March 22, Facing Headwinds

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1 March 22, 2016 Starz Facing Headwinds Industry View Cautious Stock Rating Equal-weight Price Target $32.00 MORGAN STANLEY & CO. LLC Ryan Fiftal Benjamin Swinburne, CFA James J Luan James.Luan@morganstanley.com Thomas Yeh Thomas.Yeh@morganstanley.com The fundamental revenue growth outlook for Starz standalone has weakened in the last several quarters, and we are lowering our estimates and move well below consensus for 16 and 17. This top line erosion leave us EW, despite YTD multiple compression and an M&A bull case that remains substantial. Starz relative lack of scale heightens risk from consolidation downstream, particularly T/DTV: Given its relatively limited scale, we believe Starz generally has less bargaining power with MVPDs and is therefore more exposed to rate / pricing risk vs. larger cable network peers. Starz is particularly vulnerable to T/DTV, which is on the hunt for post-merger cost synergies, for two reasons: (1) Starz over-indexes with both T and DTV (see Exhibit 2), 2 with the combined entity driving one-third of Starz Networks revenue and (2) Starz has recently expanded beyond traditional MVPDs to new digital distributors like Amazon, potentially creating some degree of channel conflict or perceived loss of exclusivity by the MVPDs. We now forecast modest Networks revenue declines in 2016 and 2017 (following YoY revenue declines in 4Q) from a modestly negative affiliate renewal cycle. But that being said, we also believe premium networks like Starz are less likely to be outright dropped than linear cable networks because (unlike basic cable networks) premiums generate direct, often high-margin revenues for MVPDs. Therefore, while the base case outlook may be tougher vs. cable net peers, we note that we also see less negative extreme / tail downside risk from MVPD renewals. We now assume modest rate pressure due to downstream distributor consolidation, putting us meaningfully below consensus: We are reducing our revenue growth forecast from roughly flat in 2016/2017 to a down ~2% CAGR, now explicitly assuming that rate step-downs at consolidating distributors (most notably T/DTV) lead to a modest (~5%) rate card reduction in future MVPD renewals. This, combined with near-term revenue pressure (4Q networks revenue decelerated for the fourth consecutive quarter and turned negative YoY) and modestly higher opex leads us to reduce our 17E/ 18E EBITDA by 13-14%, putting us ~5% and ~9% below consensus for revenue and EBITDA, respectively in However, we continue to see potential M&A upside: Much of the downside risk to Starz relates to its relative lack of scale, and therefore we continue to believe Starz could benefit from industry consolidation, primarily related to Lionsgate see "LGF Resuming Merger Talks with STRZA" but we also note that recent press reports cited interest from CBS. (Neither CBS nor Starz have commented on these reports and we are not aware of any potential discussions.) Even with our below-consensus forecast, we see stand- Starz ( STRZA.O, STRZA US ) Media / United States of America Stock Rating Equal-weight Industry View Cautious Price target $32.00 Shr price, close (Mar 21, 2016) $27.82 Mkt cap, curr (mm) $3, Week Range $ Fiscal Year Ending 12/14 12/15e 12/16e 12/17e ModelWare EPS ($) Prior ModelWare EPS ($) Consensus EPS ($) EPS ($)** Prior EPS ($)** Unless otherwise noted, all metrics are based on Morgan Stanley ModelWare framework = Consensus data is provided by Thomson Reuters Estimates ** = Based on consensus methodology e = Morgan Stanley Research estimates Morgan Stanley does and seeks to do business with companies covered in Morgan Stanley Research. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of Morgan Stanley Research. Investors should consider Morgan Stanley Research as only a single factor in making their investment decision. For analyst certification and other important disclosures, refer to the Disclosure Section, located at the end of this report. 1

