband connections. However, Starz stated that mobile connectivity, access through gaming consoles and availability of these services on Android-based devices will be launched later on. Furthermore, Starz is trying hard to enter into similar types of deals with other large pay-TV operators.

Starz currently has about $1.1 billion of debt and access to a $450 million bank credit facility. Liberty Media earlier stated that the spin-off is envisioned to provide a cash dividend of $1.8 billion to the company. We believe that the spin-off of Starz will help Liberty Media to increase its stake in Barnes & Noble Inc. (BKS) and Live Nation Entertainment Inc. (LYV), together with SIRIUS XM Radio Inc. (SIRI). Liberty Media recently got regulatory approval to control more than 50% stake of SIRIUS XM.

 
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