STARZ's Owned-Content Pivot Gains Traction as OTT Returns to Growth
The Quarter: OTT Inflection
STARZ ended the second quarter with a rare combination: OTT revenue growing sequentially and year-over-year, while subscribers and ARPU both improved. CEO Jeffrey Hirsch opened the call with a familiar refrain—momentum across the business—but backed it with numbers. The content portfolio delivered the second-highest engagement quarter in company history, and the season premiere of Raising Kanan and the launch of Fightland drove that engagement. As Hirsch noted, “Fightland premiered as STARZ's second best-rated new IP launch of all time” — Jeffrey Hirsch, President and CEO · 2026-08-07, a clear signal that the owned-content strategy is resonating with the core audience. The company also executed a price increase in April without significant churn, a testament to pricing power in a competitive streaming landscape.
The financials underpin the narrative. CFO Scott MacDonald reported “Total revenue in the second quarter was $308 million. OTT revenue was $221 million, growing year-over-year for the first time since the fourth quarter of 2024” — Scott MacDonald, Chief Financial Officer · 2026-08-07—a milestone after four quarters of declines. Management was careful to note a $3 million Canadian-related headwind, but the underlying strength was evident. This is the first time in six quarters that OTT revenue has grown on a y/y basis, a key inflection point for the company's broader turnaround.
Prior quarters had already hinted at the improvement. In the May 2026 call, Alison Hoffman had observed, “we have seen churn reach an all-time low in our business” — Alison Hoffman, President of Starz · 2026-05-08, and that trend clearly persisted through the second quarter as the rate increase flowed through without a subscriber retreat.
Owned Content: The Fightland Model
The strategic centerpiece of the quarter was the premiere of Fightland, the company's first wholly owned original. Beyond the strong premiere, the economics are the story: Hirsch noted the show costs about $2.5 million per episode less than typical licensed content, while offering the same volume of programming. More importantly, the show is designed to cross-pollinate with the Power Universe. Alison Hoffman explained, “we see a really strong overlap with the Power Universe with Kanan, which was intentional” — Alison Hoffman, President of STARZ Networks · 2026-08-07, leading to win-backs and lower churn.
This ownership model is part of a longer-term strategy that management has been describing for over a year. In the February 2026 call, Hirsch outlined, “we are well on our way to executing against getting to that 20% margin” — Jeffrey Hirsch, President and CEO · 2026-02-27, and the roadmap relied on de-aging the slate through owned IP. The recent Netflix licensing deal for the original Power series may appear to dilute the exclusivity, but Hoffman framed it as a discovery engine: "it creates an opportunity for us to introduce the franchise to new audiences." The company retains exclusive rights to all new installments, and the second-window syndication is a deliberate lever to monetize maturing titles.
The cost discipline is evident in the Universal Pay-2 exit, which freed up capital and removed low-performing library content. Management reiterated that the $147 million restructuring charge was the last of its magnitude, and the company is now reinvesting savings into higher-engagement owned and licensed titles.
Free Cash Flow and Deleveraging
The quarter's most tangible proof point was the free cash flow inflection. After a seasonally weak Q1, Q2 delivered positive unlevered free cash flow of $66 million year-to-date, with management raising guidance to the mid-to-upper end of the $80–$120 million range. Scott MacDonald put it plainly:
The free cash flow inflection we've guided to all year is materializing, and we are raising our unlevered free cash flow outlook to the mid- to upper-end of our previously provided $80 million to $120 million range.
The metric Free Cash Flow (less SBC) reached $66M in Q2, yoy +191%, demonstrating that the earlier negative figure was purely a timing issue. Management expects full-year cash content spend to come in below $600 million, a further decline from prior years, and sees a major inflection in 2029 when the final Universal payments are made. The company also announced a $100 million increase to its credit facilities—$67 million term loan increase and $33 million revolver—driven by the desire to refinance higher-cost programming notes. Importantly, CEO Hirsch noted that even after this incremental debt, year-end leverage is projected at ~2.7x, with the path to 2.5x arriving sooner than originally planned.
Distribution and Strategic Optionality
On the distribution front, STARZ added two notable partnerships. The OTT revenue growth is supported by a new Peacock add-on deal, giving access to 48 million subscribers, and a Crunchyroll bundle on Prime Video. Hirsch has long positioned STARZ as a complementary service that thrives on top of broad-based streamers, and the recent Warner Bros.–Paramount consolidation is seen as another potential distribution outlet. Management remains disciplined on M&A, reiterating that any deal must fit within the leverage framework and accelerate the organic strategy. The customer acquisition economics are improving—Hirsch highlighted that Fightland is acquiring subscribers at a cost of ~$6 vs. the historical ~$2–$3, but with better lifetime value.
Prior calls had already laid the groundwork for this expansion. In February 2026, Hoffman noted, “bundling is really a focus for us” — Alison Hoffman, President · 2026-02-27, and that focus is now paying dividends with two new partners in a single quarter.
The stock has responded to the narrative—up 145% since separation, with a recent 90-day gain of 88.5% and a modest drawdown from its July peak. The market is clearly rewarding the inflection in OTT revenue and free cash flow, even as the company keeps a cautious eye on leverage and content spend.