QVC, Starz Drive Liberty Gains

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Gains at its QVC home shopping channel and Starz Entertainment premium network helped drive gains at Liberty Media in the second quarter.
Liberty Media consists of three tracking stocks: Liberty Interactive, which includes QVC and several e-commerce companies; Liberty Starz, which includes its premium cable service Starz Entertainment; and Liberty Capital, which includes Starz Media and minority investments in several media companies, such as Time Warner Inc. and Viacom.
At Liberty Interactive, consolidated revenue was up 6% to $2.1 billion and adjusted operating income before depreciation and amortization rose 4% to $428 million, largely due to increases at QVC.
QVC increased domestic revenue by 4% to $1.2 billion and domestic AOIBDA rose 10% to $303 million, fueled by strong gains in several product categories, including kitchen, cooking and accessories. QVC's e-commerce business - QVC.com - also increased sales by 21% in the quarter.
At Liberty Starz, quarterly subscriber increases at Starz Entertainment (200,000) helped drive overall revenue up 4% to $311 million. Adjusted OIBDA declined by 1% during the period to $103 million, mainly due to impairments taken for two discontinued programs - Party Down and Gravity - and an increase in corporate and other expenses.
At Starz Entertainment, revenue rose 4% to $308 million and AOIBDA increased 2% to $107 million in the quarter. On a conference call with analysts, Starz CEO Chris Albrecht said the premium channel had it second consecutive quarter of subscriber growth. He added that the channel's focus on original programming is continuing.
"Starz Entertainment is exploring several different financing models to fund our acceleration into the originals space," Albrecht said. "We've had meaningful and constructive dialog with potential partners. But please note that this project could take several more months before reaching its ultimate resolution."
At Liberty Capital, revenue increased 1% to and AOIBDA losses rose by $63 million in the period. Starz Media continued to drag on results, with revenue down 6.7% and AOIBDA declining from a positive $17 million in the second quarter of 2009 to a negative $54 million in the most recent period. A significant portion of that AOIBDA deficit - about $42 million - was due to impairment costs tied to film production at its Overture Films unit. That cost should disappear in future quarters after Starz Media shut down Overture in July and reached a deal with Relativity Studios to handle distribution of its remaining three films. Albrecht said on the call that Starz continues to "evaluate strategic alternatives for the remainder of Starz Media's businesses."
Liberty said it is moving forward with the planned spin of its Liberty Capital and Liberty Starz tracking stocks - and converting its Liberty Interactive tracker into an asset-backed security. However, the company noted the plan may be delayed because of a lawsuit filed last week against one of its lenders - Bank of New York Mellon - over how the transaction will affect its lending agreements after the spin. Liberty CEO Greg Maffei said on the call that although the spin-offs will not be completed until the lawsuit is resolved, he anticipated they will be consummated during the first quarter of next year.

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