Speaker 1: Bloomberg Audio Studios, podcasts, radio news joining us now. I'm
Speaker 1: pleased to say we have Jeffrey Hirsch. He is the
Speaker 1: CEO of Stars. Jeffrey, great to see you in person, Thanks.
Speaker 2: For having me excited to be here this morning.
Speaker 1: And I have to imagine this is some validation, a
Speaker 1: real proof of concept that Stars should be a standalone business. Yeah.
Speaker 2: Look, I think the corporation made the right decision to
Speaker 2: separate the companies and put the value in both the
Speaker 2: sides of the Lionsgate side and the Star side. I
Speaker 2: think you're seeing the great decision by the board coming
Speaker 2: to fruitions with the stock price on both sides, moving
Speaker 2: and putting the value in the right place on both companies.
Speaker 3: So what is your target audience? I mean we were
Speaker 3: just talking a little bit during the break about HBO.
Speaker 3: Max has made a number of changes. You've worked there too,
Speaker 3: So what are you doing at Stars? What's your focus?
Speaker 2: Yeah, we're really focused on really two core demos, women
Speaker 2: and underrepresented audiences. When we launched our OTT product in
Speaker 2: April of two thousand and six, what we saw was
Speaker 2: driving our business was women, and so we leaned into
Speaker 2: that very significantly, and our programming mandate now is a
Speaker 2: narratives for buying about women and other represented audiences. So
Speaker 2: shows like Outlander, shows like p Valley, the Power Franchise
Speaker 2: really leans into that. It's very adult, very are rated.
Speaker 2: We don't have any advertising and so we'll continue to
Speaker 2: really focus on that and that makes us a very
Speaker 2: complimentary bundling partner to most of the broad bay streamers
Speaker 2: out there that you see today. So we think we're
Speaker 2: really uniquely positioned in a very competitive space today.
Speaker 1: So our rated content not something that you would pop on.
Speaker 3: I used to call it skinmax, but that's that's what
Speaker 3: you are now, right.
Speaker 2: No, I think we're a little more elevated in terms
Speaker 2: of scripted too, but I appreciate the reference. No, look,
Speaker 2: I think there was a time in the place that
Speaker 2: Cinemax had it's run back in the day. But you know,
Speaker 2: we've got some of the biggest shows on television with Outlander,
Speaker 2: we have the prequel coming this summer on August eighth,
Speaker 2: We premiere BMF this weekend, and these you know, it's
Speaker 2: really more of where the story goes, naturally we go there, right,
Speaker 2: and so we don't black them off your family, Yes,
Speaker 2: fifty cent show, really big show for us. We're excited
Speaker 2: to have it come back on the service. But for us,
Speaker 2: you know the tour, when the natural story goes to
Speaker 2: certain places, we allow our creators to go there, whereas
Speaker 2: other services kind of pull them back because they want
Speaker 2: to put ads against it.
Speaker 1: So there's plot, of course. And I mean, you think
Speaker 1: about Game of Thrones the best television show of all
Speaker 1: time in my opinion.
Speaker 3: Obviously I hear people in this office saying that about Outlander.
Speaker 2: I mean they evolve it true, true. I mean, Outlander
Speaker 2: is one of the biggest shows on TV. And you know,
Speaker 2: we have a prequel coming which takes us back to
Speaker 2: seventeen hundred Scotland, and it's the love story for how
Speaker 2: each of the leads from Outlanders parents met and fell
Speaker 2: in love. So there's a little bit of a Romeo
Speaker 2: and Juliette story on one side where it's forbidden clans
Speaker 2: and they fall in love, and the other side is
Speaker 2: a World War One story, and so we're really excited
Speaker 2: about it. But I think all of our shows are.
Speaker 2: You know, we have five shows that do between nine
Speaker 2: and twelve million eyeballs a week. Those are some of
Speaker 2: the biggest shows on TV, and so we're really excited
Speaker 2: about our content strategy in the place that we play
Speaker 2: in the whole ecosystem.
Speaker 1: Let's say to my next question. We heard from your
Speaker 1: chief financial officer recently on your conference call with analysts
Speaker 1: saying that you see roughly seven hundred million dollars of
Speaker 1: content spending in twenty twenty six.
Speaker 2: Can you give us more detail on that.
