Starz CEO Jeff Hirsch said the company has exited its output deal with Universal as it revisits content costs a year into its run as a standalone.

“Today, we are announcing that we have exited our Pay 2 agreement with Universal. The Universal titles, which we originally planned to air through calendar 28, are incredibly popular and bring with them tremendous box office strength,” he said on a call after earnings, noting that due to high subscriber overlap between Amazon and Starz, “these titles are heavily watched before they come to us in the Pay 2 window.”

Universal splits its pay-1 licensing deal between Amazon and Peacock.

“This unique dynamic with Amazon has resulted in lower viewership than we originally projected. In order to replace the revenue component of the Pay 2, we will reinvest and acquire high-performing titles at superior economics. We are thankful to our partners at Universal for working with us to find a mutually beneficial solution,” Hirsch said.

Starz wants to hit a 20% margin target, which, Hirsch said, requires “right-sizing” the content cost structure of the business. The Universal agreement moves that goal forward a year to the back half of 2027 instead of the end of 2028.

CFO Scott MacDonald said the company will record a restructuring charge (not specified) for the current second quarter for exiting the deal. The revised terms “meaningfully improve our cash payment obligations, creating a significant reduction in cash content spend beginning in 2027,” he said.

Starz reported a $139 million charge in the first quarter as part of efforts to streamline content costs.

Hirsch also weighed in on deals. He’s discussed M&A in the past but was a bit more explicit on the call today.

“We continue to see two paths for value creation for the STARZ business. First, our focus has been growing the core business to achieve the 20% margin guide. Second, we believe there is an additional path to growth through potential M&A opportunities,” Hirsch said.

“Our approach to M&A remains disciplined. Any strategic initiative must be complementary and additive to our core audience, must fit within an acceptable leverage parameter, and create clear and identifiable value for our shareholders. But given the strength and the profitability of our core business, we do not need M&A to maximize shareholder value,” he added.

Starz split from Lionsgate a year ago with both now standalone public companies. Merger speculation has swirled around both.