Content

Starz Born Again as Movie Producer

9/01/2006 8:00 PM Eastern

Starz is significantly ramping up production of original series and movies for network and theatrical distribution, following parent Liberty Media Corp.'s acquisition of IDT Entertainment.

IDT — owner of Film Roman, the animation house behind The Simpsons and King of the Hill — was sold by IDT Corp. for $186 million in cash. Liberty also relinquished 17.2 million class-B shares of IDT Corp., a 5% minority interest in IDT Telecom (originally bought for $30 million in January 2002), and approximately 4% minority interest in certain IDT Capital subsidiaries. About $74 million in IDT Entertainment debt also goes to Liberty.

IDT Entertainment has been renamed Starz Media. That unit, best known for animation, will produce movies and shows. Starz Entertainment Group — which primarily distributes theatrical films via premium pay TV channels, subscription video-on-demand and the Vongo Internet-download service — will drop the word “Group” from its name. Both will be housed under a new entity, Starz LLC.

Robert Clasen, who was CEO of Starz Entertainment Group, becomes chairman of all three entities.

FULL-PURPOSE MACHINERY

“The driver in doing this combination,” said Clasen, “is really to have a full-purpose production, distribution and marketing company where we have products that we can create for theatrical distribution, television distribution in all its forms, and broadband.”

The goal: “a one-stop shop for the entertainment community.”

New content for distribution includes animated feature films, such as Everyone's Hero (due out Sept. 15) and the $40 million Sheepish (due in 2007); animated TV programming, such as Eloise for Starz Kids & Family and DVD release; and contracted animation shows, such as Tripping the Rift for Sci Fi Channel.

Starz now also offers home-entertainment distribution such as Roseanne and Three's Company, as well as a few fitness videos; the live action shows Masters of Horror — Season 2 for Showtime and Masters of Science Fiction for ABC; and original documentary films Buy the Ticket, Take the Ride: Hunter S. Thompson on Film and Going to Pieces: The Rise and Fall of the Slasher Movie, both for the Starz channel.

“Over the years we've been kind of leaking our way into originals by experimenting with short-form, with 'Bunnies,' with the program that we're doing with Hollywood news … This is just another step along the road,” said Clasen. The “30-Second Bunnies Theater” features deliver cartoonish parodies on feature films, such as Brokeback Mountain.

But while several animation and live action originals are in production, Clasen said the goal of the combined company isn't to develop large amounts of original programming for Starz thematic cable channels to help compete against HBO and Showtime.

Instead, the company will look to drive new revenue through the production of original series and movies, to be sold to networks ranging from Showtime to Sci Fi. “This is not heralding the era of major originals on Starz. Movies make us,” Clasen said.

Clasen said Starz will also look to use the IDT acquisition to boost its production of content that can be distributed by cable operators over high-speed Internet connections.

He added that the company would consider experimenting with releasing new movies simultaneously in movie theaters and cable video-on-demand platforms.

“What are we discovering about 24? They released its DVD version three years earlier than television shows normally did and its ratings went right through the roof the next year,” Clasen said.

MALONE'S MANTRA

The production of original content by Starz has been a long-term goal for Liberty Media Corp. chairman John Malone. In May, prior to entering into negotiations with IDT, Malone said: “This is one that [Starz founder and former chairman] John Sie and I have always disagreed on. He wanted to make it movies, movies, movies, and I've always said, 'Isn't there some way that we can actually build an inventory of assets?'”

At the time, Malone contrasted Starz to another Liberty holding, Discovery Communications Inc. “They pretty much own everything,” he said. “Their library is like 100,000 hours of video programming that they own. So they've got that huge residual asset that they add to every year. It's global in scope.”

In the Starz
A sampling of fare produced by IDT Entertainment:
Animated feature films:Everyone's Hero (original director: Christopher Reeve); Space Chimp (in production); Sheepish (2008).
Animated TV shows: Wow! Wow! Wubbzy (for Nick Jr.); Eloise (for Starz Kids & Family)
Anime productions: Ghost in the Shell, Astro Boy, Street Fighter
Contract work on animated TV shows: The Simpsons, King of the Hill (both for Fox)
Live-action TV shows:Masters of Horror — Season 2 (for Showtime)
Original documentary films:
Buy the Ticket, Take the Ride: Hunter S. Thompson on Film
Music programming: “Musaic,” a monthly concert series.
Source:Multichannel News research

September