Now that Liberty Media says it will spin-off Starz into a separate company (after denying it just last month), speculation is turning to the possible step after that -- an acquisition of the premium TV network by one of several media powerhouses.
There are factors conspiring to encourage the its eventual purchase.
Starz, which operates movie and TV channels under the same name as well as the Encore movie channels, has been adding subscribers: Starz boasted about 20.7 million subscribers during the second quarter ended July 31, a 9% increase from the year prior, while Encore's subscription base increased 4% to about 34.2 million. And the Starz network has been trying to better compete against the larger HBO and Showtime by beefing up original programming with shows such as "Boss" and "Magic City."
But Starz may have trouble funding this kind of programming on a large scale when it's a standalone company, according to analysts. "While in the short-term Starz can stand on its own, more value can be created as part of a larger player," said Jeff Wlodarczak, analyst at Pivotal Research Group.
Starz also has exclusive rights to distribute movies from Walt Disney and Sony Pictures, but its ability to renew those deals has become less certain since new potential bidders such as Netflix have emerged, BTIG analyst Richard Greenfield wrote in a recent note to investors.
There are at least a few media giants that could be eager to help Starz grow as part of their portfolios. The question is which ones could actually pull off a deal.
Comcast is the most likely acquirer, according to Mr. Wlodarczak, because it could let the NBC Universal parent to better take advantage of its Universal Studios content, currently wrapped up in a deal with Time Warner 's HBO.
For any player whose business depends on retransmission agreements -- like Comcast, owner of the country's largest cable-TV service -- Starz could also give leverage in renewal negotiations, Mr. Wlodarczak added.
NBC Universal's TV production capabilities, meanwhile, could help Starz expand its original programming, Mr. Greenfield has suggested.
Like Comcast and its Universal Studios, News Corp. could use Starz for its Twentieth Century Fox movies.
The company is a big fan of businesses that collect revenue partly from consumers instead of depending entirely on advertising. "News Corp is also quite focused on building subscription-driven assets, with its subscription focus increasing following the publishing split," Mr. Greenfield said.
Viacom, which owns the movie channel Epix with MGM and Lionsgate, may look to Starz as a compliment.
Viacom makes the most sense as a potential acquirer, Janney Capital Markets analyst Tony Wible said. "If you combine Starz with Epix you get close to competing with HBO on content," he said. "Epix also needs to boost its carriage and this can be one way to do that ."
Time Warner would become the king of pay-TV if it purchased Starz. And Starz CEO Chris Albrecht knows the ins and outs of Time Warner after working at HBO for 22 years. Then again, Time Warner eventually ousted Mr. Albrecht after a fight in a Las Vegas parking lot.
More importantly, analysts said Time Warner may lay low in an acquisition due to some possible anti-trust issues. HBO and Starz together would have access to over two-thirds of movie studios' content, according to estimates.
And adding Starz content wouldn't necessarily bring in more subscribers for HBO, Mr. Wible said, making an acquisition less appealing.
Netflix has been pegged as a possible buyer as the streaming giant works to break further into original content. But it's probably a long shot.
Starz could give Netflix more original programming and some exclusivity, which becomes increasingly important as the possibility looms that Netflix's exclusive pact with Epix may not be renewed, Mr. Wible said.
Netflix might not have enough cash, however, to finance such a deal, Mr. Wible said.
Netflix and Starz also have a rocky history. Starz pulled its content from Netflix in February after declining to renew its streaming deal and previously pulled Sony movies from Netflix because of the terms of its contract with Sony, which stipulated a cap on the number of subscribers who can watch online.
"This is a big stretch," Mr. Wlodarczak said. "Netflix has a love/hate relationship with the distributors. If Netflix were to buy Starz it's likely several cable companies would look to exit Starz."