2 alone (ex-m&a) value of ~$27 (10-11x 2020E FCF/share looking through Disney cost step-downs and Sony cost step-ups discounted back to YE16). In addition, we estimate a combination with either a large media or non-us media company (see "Subscriber Momentum + M&A Potential") could generate ~$2B of total NPV synergies (or $20 per STRZA share). In a "merger of equals" scenario, we believe roughly half of the synergies would accrue to STRZA holders, potentially creating $10 of upside for the stock. Our new $32 PT ($35 prior) represents the midpoint of the stand-alone and "merger of equals" scenarios (see Exhibit 1 for further detail). 2

3 Risk Reward Risk-Reward Snapshot: Starz (STRZA, $27.82, EW, PT $32) Price Target $32 Bull $40 ~10x EV/fwd base case EBITDA ~11.5x P/adj. base case fwd FCF/sh Base $32 ~9.5x EV/fwd base case EBITDA ~10.5x P/fwd adj. base case FCF/sh Our $32 PT implies ~11x 2020E base case FCF/shr (looking through Disney cost roll-offs and Sony cost step-ups) discounted back to YE16 at 10% cost of equity in addition to $5 of M&A premium. See Exhibit 1 for further discussion. Starz participates in industry consolidation, ~65% of synergies accrue to STRZA holders. Starz' Chairman Greg Maffei has publicly stated in the past that a large organization with a broader distribution and potentially greater content could do more with Starz. However, there is a wide range of potential outcomes. We note that we have no knowledge of any deals. See our note Subscriber Momentum & M&A Potential for synergy discussion. Top-line growth decelerates on affiliate fee step-downs in 2016, while Starz ramps original programming in Stock holds some M&A premium. We expect Networks rev declines ~1% p.a. in '16E-17E as it navigates through a modestly negative affiliate renewal cycle. Starz grows original programming hours to in 2017, with ~$275M in annualized original programming cash spend in '18. Total Starz subscribers finish flat YoY at YE16, and decline 4% in YE17 as Disney content rolls off. Near-term original programming investment ramps significantly, finishing at ~$220M in 2016 and growing ~$25M p.a. In 2017, DIS content roll-off drives double-digit rebound in the Networks EBITDA. Repurchases accelerate to $325M in Investment Thesis Compared to media peers, Starz has less exposure to areas of concern. First, it does not rely on ad revs. Second, as a premium net, Starz is already sold on an a la carte basis and could ultimately be offered alongside 'skinny video' packages (or even stand-alone). Starz' relative lack of scale could make it a potential beneficiary of industry consolidation Starz' top line and EBITDA growth at the lower end of media, though it trades at a mid-range EBITDA multiple, suggesting the market is already pricing in some M&A upside Given Liberty's influence we expect disciplined capital allocation, with cash flows likely used for 10-15% p.a. equity shrink. Key Value Drivers and Potential Catalysts Original programming success could drive subscriber and top-line growth. If HBO successfully exploits the OTT opportunity, we believe this would lift the perceived value of premium networks more broadly, potentially driving a re-rating or strategic interest Accelerated share repurchases Starz is acquired by a large media company or non-us media company Risks to Achieving Price Target New distribution agreements are struck with rate reductions (similar to two renewals in 4Q12) or a distributor drops Starz, potentially in favor of EPIX. Declines in variable subs drive volume headwinds. Starz ramps original content spend faster than expected, pressuring margins. Pressure on affiliate revenues as Disney film output rolls off Pressure on affiliate revenues from cable consolidation Bear $22 ~8.5x EV/fwd bear case EBITDA ~8.5x P/adj fwd bear case FCF/sh Sub decline when Disney rolls off in '17, distribution fees decelerate, no M&A premium. Starz subs decline 1% in 2016 and 7% in 2017, while variable-fee subs decline ~8% in 2017 as DIS content rolls off. Distribution fee growth declines ~1% p.a. '16- '17, leading to LSD % Networks revenue decline in '16, followed by down MSD % in '17. Starz repurchases shares roughly ~$100M lower per year '16-'17E versus the base case. 3

4 Starz Exhibits Exhibit 1: Valuation Methodology and Bull / Bear Scenario Description 4

5 Exhibit 2: Based on our 2015 Online Video survey, Starz largely overindexes AT&T and DTV among the major MVPDs, with 41% and 26% of the respondents, respectively, subscribing to Starz Source: Alphaw ise, Morgan Stanley Research 5

