1 00:00:02,360 --> 00:00:07,520 Speaker 1: Bloomberg Audio Studios, podcasts, radio news joining us now. I'm 2 00:00:07,520 --> 00:00:09,559 Speaker 1: pleased to say we have Jeffrey Hirsch. He is the 3 00:00:09,600 --> 00:00:12,600 Speaker 1: CEO of Stars. Jeffrey, great to see you in person, Thanks. 4 00:00:12,360 --> 00:00:13,920 Speaker 2: For having me excited to be here this morning. 5 00:00:14,000 --> 00:00:17,239 Speaker 1: And I have to imagine this is some validation, a 6 00:00:17,320 --> 00:00:21,279 Speaker 1: real proof of concept that Stars should be a standalone business. Yeah. 7 00:00:21,360 --> 00:00:24,239 Speaker 2: Look, I think the corporation made the right decision to 8 00:00:24,320 --> 00:00:27,440 Speaker 2: separate the companies and put the value in both the 9 00:00:27,440 --> 00:00:29,840 Speaker 2: sides of the Lionsgate side and the Star side. I 10 00:00:29,840 --> 00:00:32,600 Speaker 2: think you're seeing the great decision by the board coming 11 00:00:32,600 --> 00:00:35,200 Speaker 2: to fruitions with the stock price on both sides, moving 12 00:00:35,440 --> 00:00:37,959 Speaker 2: and putting the value in the right place on both companies. 13 00:00:38,800 --> 00:00:42,400 Speaker 3: So what is your target audience? I mean we were 14 00:00:42,440 --> 00:00:46,360 Speaker 3: just talking a little bit during the break about HBO. 15 00:00:46,440 --> 00:00:49,520 Speaker 3: Max has made a number of changes. You've worked there too, 16 00:00:49,600 --> 00:00:52,519 Speaker 3: So what are you doing at Stars? What's your focus? 17 00:00:52,600 --> 00:00:55,520 Speaker 2: Yeah, we're really focused on really two core demos, women 18 00:00:55,560 --> 00:00:58,840 Speaker 2: and underrepresented audiences. When we launched our OTT product in 19 00:00:58,920 --> 00:01:00,960 Speaker 2: April of two thousand and six, what we saw was 20 00:01:01,040 --> 00:01:03,800 Speaker 2: driving our business was women, and so we leaned into 21 00:01:03,800 --> 00:01:06,720 Speaker 2: that very significantly, and our programming mandate now is a 22 00:01:07,319 --> 00:01:10,760 Speaker 2: narratives for buying about women and other represented audiences. So 23 00:01:10,880 --> 00:01:14,960 Speaker 2: shows like Outlander, shows like p Valley, the Power Franchise 24 00:01:15,000 --> 00:01:18,119 Speaker 2: really leans into that. It's very adult, very are rated. 25 00:01:18,640 --> 00:01:20,760 Speaker 2: We don't have any advertising and so we'll continue to 26 00:01:20,800 --> 00:01:23,120 Speaker 2: really focus on that and that makes us a very 27 00:01:23,240 --> 00:01:26,560 Speaker 2: complimentary bundling partner to most of the broad bay streamers 28 00:01:26,560 --> 00:01:28,200 Speaker 2: out there that you see today. So we think we're 29 00:01:28,440 --> 00:01:31,240 Speaker 2: really uniquely positioned in a very competitive space today. 30 00:01:31,400 --> 00:01:34,320 Speaker 1: So our rated content not something that you would pop on. 31 00:01:34,520 --> 00:01:38,200 Speaker 3: I used to call it skinmax, but that's that's what 32 00:01:38,240 --> 00:01:39,000 Speaker 3: you are now, right. 