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Malone: After Spin, Starz Could Use A “Big Brother”

New York – Liberty Media chairman John Malone added fuel to speculation that its Starz premium channel may merge with another larger programmer after a planned spin-off later this year.

“Everybody can use a big brother,” Malone said at Liberty’s annual Investor Day meeting here Wednesday. “There are substantial synergies for Starz working together with various potential media partners. One of the opportunities that we are creating by separating it is for [Starz CEO] Chris [Albrecht] and the board to explore other relationships. Unfortunately, other than financial synergies, Liberty really can’t provide Starz with much in the way of operational synergies in this space in the U.S.”

Liberty announced its intention to spin out Starz into a separate publicly traded entity in August. The transaction would involve the distribution of shares in a new subsidiary to be called Liberty Media that would consist of all Liberty assets other than Starz – including interests in Sirius XM Radio, Live Nation and Barnes & Noble, as well as its stake in the Atlanta Braves Major League Baseball team – to current Liberty shareholders. Starz, about $1.5 billion in debt and an undetermined amount of cash would remain in the old entity, which would be renamed Starz and would trade under the symbols “STRZA” and “STRZB.” The spin is expected to be completed before the end of the year.

Speculation of a possible future sale ran high shortly after the spin announcement, with some reports that Time Warner Inc.’s Home Box Office unit or CBS’s Showtime premium channel could be possible suitors. Other possible suitors include Comcast (which controls the NBC Universal partnership), News Corp., The Walt Disney Co., and Netflix.   

Starz has been on a roll in the past several years, growing cash flow by 16.7% since 2009 while revenue has risen a slightly disappointing 1.9% over the same period. Starz has about 20 million subscribers – up from 16 million in 2008 – and has focused on creating its own original programming in recent years. Earlier in the day Albrecht said the goal is still to create 50 hours of original programming by 2015. Already the channel has launched the successful gladiator series Spartacus – the final installment Spartacus: War of the Damned is coming in January – as well as Boss and Magic City. Period drama Da Vinci’s Demons is slated for a spring 2013 debut, while production is expected to begin next year on mini-series like Marco Polo.