Starz CEO On Developing Replacements For Shows As They Become More Expensive After 3-4 Seasons

With Starz set to become a pure play standalone public company by year end, CEO Jeff Hirsch is out talking up its strong points and how it competes in a crowded streaming landscape — price increases,  bundling, and most importantly, he said, containing content costs with a slate of new shows in development as later season series get costly.

“When seasons go from one to two to three to four [seasons], three to four is where the cost really pops because most of the actors get bigger raises, and you have to really manage that. So, you have to have in your portfolio of development shows that can actually replace shows as they get into later seasons,” he said at a Deutsche Bank media conference today, providing one of the most blunt assessments of a practice introduced by Netflix and embraced by other streamers where shows produced under the Cost Plus model are often canceled after 3-4 seasons when they get too expensive.

“As you turn the slate over to go from season four and five economics, to season one economics, you can pull a ton of cost out of the business. What you have to do is map out each of those shows and … what the curve looks like, and know where you have to pop a new show on to bring that cost down. And so we’ve got a pretty good map of what that looks like. Because again, we focus on those two core demos, we’ve been able to manufacture hits for those demos.”

Starz focuses on underserved demos and women.   

“And so when you bring a BMF on — you know, BMF will be probably one of our two biggest shows, okay, it looks a lot like Power, it cost half as much, right?”

And “You look at the [Power] map and say, ‘Okay, if I take one of those characters out and spin one of those out, I can bring that on to replace the Power show at half the cost.’ Now I’m putting a lot of money right to the bottom line. And I’m really not losing anything in terms of acquisition costs and subscriber viewership, because we know what those demos want. And we know how to line those up. And so that’s really the core of getting to that 20% [margin] — turning that slate over with fresh content to drive the business.”

“If you think about our slate of seven to 10 shows,” he said, “It’s a lot like the salary cap management in the NFL … if you have a special teams player who’s coming off his rookie deal and about to become a veteran … You can go back and draft and pick a rookie, bring them on with a rookie deal and manage costs. Managing a content portfolio of originals is kind of the same thing.”

The Power universe, which originated with Mark Canton, has spawned three spinoffs including Power Book II: Ghost, Power Book III: Raising Kanan and Power Book IV: Force. Yesterday, Lionsgagte Television signed a new deal with producer, showrunner and writer Gary Lennon to work on development opportunities to expand the Power Universe. Lennon has served as showrunner and executive producer for Season 2 of the Power spinoff series Power Book IV: Force and will return for the third installment of the Chicago-based crime thriller currently in production.

The Power series, which debuted in 2014, was created and produced by Courtney A. Kemp in collaboration with Curtis “50 Cent” Jackson, who also executive produced BMF, which was just renewed for a fourth season at Starz ahead of its Season 3 premiere March 1.

Under the Cost Plus model, networks and streamers pay upfront a show’s production costs plus a premium, typically about 30%+ of the costs. Then there are bumps/bonuses after each season for talent. While the payments are relatively modest after Season 1 and a little bigger after Season 2, they usually escalate after Season 3 as the studios start to pay off the shows’ back-end. Production costs also increase with each season.