By Lillian Rizzo 

Comcast Corp. and Lions Gate Entertainment Corp., the owner of premium cable channel Starz, reached a new distributor agreement for the network following months of tense negotiations.

As part of the deal, Starz and its sister channel Encore will remain in Comcast premium channel packages for the foreseeable future before being transitioned to be sold individually, or "a la carte." That means the channels have the potential to reach more homes than they would as a stand-alone offering.

In return, Lions Gate agreed to license its television and film content to Comcast's streaming platform, Peacock, which launches next April.

Peacock will have original content as well as NBC staples including "The Office." Comcast recently said it plans to spend about $2 billion on Peacock, and the streaming service will rely heavily on advertising.

The newly constructed deal also includes an outlet for Comcast's NBCUniversal, which will begin to license its content to Starz in the U.S., as well as on its international streaming service, STARZPLAY.

In recent months, Comcast began alerting its cable customers that the Starz and Encore channels would be dropped from premium channel packages. The threat of a blackout caused an outcry from customers, as well as a social-media campaign by rapper 50 Cent, star of the popular Starz drama "Power." The rapper questioned Comcast's diversity standards, since "Power" primarily has an African American cast. Starz will stay in the package through the end of the final season of "Power," according to people familiar with the deal.

Terms of the latest deal haven't been disclosed. After "Power" ends, Comcast subscribers can purchase the channels a la carte, or pay for Starz's direct-to-consumer app for $8.99 a month.

The loss of the Comcast deal, which was estimated to be worth $225 million, would have been a major blow to Lions Gate, especially after its deal with AT&T Inc.'s DirecTV unit was cut earlier this year. Though the a la carte transition likely means less favorable financial terms for Lions Gate down the road, the channels' inclusion in the premium package in the short term will soften the blow.

In a November earnings call, Lions Gate CEO Jon Feltheimer said the company was continuing to shift toward deriving most of its revenue from a la carte offerings, which made up 60% of the company's revenue, compared with 40% three years ago.

Lions Gate, which took on new debt earlier this year, has been considered an acquisition target as there are few independent movie studios. The company has also flirted with offloading Starz and Encore, The Wall Street Journal reported.

Write to Lillian Rizzo at Lillian.Rizzo@wsj.com

 

(END) Dow Jones Newswires

December 23, 2019 15:55 ET (20:55 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.
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