Starz Q2 Earnings Lower, Despite Revenue Gains

Costs Higher for Production, Interest
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Starz increased revenue and subscribers in the second quarter but higher production costs and interest expenses pushed net income lower.
Net income fell to $63.9 million, or 52 cents, a share from $68.7 million, or 57 a share, a year ago.

Revenue rose 29% to $517 million.

Subscriptions to Starz increased by 5% to 21.8 million and subscriptions to Encore increased 3% to 35.1 million since June 30, 2012, the company said.

"Starz delivered solid operational and financial performance in the second quarter.  We achieved a new all-time subscriber high at Starz with nearly 22 million subscribers.  We are also very pleased with the new, multi-year multi-platform distribution agreement with Time Warner Cable," Starz CEO Chris Albrecht said in a statement. “We are well positioned to continue momentum with our original programming heading into 2014 where five series are now scheduled to air on our flagship network

At Starz Networks, contractual terms under affiliation agreements with two distributors resulted in a one-time recognition of $18.6 million of previously deferred revenue. The  revenue led to higher operating income at Starz Networks, but was offset by increased advertising and market costs as the company launched two original series, compared to one a year ago.

Production and acquisition costs rose to $113.3 million from $39.4 million a year ago.