Starz has exited its Pay-2 output agreement with Universal to reduce content costs and restructure its business expenses [1].
The move signals a shift in how the premium network manages its library acquisitions as it struggles with the impact of digital rentals and streaming competition. By removing high-cost licensing deals, Starz aims to improve its financial efficiency and reach specific profitability goals.
Jeff Hirsch, CEO of Starz, said the company is announcing the exit from the agreement to right-size the content cost structure. This adjustment is part of a broader strategy to reach a stated goal of a 20% [1] adjusted OIBDA margin.
Hirsch said the performance of Universal titles on the network had been negatively impacted by other platforms. He said the Universal titles are heavily watched on Amazon before they arrive, which lowered their performance on Starz [2].
This decision follows a period of revisiting the business's overall spending. Hirsch said that right-sizing the content cost structure of the business has been paramount to reaching the company's margin goals [2].
While the company remains focused on the 20% [1] margin target, the timeline for achieving this goal has been shifted. The company now expects to reach this financial milestone by late 2027 [3].
“"Today, we are announcing that we have exited our Pay-2 agreement with Universal."”
This strategic pivot reflects the eroding value of traditional 'Pay-2' windows, where premium channels paid for the right to air films after their initial theatrical and rental runs. As consumers increasingly use platforms like Amazon for early access, the exclusivity that once drove subscriptions for networks like Starz has diminished, forcing the company to prioritize margin targets over high-profile library acquisitions.
