Starz Defies Revenue Drop: Strategic Shifts Propel Profit Outlook Amidst Evolving Entertainment Landscape

Second Quarter Financial Performance: A Mixed Picture

In the second quarter of 2026, Starz reported a 4% dip in overall revenue, reaching $307.9 million. However, a silver lining emerged in the streaming division, which marked its first year-over-year revenue increase in a year and a half. This positive trend in streaming, albeit slight, has bolstered the company's confidence, leading to an upward revision of its adjusted operating income before depreciation and amortization (OIBDA) growth forecast for the full year 2026 from low single-digits to mid single-digits.

Streaming Revenue Sees Growth, Linear TV Declines

Delving into the specifics, Starz's over-the-top (OTT) revenue reached $221.3 million, a marginal increase from the previous year. Factoring out revenue from Canadian operations (which transitioned to a content-licensing model), streaming revenue would have seen a 1.4% increase. Conversely, linear TV and other revenue streams experienced a notable 14% decline, falling to $86.6 million, primarily due to the ongoing reduction in traditional linear television households.

Impact of Universal Output Deal Termination on Net Loss

The company's net loss significantly expanded to $189.4 million, a stark contrast to the $42.5 million loss in Q2 2025. A major contributor to this was a $147 million restructuring charge related to the early termination of its film output agreement with Universal Pictures. Starz executives indicated this substantial charge is expected to be a one-off event, positioning the company for reduced restructuring activities in the future and anticipating significant free cash flow growth by 2029.

Key Content Driving Audience Engagement and Future Prospects

During the quarter, Starz saw strong performance from titles such as the finale of “Outlander,” the premiere of “Power Book III: Raising Kanan” Season 5, and the psychological thriller “The Housemaid.” CEO Jeff Hirsch highlighted the impressive audience growth of “Raising Kanan” and the successful launch of “Fightland,” a boxing crime drama, as evidence of the strength of Starz’s content portfolio and ownership strategy. These successes contribute to the company’s optimistic outlook for the latter half of 2026.

Strategic Partnerships and Upcoming Programming

Starz has also actively pursued strategic partnerships, including a new collaboration with NBCUniversal’s Peacock to offer Starz as an add-on subscription, and a discounted bundle with Crunchyroll on Prime Video. Looking ahead, the company’s programming slate includes the return of “P-Valley,” further expansion of the “Outlander” universe with “Blood of My Blood” Season 2, and the upcoming biopic “Michael.” Additionally, new original content like the “Untitled Black Rodeo Show” is in development, signaling a continued investment in owned intellectual property.

Adjusted OIBDA and Cash Flow Projections

Adjusted OIBDA for Q2 stood at $60 million, exceeding expectations. While Q3 is projected to see lower OIBDA due to higher programming amortization from new and returning shows, Q4 is expected to rebound strongly. The company anticipates full-year 2026 cash content spend to be below $600 million following the Universal agreement's termination. Despite negative unlevered and equity free cash flow in Q2 due to content payment timing, these figures were still better than expected, and Starz secured commitments to increase its credit facilities, aiming for a stable adjusted OIBDA leverage ratio by the end of 2026.