WEBVTT - Starz Entertainment Corp President & CEO Jeffrey Hirsch Talks Streaming

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news joining us now. I'm

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<v Speaker 1>pleased to say we have Jeffrey Hirsch. He is the

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<v Speaker 1>CEO of Stars. Jeffrey, great to see you in person, Thanks.

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<v Speaker 2>For having me excited to be here this morning.

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<v Speaker 1>And I have to imagine this is some validation, a

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<v Speaker 1>real proof of concept that Stars should be a standalone business. Yeah.

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<v Speaker 2>Look, I think the corporation made the right decision to

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<v Speaker 2>separate the companies and put the value in both the

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<v Speaker 2>sides of the Lionsgate side and the Star side. I

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<v Speaker 2>think you're seeing the great decision by the board coming

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<v Speaker 2>to fruitions with the stock price on both sides, moving

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<v Speaker 2>and putting the value in the right place on both companies.

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<v Speaker 3>So what is your target audience? I mean we were

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<v Speaker 3>just talking a little bit during the break about HBO.

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<v Speaker 3>Max has made a number of changes. You've worked there too,

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<v Speaker 3>So what are you doing at Stars? What's your focus?

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<v Speaker 2>Yeah, we're really focused on really two core demos, women

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<v Speaker 2>and underrepresented audiences. When we launched our OTT product in

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<v Speaker 2>April of two thousand and six, what we saw was

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<v Speaker 2>driving our business was women, and so we leaned into

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<v Speaker 2>that very significantly, and our programming mandate now is a

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<v Speaker 2>narratives for buying about women and other represented audiences. So

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<v Speaker 2>shows like Outlander, shows like p Valley, the Power Franchise

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<v Speaker 2>really leans into that. It's very adult, very are rated.

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<v Speaker 2>We don't have any advertising and so we'll continue to

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<v Speaker 2>really focus on that and that makes us a very

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<v Speaker 2>complimentary bundling partner to most of the broad bay streamers

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<v Speaker 2>out there that you see today. So we think we're

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<v Speaker 2>really uniquely positioned in a very competitive space today.

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<v Speaker 1>So our rated content not something that you would pop on.

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<v Speaker 3>I used to call it skinmax, but that's that's what

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<v Speaker 3>you are now, right.

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<v Speaker 2>No, I think we're a little more elevated in terms

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<v Speaker 2>of scripted too, but I appreciate the reference. No, look,

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<v Speaker 2>I think there was a time in the place that

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<v Speaker 2>Cinemax had it's run back in the day. But you know,

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<v Speaker 2>we've got some of the biggest shows on television with Outlander,

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<v Speaker 2>we have the prequel coming this summer on August eighth,

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<v Speaker 2>We premiere BMF this weekend, and these you know, it's

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<v Speaker 2>really more of where the story goes, naturally we go there, right,

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<v Speaker 2>and so we don't black them off your family, Yes,

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<v Speaker 2>fifty cent show, really big show for us. We're excited

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<v Speaker 2>to have it come back on the service. But for us,

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<v Speaker 2>you know the tour, when the natural story goes to

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<v Speaker 2>certain places, we allow our creators to go there, whereas

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<v Speaker 2>other services kind of pull them back because they want

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<v Speaker 2>to put ads against it.

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<v Speaker 1>So there's plot, of course. And I mean, you think

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<v Speaker 1>about Game of Thrones the best television show of all

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<v Speaker 1>time in my opinion.

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<v Speaker 3>Obviously I hear people in this office saying that about Outlander.

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<v Speaker 2>I mean they evolve it true, true. I mean, Outlander

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<v Speaker 2>is one of the biggest shows on TV. And you know,

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<v Speaker 2>we have a prequel coming which takes us back to

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<v Speaker 2>seventeen hundred Scotland, and it's the love story for how

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<v Speaker 2>each of the leads from Outlanders parents met and fell

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<v Speaker 2>in love. So there's a little bit of a Romeo

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<v Speaker 2>and Juliette story on one side where it's forbidden clans

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<v Speaker 2>and they fall in love, and the other side is

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<v Speaker 2>a World War One story, and so we're really excited

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<v Speaker 2>about it. But I think all of our shows are.

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<v Speaker 2>You know, we have five shows that do between nine

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<v Speaker 2>and twelve million eyeballs a week. Those are some of

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<v Speaker 2>the biggest shows on TV, and so we're really excited

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<v Speaker 2>about our content strategy in the place that we play

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<v Speaker 2>in the whole ecosystem.

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<v Speaker 1>Let's say to my next question. We heard from your

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<v Speaker 1>chief financial officer recently on your conference call with analysts

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<v Speaker 1>saying that you see roughly seven hundred million dollars of

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<v Speaker 1>content spending in twenty twenty six.

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<v Speaker 2>Can you give us more detail on that.