6 Exhibit 3: Starz Prior vs. Current estimates Exhibit 4: We are ~8-9% below consensus in 2016 and 2017 EBITDA. 1Q16 MS vs. Consensus MSE Cons. MSvCons Revenue $419.7 $ % EBITDA $122.0 $ % Margin 29.1% 30.5% (139bp) EPS $0.64 $0.68-6% MS vs. Consensus MSE Cons. MSvCons MSE Cons. MSvCons MSE Cons. MSvCons Revenue $1,622.4 $1, % $1,633.0 $1, % $1,664.4 $1, % EBITDA $392.5 $ % $443.6 $ % $467.8 $ % Margin 24.2% 25.0% (76bp) 27.2% 28.5% (135bp) 28.1% 33.3% (519bp) EPS $2.05 $ % $2.57 $2.79-8% $2.98 $ %, Note: Consensus is Thomson Reuters Mean Estimate 6

7 Financials Exhibit 5: Starz Fair Market Value 7

8 Exhibit 6: Starz Multiples 8

9 Exhibit 7: Starz Revenues and EBITDA, Annual ($ in Millions) E 2017E 2018E 2019E 2020E Starz Networks Networks Revenue $1,312.0 $1,324.4 $1,306.6 $1,297.4 $1,315.0 $1,332.8 $1,350.8 % growth 2.6% 0.9% -1.3% -0.7% 1.4% 1.4% 1.3% Operating Expenses % growth -4.9% 9.2% 0.2% -10.6% -1.5% 6.8% 2.9% Selling, General & Administrative Expenses % growth 2.9% 11.9% 3.2% 4.4% 2.3% 2.3% 2.3% Networks EBITDA $496.4 $428.6 $402.4 $454.7 $476.0 $447.6 $441.6 % growth 8.8% -13.7% -6.1% 13.0% 4.7% -6.0% -1.4% % EBITDA Margin 37.8% 32.4% 30.8% 35.0% 36.2% 33.6% 32.7% Starz Distribution Distribution Revenue $321.5 $353.8 $318.6 $338.3 $352.1 $363.8 $373.0 % growth -28.5% 10.0% -10.0% 6.2% 4.1% 3.3% 2.5% Total Operating Expenses $242.1 $254.8 $233.8 $250.3 $259.9 $267.7 $274.4 % growth -29.9% 5.2% -8.2% 7.0% 3.8% 3.0% 2.5% Selling, General & Administrative Expenses $71.9 $62.9 $59.8 $63.3 $64.0 $65.3 $66.6 % growth -10.2% -12.5% -5.0% 6.0% 1.0% 2.0% 2.0% Distribution EBITDA $7.5 $36.1 $25.0 $24.7 $28.3 $30.9 $32.1 % growth -68.7% 381.3% -30.7% -1.4% 14.6% 9.2% 3.9% % EBITDA Margin 2.3% 10.2% 7.9% 7.3% 8.0% 8.5% 8.6% Starz Animation Animation Revenue $31.7 $24.6 $0.0 $0.0 $0.0 $0.0 $0.0 % growth -2.4% -22.4% % Operating Expenses % growth -3.3% -23.1% % Selling, General & Administrative Expenses % growth 0.0% -32.7% % Animation EBITDA ($2.3) ($1.5) $0.0 $0.0 $0.0 $0.0 $0.0 % growth -13.4% -34.8% % % EBITDA Margin -7.3% -6.1% 0.0% Corporate & Other Revenue ($1.3) ($2.7) ($2.7) ($2.7) ($2.7) ($2.7) ($2.7) Corporate & Other Operating Expenses $1.3 $1.8 $1.8 $1.8 $1.8 $1.8 $1.8 Corporate & Other Selling, General & Admin. Expen ($2.7) ($2.9) ($2.9) ($2.9) ($2.9) ($2.9) ($2.9) Corporate and Other EBITDA 0.1 (1.6) (1.6) (1.6) (1.6) (1.6) (1.6) % EBITDA Margin NM NM NM NM NM NM NM Consolidated STARZ STARZ REVENUES $1,663.9 $1,700.1 $1,622.4 $1,633.0 $1,664.4 $1,693.9 $1,721.1 % growth -6.4% 2.2% -4.6% 0.7% 1.9% 1.8% 1.6% Group Operating Expenses GroupSG&A (excl. SBC) STARZ Adj. EBITDA $501.7 $461.6 $425.8 $477.8 $502.7 $476.9 $472.1 % growth 9.5% -8.0% -7.8% 12.2% 5.2% -5.1% -1.0% % EBITDA Margin 30.2% 27.2% 26.2% 29.3% 30.2% 28.2% 27.4% check Stock Comp Expense ($30.6) ($32.5) ($33.3) ($34.1) ($34.8) ($35.5) ($36.2) STARZ EBITDA $471.1 $429.1 $392.5 $443.6 $467.8 $441.4 $435.8 % margin 28.3% 25.2% 24.2% 27.2% 28.1% 26.1% 25.3% Impairment of goodwill & other assets $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 Depreciation & Amortization ($19.4) ($19.0) ($19.6) ($20.0) ($20.5) ($21.1) ($21.6) STARZ EBIT $451.7 $410.1 $372.9 $423.6 $447.3 $420.3 $414.3 % margin 27.1% 24.1% 23.0% 25.9% 26.9% 24.8% 24.1% 9

