Starz has exited its Pay-2 film output agreement with Universal Pictures after the studio's titles failed to meet viewership projections.
The move signals a shift in how the media company manages content costs to stabilize its financial position. By cutting ties with one of the industry's largest studios, Starz is prioritizing profit margins over a broad library of blockbuster films.
Jeffrey Hirsch, president and CEO of Starz, said the decision during the company's first-quarter 2026 earnings call on Thursday, May 9. "Today, we are announcing that we have exited our Pay 2 agreement with Universal," Hirsch said [2].
The decision follows a challenging start to the year. Starz reported revenue of $306.9 million [1] for the first quarter of 2026, which slightly exceeded the $305.7 million [1] expected by Wall Street. However, the company reported a net loss of $164.9 million [1] for the same period.
These losses were higher than analyst projections. The company reported a loss per share of $9.83 [1], while Wall Street had expected a loss of only 81 cents per share [1].
Company leadership said the exit from the Universal deal is part of a larger strategy to reach a financial inflection point. Starz is now targeting a 20% margin by the back half of 2027 [1].
The company cited lower-than-projected viewership of Universal titles as the primary driver for the reassessment. This suggests that the cost of maintaining the output deal outweighed the value provided by the films in attracting or retaining subscribers.
“"Today, we are announcing that we have exited our Pay 2 agreement with Universal."”
This strategic pivot reflects a broader trend in the streaming and cable industry where platforms are moving away from expensive, broad-catalog licensing deals in favor of leaner, more targeted content spends. The stark discrepancy between the actual loss per share and Wall Street's expectations puts pressure on Starz to prove that reducing its library will not lead to a decline in subscriber growth.