33 00:01:39,000 --> 00:01:41,400 Speaker 2: No, I think we're a little more elevated in terms 34 00:01:41,400 --> 00:01:45,679 Speaker 2: of scripted too, but I appreciate the reference. No, look, 35 00:01:45,720 --> 00:01:47,640 Speaker 2: I think there was a time in the place that 36 00:01:47,680 --> 00:01:50,080 Speaker 2: Cinemax had it's run back in the day. But you know, 37 00:01:50,120 --> 00:01:52,880 Speaker 2: we've got some of the biggest shows on television with Outlander, 38 00:01:52,880 --> 00:01:55,080 Speaker 2: we have the prequel coming this summer on August eighth, 39 00:01:55,280 --> 00:01:57,560 Speaker 2: We premiere BMF this weekend, and these you know, it's 40 00:01:57,600 --> 00:02:01,600 Speaker 2: really more of where the story goes, naturally we go there, right, 41 00:02:01,640 --> 00:02:03,640 Speaker 2: and so we don't black them off your family, Yes, 42 00:02:04,080 --> 00:02:07,600 Speaker 2: fifty cent show, really big show for us. We're excited 43 00:02:07,640 --> 00:02:09,880 Speaker 2: to have it come back on the service. But for us, 44 00:02:09,960 --> 00:02:12,440 Speaker 2: you know the tour, when the natural story goes to 45 00:02:12,480 --> 00:02:15,120 Speaker 2: certain places, we allow our creators to go there, whereas 46 00:02:15,160 --> 00:02:17,120 Speaker 2: other services kind of pull them back because they want 47 00:02:17,120 --> 00:02:18,000 Speaker 2: to put ads against it. 48 00:02:18,360 --> 00:02:20,080 Speaker 1: So there's plot, of course. And I mean, you think 49 00:02:20,120 --> 00:02:22,880 Speaker 1: about Game of Thrones the best television show of all 50 00:02:22,919 --> 00:02:23,880 Speaker 1: time in my opinion. 51 00:02:23,960 --> 00:02:27,440 Speaker 3: Obviously I hear people in this office saying that about Outlander. 52 00:02:27,480 --> 00:02:30,399 Speaker 2: I mean they evolve it true, true. I mean, Outlander 53 00:02:30,440 --> 00:02:32,960 Speaker 2: is one of the biggest shows on TV. And you know, 54 00:02:33,000 --> 00:02:35,600 Speaker 2: we have a prequel coming which takes us back to 55 00:02:35,720 --> 00:02:38,120 Speaker 2: seventeen hundred Scotland, and it's the love story for how 56 00:02:38,160 --> 00:02:40,679 Speaker 2: each of the leads from Outlanders parents met and fell 57 00:02:40,720 --> 00:02:42,519 Speaker 2: in love. So there's a little bit of a Romeo 58 00:02:42,560 --> 00:02:45,160 Speaker 2: and Juliette story on one side where it's forbidden clans 59 00:02:45,520 --> 00:02:47,040 Speaker 2: and they fall in love, and the other side is 60 00:02:47,040 --> 00:02:49,360 Speaker 2: a World War One story, and so we're really excited 61 00:02:49,400 --> 00:02:51,720 Speaker 2: about it. But I think all of our shows are. 62 00:02:51,760 --> 00:02:53,839 Speaker 2: You know, we have five shows that do between nine 63 00:02:53,840 --> 00:02:55,880 Speaker 2: and twelve million eyeballs a week. Those are some of 64 00:02:55,880 --> 00:02:58,200 Speaker 2: the biggest shows on TV, and so we're really excited 65 00:02:58,240 --> 00:03:01,480 Speaker 2: about our content strategy in the place that we play 66 00:03:01,520 --> 00:03:02,640 Speaker 2: in the whole ecosystem. 67 00:03:03,440 --> 00:03:05,680 Speaker 1: Let's say to my next question. We heard from your 68 00:03:05,760 --> 00:03:09,480 Speaker 1: chief financial officer recently on your conference call with analysts 69 00:03:09,480 --> 00:03:12,880 Speaker 1: saying that you see roughly seven hundred million dollars of 70 00:03:12,919 --> 00:03:15,320 Speaker 1: content spending in twenty twenty six. 71 00:03:15,560 --> 00:03:17,120 Speaker 2: Can you give us more detail on that. 72 00:03:17,200 --> 00:03:20,600 Speaker 1: Is that for some of your existing franchises, your existing shows, 73 00:03:20,680 --> 00:03:24,160 Speaker 1: or you also are you putting that towards developing new content? 