QVC Boosts Liberty 3rd Quarter Results


Liberty Media Corp. reported strong third-quarter operating results, fueled by its recently acquired QVC Inc. home-shopping channel but tempered in part by declines at its Starz Encore Group LLC premium unit.

Liberty reported revenue of $905 million, up 79% from the same period last year. That revenue growth was mainly due to the inclusion of QVC, which Liberty began consolidating on Sept 1. Without QVC's $400 million in revenue in that month, revenue would have declined almost 4%, to $505 million, QVC had another stellar quarter, reporting a 14% increase in revenue to $1.15 billion and an increase in operating cash flow to $234 million. Liberty completed its purchase of the 56.5% of QVC it didn't already own from Comcast Corp. in September, for $7.9 billion.

At its Discovery Communications Inc. unit, revenue was up 20.3% to $474 million and operating cash flow improved 48.7% to $116 million.

Starz Encore, however, did not have as robust a quarter. Subscribers at the premium unit were flat sequentially. Revenue fell 10.7%, to $217 million, and operating cash flow dropped 27.3%, to $72 million, mainly a result of the resolution of its recent dispute with Comcast Corp.

As part of the settlement, Comcast will pay Starz based on per-subscriber rates rather than a flat fee. Comcast has also agreed to actively market Starz Encore services.

That lack of marketing helped put a major crimp in Starz's subscriber growth. On a conference call with analysts last Friday, Starz president and chief operating officer Mark Bauman said that the premium service was losing 100,000 subscribers per month on Comcast systems. Its Encore service was not affected because it is included on a digital tier on Comcast cable systems.

"Now that we have redone our deal with them, we've seen tremendous good faith actions out of Comcast. We have an agreement with them over the next two years to spend an unprecedented amount of money on marketing of the Starz services, including Starz On Demand," Bauman said on the call.

He added that Comcast has also agreed to launch Starz On Demand to 15 million basic homes by the end of the year, a total that will jump to 20 million by the end of 2004.

"We think with the renewed relationships with Comcast — that's where we were really losing all the Starz units — we're going to see that turn around and turn into growth," Bauman said.

Liberty president Dob Bennett downplayed speculation that Liberty is making moves to purchase Cox Communications Inc.'s 25% interest in Discovery. Liberty already owns 50% of the cable network.

"Yes, we always are interested in owning more of Discovery. If they [Cox] were to call us up, it certainly is a discussion we would be happy to have," Bennett said. "We don't control what circumstance would bring them to that."