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<v Speaker 1>Is that for some of your existing franchises, your existing shows,

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<v Speaker 1>or you also are you putting that towards developing new content?

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<v Speaker 2>So what's in that number is a combination of our

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<v Speaker 2>big originals. There's a lions Gate Pay one, which is

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<v Speaker 2>the first movie windows that come to that in a

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<v Speaker 2>universal pay too, and we think that the portfolio of

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<v Speaker 2>content really makes us a very compelling service at our

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<v Speaker 2>eleven dollars price point. And you saw that in the

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<v Speaker 2>first quarter numbers. We actually grew the US subscriber based

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<v Speaker 2>total by almost two percent in the first quarter, which

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<v Speaker 2>is a really really great accomplishment in a very competitive space.

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<v Speaker 2>But we're always we have a you know, a programming group.

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<v Speaker 2>We have got forty to fifty shows in development at

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<v Speaker 2>any given time, and as we talked about on the call.

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<v Speaker 2>We want to go from a fifteen percent profit margin

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<v Speaker 2>to a twenty percent profit margin by twenty twenty and

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<v Speaker 2>twenty twenty eight. One of the ways that we get

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<v Speaker 2>there is actually by turning the slate over and putting

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<v Speaker 2>new shows on the air that we can own. As

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<v Speaker 2>we separated from Lionsgate and so ownership economics is really

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<v Speaker 2>important because season ones are much cheaper than seasons five, six,

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<v Speaker 2>and seven. And we can also put international sales back

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<v Speaker 2>into the business, which is another way to net down

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<v Speaker 2>the cost of a show. And so as we separate,

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<v Speaker 2>we just announced that we open four writers rooms in

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<v Speaker 2>the last couple of weeks on some really compelling shows

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<v Speaker 2>that I'm excited about. As we start to move into

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<v Speaker 2>twenty seven, you'll start to see more of our own

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<v Speaker 2>shows come on the slate. I imagine.

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<v Speaker 3>You know, with something like Outlander, you can get people

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<v Speaker 3>to come and pay four dollars a month, which is

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<v Speaker 3>what your special offer is right now? Can you grow

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<v Speaker 3>that over time as you have these massive competitors like Netflix,

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<v Speaker 3>like HBO or do you have to hold it at

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<v Speaker 3>a lower level.

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<v Speaker 2>So one, we don't see them as competitors, We see

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<v Speaker 2>them as complementary services. If you think about the old

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<v Speaker 2>traditional world, Stars was always set up as a cherry

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<v Speaker 2>on top or an additive to broad based services. So

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<v Speaker 2>Comcast for a long time sold Stars on top of

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<v Speaker 2>expanded basic television. We think that world gets replicated to

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<v Speaker 2>the digital world, and so we've always positioned ourselves as

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<v Speaker 2>being a complementary add on to the broad services like Netflix,

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<v Speaker 2>like Amazon, like Hulu, and so we will always be

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<v Speaker 2>priced well below the broad based services so that we

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<v Speaker 2>are viewed in the consumer's mind, is complementary and not competitive.

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<v Speaker 1>Before we let you go, I do want to talk

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<v Speaker 1>a little bit about your business because I believe you

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<v Speaker 1>derive about seventy percent of your revenue from streaming. That

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<v Speaker 1>leaves about thirty percent of your company exposed to, you know,

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<v Speaker 1>cord cutting. So how do you plan to deal with

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<v Speaker 1>that over time? Is that something that you're trying to

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<v Speaker 1>whittle down that thirty percent?

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<v Speaker 2>We really follow the consumer, right, and so as the

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<v Speaker 2>consumer has shifted from linear to digital, we kind of

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<v Speaker 2>followed the consumer there. But I think there's a real

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<v Speaker 2>value in still the linear business today. You know what's

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<v Speaker 2>interesting about all of our customers. Eighty percent of all

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<v Speaker 2>of our customers are either added on or all the art,

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<v Speaker 2>which means customers chose stars. It wasn't. We're in a bundle,

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<v Speaker 2>and so that we see the cord cutting and we're

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<v Speaker 2>just the natural evolution of cord cutting people who actually

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<v Speaker 2>pick stars because the content is working. And what it

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<v Speaker 2>also means is that we actually are a revenue generator

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<v Speaker 2>for our partners. And so I actually think that there's

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<v Speaker 2>a lot of opportunities still in the old traditional world

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<v Speaker 2>for us as the content continues to roll out, that

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<v Speaker 2>there's opportunities to grow that business. And actually what we

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<v Speaker 2>saw at the end of the first quarter was a

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<v Speaker 2>lessening of the cord cutting loss. Now it's a little

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<v Speaker 2>bit of time. I wouldn't claim victory on that yet.

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<v Speaker 2>Or hope is that that law starts to slow and

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<v Speaker 2>that's added into the long term health of the business.