Speaker 1: Is that for some of your existing franchises, your existing shows,
Speaker 1: or you also are you putting that towards developing new content?
Speaker 2: So what's in that number is a combination of our
Speaker 2: big originals. There's a lions Gate Pay one, which is
Speaker 2: the first movie windows that come to that in a
Speaker 2: universal pay too, and we think that the portfolio of
Speaker 2: content really makes us a very compelling service at our
Speaker 2: eleven dollars price point. And you saw that in the
Speaker 2: first quarter numbers. We actually grew the US subscriber based
Speaker 2: total by almost two percent in the first quarter, which
Speaker 2: is a really really great accomplishment in a very competitive space.
Speaker 2: But we're always we have a you know, a programming group.
Speaker 2: We have got forty to fifty shows in development at
Speaker 2: any given time, and as we talked about on the call.
Speaker 2: We want to go from a fifteen percent profit margin
Speaker 2: to a twenty percent profit margin by twenty twenty and
Speaker 2: twenty twenty eight. One of the ways that we get
Speaker 2: there is actually by turning the slate over and putting
Speaker 2: new shows on the air that we can own. As
Speaker 2: we separated from Lionsgate and so ownership economics is really
Speaker 2: important because season ones are much cheaper than seasons five, six,
Speaker 2: and seven. And we can also put international sales back
Speaker 2: into the business, which is another way to net down
Speaker 2: the cost of a show. And so as we separate,
Speaker 2: we just announced that we open four writers rooms in
Speaker 2: the last couple of weeks on some really compelling shows
Speaker 2: that I'm excited about. As we start to move into
Speaker 2: twenty seven, you'll start to see more of our own
Speaker 2: shows come on the slate. I imagine.
Speaker 3: You know, with something like Outlander, you can get people
Speaker 3: to come and pay four dollars a month, which is
Speaker 3: what your special offer is right now? Can you grow
Speaker 3: that over time as you have these massive competitors like Netflix,
Speaker 3: like HBO or do you have to hold it at
Speaker 3: a lower level.
Speaker 2: So one, we don't see them as competitors, We see
Speaker 2: them as complementary services. If you think about the old
Speaker 2: traditional world, Stars was always set up as a cherry
Speaker 2: on top or an additive to broad based services. So
Speaker 2: Comcast for a long time sold Stars on top of
Speaker 2: expanded basic television. We think that world gets replicated to
Speaker 2: the digital world, and so we've always positioned ourselves as
Speaker 2: being a complementary add on to the broad services like Netflix,
Speaker 2: like Amazon, like Hulu, and so we will always be
Speaker 2: priced well below the broad based services so that we
Speaker 2: are viewed in the consumer's mind, is complementary and not competitive.
Speaker 1: Before we let you go, I do want to talk
Speaker 1: a little bit about your business because I believe you
Speaker 1: derive about seventy percent of your revenue from streaming. That
Speaker 1: leaves about thirty percent of your company exposed to, you know,
Speaker 1: cord cutting. So how do you plan to deal with
Speaker 1: that over time? Is that something that you're trying to
Speaker 1: whittle down that thirty percent?
Speaker 2: We really follow the consumer, right, and so as the
Speaker 2: consumer has shifted from linear to digital, we kind of
Speaker 2: followed the consumer there. But I think there's a real
Speaker 2: value in still the linear business today. You know what's
Speaker 2: interesting about all of our customers. Eighty percent of all
Speaker 2: of our customers are either added on or all the art,
Speaker 2: which means customers chose stars. It wasn't. We're in a bundle,
Speaker 2: and so that we see the cord cutting and we're
Speaker 2: just the natural evolution of cord cutting people who actually
Speaker 2: pick stars because the content is working. And what it
Speaker 2: also means is that we actually are a revenue generator
Speaker 2: for our partners. And so I actually think that there's
Speaker 2: a lot of opportunities still in the old traditional world
Speaker 2: for us as the content continues to roll out, that
Speaker 2: there's opportunities to grow that business. And actually what we
Speaker 2: saw at the end of the first quarter was a
Speaker 2: lessening of the cord cutting loss. Now it's a little
Speaker 2: bit of time. I wouldn't claim victory on that yet.
Speaker 2: Or hope is that that law starts to slow and
Speaker 2: that's added into the long term health of the business.