Starz to Increase Brand Presence with AT&T Carriage Deal

On August 30, AT&T announced a multi-year content carriage deal with Starz, allowing AT&T to offer STARZ content to its customers. This content deal includes STARZ and STARZ ENCORE premium linear and HD channels, On-Demand, HD On-Demand and online services. While the duration of deal and price tag remains undisclosed, Starz is looking to increase its brand awareness with users through AT&T’s consumer reach on its DirecTV, AT&T TV and U-verse cable platforms. AT&T, on the other hand, is looking to increase content output through leveraging Starz’s content offering.

“Our customers want more choice and value in addition to compelling entertainment in our channel offerings. We’re pleased to deliver that combination in this new agreement with Starz,” said Daniel York, chief content officer, AT&T Communications.

According to AT&T 2019 quarterly earnings, AT&T has 21.6 million premium TV subscribers and 1.3 million DirecTV Now Subscribers. The expanded Starz content further strengthens Starz’s already sizeable user reach. Lionsgate’s fiscal first quarter 2020 reports 26.5 million total global subscribers, with 24.4 million domestic subscribers. Starz’s over-the-top (OTT) service saw an increase in growth over the quarter, totalling 4.4 million subscribers.

This new deal works as a great avenue for Starz to expand its content strategy, but it could potentially dilute its core brand image amongst AT&T’s audience. With its placement on AT&T services, users are more likely to make a connection and brand recall with AT&T first, then Starz. AT&T users will form a conscious habit of needing to first access AT&T’s services in order to watch Starz content.

The imminent launch of HBO Max, owned by WarnerMedia Entertainment, a division of AT&T's WarnerMedia, will also result in some movements for the consumer. Existing pay-TV and OTT subscribers will begin to evaluate which TV services yield better value and relevance to them as consumers. AT&T’s second quarter earnings reveals a net loss of 778,000 pay-TV subscribers and, more troubling for the long-term future of the video business, 168,000 DirectTV Now subscribers. What this means for both media giants is that more subscribers could potentially migrate to HBO Max.

The success of the Starz’s original American Gods underlines the challenges facing the US network. American Gods has been successful both in the US and internationally, albeit through its rebranding as an Amazon Original available through Amazon Prime Video. Because of this, the Starz brand struggles to gain recognition from a global audience. Between Q2 2018 and Q2 2019 (source: MIDiA Research Consumer Survey data) 35% and 40% of US respondents like Starz as a TV network respectively. However, over the same period 72% of German respondents, 59% of UK and 54% of Spain did not know Starz as a TV network. Chief Operating Officer of Starz, Jeffrey Hirsch, said “Starz is pleased to have found a mutually beneficial way to extend our relationship over the next several years to give millions of AT&T subscribers access to our acclaimed premium original content and vast library of blockbuster films”. This deal will continue to see Starz’s brand recognition grow amongst its US audience; however, the TV network needs to also start strengthening its brand value with its international audience if it is to maintain its value proposition in future carriage deals with the pay-TV operators.