74 00:03:24,680 --> 00:03:27,200 Speaker 2: So what's in that number is a combination of our 75 00:03:27,240 --> 00:03:30,000 Speaker 2: big originals. There's a lions Gate Pay one, which is 76 00:03:30,040 --> 00:03:31,720 Speaker 2: the first movie windows that come to that in a 77 00:03:31,800 --> 00:03:34,360 Speaker 2: universal pay too, and we think that the portfolio of 78 00:03:34,400 --> 00:03:36,680 Speaker 2: content really makes us a very compelling service at our 79 00:03:36,680 --> 00:03:38,760 Speaker 2: eleven dollars price point. And you saw that in the 80 00:03:38,760 --> 00:03:41,760 Speaker 2: first quarter numbers. We actually grew the US subscriber based 81 00:03:41,760 --> 00:03:44,240 Speaker 2: total by almost two percent in the first quarter, which 82 00:03:44,240 --> 00:03:47,560 Speaker 2: is a really really great accomplishment in a very competitive space. 83 00:03:47,800 --> 00:03:49,839 Speaker 2: But we're always we have a you know, a programming group. 84 00:03:49,880 --> 00:03:51,760 Speaker 2: We have got forty to fifty shows in development at 85 00:03:51,760 --> 00:03:55,120 Speaker 2: any given time, and as we talked about on the call. 86 00:03:55,440 --> 00:03:57,480 Speaker 2: We want to go from a fifteen percent profit margin 87 00:03:57,520 --> 00:03:59,760 Speaker 2: to a twenty percent profit margin by twenty twenty and 88 00:04:00,000 --> 00:04:02,400 Speaker 2: twenty twenty eight. One of the ways that we get 89 00:04:02,400 --> 00:04:04,480 Speaker 2: there is actually by turning the slate over and putting 90 00:04:04,480 --> 00:04:06,839 Speaker 2: new shows on the air that we can own. As 91 00:04:06,840 --> 00:04:09,720 Speaker 2: we separated from Lionsgate and so ownership economics is really 92 00:04:09,760 --> 00:04:12,760 Speaker 2: important because season ones are much cheaper than seasons five, six, 93 00:04:12,800 --> 00:04:15,440 Speaker 2: and seven. And we can also put international sales back 94 00:04:15,440 --> 00:04:17,360 Speaker 2: into the business, which is another way to net down 95 00:04:17,360 --> 00:04:19,960 Speaker 2: the cost of a show. And so as we separate, 96 00:04:20,360 --> 00:04:22,920 Speaker 2: we just announced that we open four writers rooms in 97 00:04:22,960 --> 00:04:25,479 Speaker 2: the last couple of weeks on some really compelling shows 98 00:04:25,480 --> 00:04:28,440 Speaker 2: that I'm excited about. As we start to move into 99 00:04:28,480 --> 00:04:30,279 Speaker 2: twenty seven, you'll start to see more of our own 100 00:04:30,279 --> 00:04:32,520 Speaker 2: shows come on the slate. I imagine. 101 00:04:32,839 --> 00:04:35,240 Speaker 3: You know, with something like Outlander, you can get people 102 00:04:35,240 --> 00:04:37,599 Speaker 3: to come and pay four dollars a month, which is 103 00:04:37,960 --> 00:04:42,760 Speaker 3: what your special offer is right now? Can you grow 104 00:04:42,839 --> 00:04:47,600 Speaker 3: that over time as you have these massive competitors like Netflix, 105 00:04:47,800 --> 00:04:51,160 Speaker 3: like HBO or do you have to hold it at 106 00:04:51,200 --> 00:04:51,919 Speaker 3: a lower level. 