10 Exhibit 8: Starz Revenues and EBITDA, Quarterly E ($ in Millions) 1Q 2Q 3Q 4Q 1QE 2QE 3QE 4QE Starz Networks Networks Revenue $334.0 $333.3 $329.3 $ $330.2 $329.8 $325.5 $ % growth 3.1% 1.6% 0.6% -1.4% -1.1% -1.0% -1.1% -2.1% Operating Expenses % growth -6.4% -2.7% 2.3% 50.7% 0.5% 3.6% 0.5% -3.1% Selling, General & Administrative Expe % growth 9.3% 21.0% -8.4% 30.2% 4.6% 10.3% 3.8% -4.3% Networks EBITDA % growth 13.8% 0.3% 2.9% -57.8% -5.5% -12.0% -5.8% 3.3% % EBITDA Margin 38.8% 36.7% 34.3% 19.4% 37.1% 32.6% 32.7% 20.5% Starz Distribution Distribution Revenue $109.7 $78.4 $65.6 $ $89.8 $80.9 $65.1 $ % growth 25.7% 4.4% -10.7% 16.9% -18.1% 3.2% -0.8% -17.3% Total Operating Expenses $67.4 $55.0 $46.9 $ % growth 24.3% 0.8% -11.4% 7.4% -0.9% -9.5% -5.3% -15.6% Selling, General & Administrative Ex % growth -23.1% -16.1% -15.9% 5.0% -5.0% -5.0% -5.0% -5.0% Distribution EBITDA $26.4 $2.0 $1.8 $5.9 - $7.9 $11.1 $4.6 $1.4 - % growth NM NM NM NM NM NM NM NM % EBITDA Margin 24.1% 2.6% 2.7% 5.9% 8.8% 13.7% 7.1% 1.7% Starz Animation Animation Revenue $7.3 $6.5 $9.3 $1.5 - $0.0 $0.0 $0.0 $0.0 - % growth -18.0% -9.7% 17.7% -80.5% Operating Expenses $0.0 $0.0 $0.0 $0.0 % growth -16.1% -5.5% 9.4% -80.5% % % % Selling, General & Administrative Expe % growth -50.0% 2.0% 0.0% % Animation EBITDA ($0.6) ($0.7) ($0.1) ($0.1) - $0.0 $0.0 $0.0 $0.0 - % growth NM NM NM 0.0% NM NM NM NM % EBITDA Margin -8.2% -10.8% -1.1% Corporate & Other Revenue ($0.3) ($0.5) ($0.1) ($1.8) - ($0.3) ($0.5) ($0.1) ($1.8) - Corporate & Other Operating Expenses $0.4 $0.4 $0.6 $0.4 - $0.4 $0.4 $0.6 $0.4 - Corporate & Other Selling, General & A ($0.7) ($0.8) ($0.6) ($0.8) - ($0.7) ($0.8) ($0.6) ($0.8) - Corporate and Other EBITDA ($0.0) ($0.1) ($0.1) ($1.4) ($0.0) ($0.1) ($0.1) ($1.4) % EBITDA Margin Consolidated STARZ STARZ REVENUES $450.7 $417.7 $404.1 $ $419.7 $410.2 $390.5 $ % growth 7.3% 1.9% -1.0% 0.5% -6.9% -1.8% -3.4% -6.0% Group Operating Expenses $218.6 $219.9 $212.0 $ GroupSG&A (excl. SBC) $70.5 $71.8 $67.5 $ STARZ Adj. EBITDA $155.5 $123.4 $114.7 $ $130.5 $118.5 $111.0 $ % growth 23.2% 5.1% 4.5% -54.1% -16.0% -4.0% -3.2% -3.4% % EBITDA Margin 34.5% 29.5% 28.4% 15.9% 31.1% 28.9% 28.4% 16.3% check Stock Comp Expense (8.3) (8.1) (8.1) (8.0) - (8.5) (8.3) (8.3) (8.2) - STARZ EBITDA $147.2 $115.3 $106.6 $ $122.0 $110.2 $102.7 $ % margin 32.7% 27.6% 26.4% 14.0% 29.1% 26.9% 26.3% 14.3% Impairment of goodwill & other assets Depreciation & Amortization (4.7) (4.8) (4.8) (4.7) - (4.9) (4.9) (4.9) (4.9) - STARZ EBIT $142.5 $110.5 $101.8 $ $117.1 $105.3 $97.8 $ % margin 31.6% 26.5% 25.2% 12.9% 27.9% 25.7% 25.1% 13.1% 10

11 Exhibit 9: Starz Subscriber Summary, Annual ($ Millions Except Per Data) E 2017E 2018E 2019E 2020E Subscriber Summary Encore Starz Total Variable Subs Total Fixed Subs Total Subscribers Growth % Encore -2.6% -5.3% 0.0% -0.2% 0.0% 0.1% 0.1% Starz 5.0% 1.3% 0.0% -4.0% -0.1% 0.0% 0.1% Total Variable Subs 3.0% -3.9% 0.1% -1.9% 0.2% 0.8% 0.8% Total Fixed Subs -1.4% -1.8% -0.1% -1.7% -0.2% -0.5% -0.4% Total Subscribers 0.4% -2.6% 0.0% -1.8% 0.0% 0.0% 0.1% Total US Pay TV Market (relinked 2/19/15) Cable Satellite Telco Other (0.6) (0.5) (0.4) (0.3) (0.2) (0.1) (0.1) Total U.S. Multichannel Subscribers Growth in U.S. Multichannel Subs 0.0% -0.3% -0.3% -0.4% -0.6% -1.1% -0.9% 11

12 Exhibit 10: Starz Networks Revenue Summary, annual Revenues Under Variable Rate Agreements E 2017E 2018E 2019E 2020E Encore Variable Rate Subscribers % of Pay TV subs (ex- CMCS & DISH) 22.2% 21.0% 21.0% 21.0% 21.2% 21.7% 22.1% Average Variable Rate Subscribers Total License Fees From Variable Rate Subscriber $191.3 $200.0 $185.0 $182.3 $185.2 $185.4 $185.3 Average License Fee/ Sub/ Month $1.22 $1.27 $1.22 $1.20 $1.22 $1.22 $1.21 % Change 3.5% 3.9% -4.3% -1.3% 1.9% -0.2% -0.5% Starz Variable Rate Subscribers % of Pay TV subs (ex- CMCS & DISH) 15.8% 15.6% 15.8% 15.3% 15.5% 15.9% 16.3% Average Variable Rate Subscribers Total License Fees From Variable Rate Subscriber $613.5 $602.1 $588.7 $571.7 $572.7 $576.4 $580.2 Average License Fee/ Sub/ Month $5.48 $5.39 $5.17 $5.11 $5.20 $5.19 $5.17 % Change 3.8% -1.6% -4.1% -1.3% 1.9% -0.2% -0.5% Total Variable Rate Subscribers Revenue from Variable Rate Agreements $804.8 $802.0 $773.8 $754.0 $757.9 $761.8 $765.5 Revenue from Netflix/ Online Providers Revenue Under Variable Rate Agreements $804.8 $802.0 $773.8 $754.0 $757.9 $761.8 $765.5 % Change 1.9% -0.3% -3.5% -2.6% 0.5% 0.5% 0.5% as % Total Revenues 61.3% 60.6% 59.2% 58.1% 57.6% 57.2% 56.7% Revenues per avg sub per month $2.95 $2.95 $2.91 $2.86 $2.90 $2.90 $2.89 % Change -5.5% 0.2% -1.6% -1.7% 1.4% 0.0% -0.3% Revenues Under Fixed Rate Agreements Total Fixed Rate Subscribers Encore Starz! Total Subscribers % of Total Starz Encore Subscribers 59.7% 60.3% 60.2% 60.3% 60.2% 59.9% 59.6% Average Subscribers License Fees from Comcast Deal $233.8 $240.8 $245.6 $250.6 $256.8 $263.2 $269.8 License Fees from Dish Network $127.2 $131.1 $133.7 $136.4 $139.8 $143.3 $146.8 Revenue from Netflix/ Online Providers License Fees from Other Fixed Rate Agreements Revenue Under Fixed Rate Agreements $507.2 $522.4 $532.8 $543.5 $557.0 $571.0 $585.2 % Change -0.1% 3.0% 2.0% 2.0% 2.5% 2.5% 2.5% as % Total Revenues 38.7% 39.4% 40.8% 41.9% 42.4% 42.8% 43.3% Revenues per sub per month $1.23 $1.28 $1.32 $1.36 $1.41 $1.45 $1.49 % Change 2.7% 4.6% 3.0% 2.9% 3.5% 2.8% 2.9% 12