107 00:04:52,120 --> 00:04:54,600 Speaker 2: So one, we don't see them as competitors, We see 108 00:04:54,680 --> 00:04:57,400 Speaker 2: them as complementary services. If you think about the old 109 00:04:57,520 --> 00:05:00,560 Speaker 2: traditional world, Stars was always set up as a cherry 110 00:05:00,560 --> 00:05:03,080 Speaker 2: on top or an additive to broad based services. So 111 00:05:03,440 --> 00:05:05,800 Speaker 2: Comcast for a long time sold Stars on top of 112 00:05:06,200 --> 00:05:09,839 Speaker 2: expanded basic television. We think that world gets replicated to 113 00:05:09,839 --> 00:05:12,599 Speaker 2: the digital world, and so we've always positioned ourselves as 114 00:05:12,640 --> 00:05:15,880 Speaker 2: being a complementary add on to the broad services like Netflix, 115 00:05:15,920 --> 00:05:18,599 Speaker 2: like Amazon, like Hulu, and so we will always be 116 00:05:18,720 --> 00:05:21,200 Speaker 2: priced well below the broad based services so that we 117 00:05:21,240 --> 00:05:24,880 Speaker 2: are viewed in the consumer's mind, is complementary and not competitive. 118 00:05:25,200 --> 00:05:26,680 Speaker 1: Before we let you go, I do want to talk 119 00:05:26,680 --> 00:05:29,599 Speaker 1: a little bit about your business because I believe you 120 00:05:29,640 --> 00:05:33,200 Speaker 1: derive about seventy percent of your revenue from streaming. That 121 00:05:33,279 --> 00:05:36,560 Speaker 1: leaves about thirty percent of your company exposed to, you know, 122 00:05:36,640 --> 00:05:39,800 Speaker 1: cord cutting. So how do you plan to deal with 123 00:05:39,839 --> 00:05:41,600 Speaker 1: that over time? Is that something that you're trying to 124 00:05:41,600 --> 00:05:43,080 Speaker 1: whittle down that thirty percent? 125 00:05:44,120 --> 00:05:47,479 Speaker 2: We really follow the consumer, right, and so as the 126 00:05:47,480 --> 00:05:49,880 Speaker 2: consumer has shifted from linear to digital, we kind of 127 00:05:49,880 --> 00:05:51,720 Speaker 2: followed the consumer there. But I think there's a real 128 00:05:51,800 --> 00:05:54,479 Speaker 2: value in still the linear business today. You know what's 129 00:05:54,520 --> 00:05:56,880 Speaker 2: interesting about all of our customers. Eighty percent of all 130 00:05:56,880 --> 00:06:00,159 Speaker 2: of our customers are either added on or all the art, 131 00:06:00,200 --> 00:06:03,239 Speaker 2: which means customers chose stars. It wasn't. We're in a bundle, 132 00:06:03,560 --> 00:06:05,680 Speaker 2: and so that we see the cord cutting and we're 133 00:06:05,760 --> 00:06:08,240 Speaker 2: just the natural evolution of cord cutting people who actually 134 00:06:08,520 --> 00:06:10,880 Speaker 2: pick stars because the content is working. And what it 135 00:06:10,920 --> 00:06:13,480 Speaker 2: also means is that we actually are a revenue generator 136 00:06:13,520 --> 00:06:16,000 Speaker 2: for our partners. And so I actually think that there's 137 00:06:16,040 --> 00:06:18,279 Speaker 2: a lot of opportunities still in the old traditional world 138 00:06:18,360 --> 00:06:20,880 Speaker 2: for us as the content continues to roll out, that 139 00:06:20,880 --> 00:06:23,279 Speaker 2: there's opportunities to grow that business. And actually what we 140 00:06:23,320 --> 00:06:25,320 Speaker 2: saw at the end of the first quarter was a 141 00:06:25,400 --> 00:06:28,880 Speaker 2: lessening of the cord cutting loss. Now it's a little 142 00:06:28,880 --> 00:06:31,320 Speaker 2: bit of time. I wouldn't claim victory on that yet. 143 00:06:31,480 --> 00:06:34,000 Speaker 2: Or hope is that that law starts to slow and 144 00:06:34,040 --> 00:06:36,080 Speaker 2: that's added into the long term health of the business.