13 Exhibit 11: Starz Networks Revenue Summary, quarterly Revenues Under Variable Rate Agreements E 1Q 2Q 3Q 4Q 1QE 2QE 3QE 4QE Encore Variable Rate Subscribers % of Pay TV subs (ex- CMCS & DISH) 22.5% 21.5% 21.0% 20.9% 21.0% 21.0% 21.0% 21.0% Average Variable Rate Subscribers Total License Fees From Variable Rate Subscriber $52.2 $50.4 $49.4 $ $46.0 $44.6 $47.6 $46.8 Average License Fee/ Sub/ Month $1.28 $1.26 $1.28 $1.25 $1.21 $1.17 $1.25 $1.23 % Change 4.5% 4.5% 4.5% 2.0% -6.0% -7.0% -2.0% -2.0% Avg. sub weighting (prior vs. current period) 50% 50% 50% 50% 50% 50% 50% 50% Starz Variable Rate Subscribers % of Pay TV subs (ex- CMCS & DISH) 14.4% 14.7% 16.9% 15.6% 15.7% 15.7% 15.7% 15.8% Average Variable Rate Subscribers Total License Fees From Variable Rate Subscriber $151.0 $151.9 $149.3 $ Average License Fee/ Sub/ Month $5.65 $5.73 $5.19 $5.07 $5.31 $5.32 $5.08 $4.97 % Change 4.6% 3.4% -5.1% -8.2% -6.0% -7.0% -2.0% -2.0% Avg. sub weighting (prior vs. current period) 20% 50% 50% 50% 50% 50% 50% 50% Total Variable Rate Subscribers Revenue from Variable Rate Agreements $203.3 $202.3 $198.7 $197.8 $196.8 $196.2 $192.3 $188.4 Revenue from Netflix/ Online Providers Revenue Under Variable Rate Agreements $203.3 $202.3 $198.7 $ $196.8 $196.2 $192.3 $188.4 % Change 2.2% 0.3% -0.2% -3.6% -3.2% -3.0% -3.2% -4.7% as % Total Revenues 60.9% 60.7% 60.3% 60.3% 59.6% 59.5% 59.1% 58.7% Revenues per avg sub per month $2.98 $3.04 $2.95 $2.92 $2.96 $2.95 $2.89 $2.83 % Change 0.5% 0.9% -1.5% -3.6% -0.8% -3.0% -1.8% -3.0% Revenues Under Fixed Rate Agreements Total Fixed Rate Subscribers Encore Starz! Total Subscribers % of Total Starz Encore Subscribers 61.1% 61.3% 58.8% 60.3% 60.2% 60.2% 60.1% 60.2% Average Subscribers License Fees from Comcast Deal License Fees from Dish Network Revenue from Netflix/ Online Providers License Fees from Other Fixed Rate Agreements Revenue Under Fixed Rate Agreements % Change 4.5% 3.5% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% as % Total Revenues 39.1% 39.3% 39.7% 39.7% 40.4% 40.5% 40.9% 41.3% 13

14 Exhibit 12: Starz Cost Summary, Annual Costs E 2017E 2018E 2019E 2020E Film Output Amortization Original Programming (Production Amortization) Total Amortization of Program Rights Other Programming Expenses Total Programming Expenses $600.6 $655.7 $656.6 $584.7 $575.1 $615.3 $633.1 % change -5.3% 9.2% 0.1% -11.0% -1.6% 7.0% 2.9% % of revs 45.8% 49.5% 50.3% 45.1% 43.7% 46.2% 46.9% Other Operating Expenses Total Operating Expenses % change -4.9% 9.2% 0.2% -10.6% -1.5% 6.8% 2.9% Sales and Marketing Expense General & Admin. Expense Total SG&A % change 2.9% 11.9% 3.2% 4.4% 2.3% 2.3% 2.3% Total Expenses $815.6 $895.8 $904.2 $842.7 $839.0 $885.2 $909.2 % change -3.1% 9.8% 0.9% -6.8% -0.4% 5.5% 2.7% Networks EBITDA EBITDA Margin 37.8% 32.4% 30.8% 35.0% 36.2% 33.6% 32.7% % change 13.4% -13.7% -6.1% 13.0% 4.7% -6.0% -1.4% % of revenues Sales and Marketing Expense 8.5% 9.6% 10.1% 10.7% 10.8% 11.0% 11.1% General & Admin. Expense 6.7% 7.2% 7.5% 7.7% 7.8% 7.8% 7.9% Other Operating Expense 1.2% 1.3% 1.4% 1.4% 1.4% 1.4% 1.4% Exhibit 13: Starz Cost Summary, Quarterly Costs E 1Q 2Q 3Q 4Q 1QE 2QE 3QE 4QE Film Output Amortization Original Programming (Production Amortization) Total Amortization Other Programming Expenses Total Programming Expenses % change -6.9% -2.5% 2.3% 51.2% 0.5% 3.7% 0.5% -3.2% seasonality (% of FY) 24.0% 23.1% 24.5% 28.4% 24.0% 23.1% 24.5% 28.4% Other Operating Expenses Total Operating Expenses % change -6.4% -2.7% 2.3% 50.7% 0.5% 3.6% 0.5% -3.1% Sales and Marketing Expense General & Admin. Expense Total SG&A % change 9.3% 21.0% -8.4% 30.2% 4.6% 10.3% 3.8% -4.3% Total Expenses % change -2.7% 2.3% -0.5% 45.2% 1.6% 5.3% 1.3% -3.4% Networks EBITDA EBITDA Margin 38.8% 36.7% 34.3% 19.4% 37.1% 32.6% 32.7% 20.5% % change 13.8% 0.3% 2.9% -57.8% -5.5% -12.0% -5.8% 3.3% % of revenues Sales and Marketing Expense 9.8% 9.2% 9.0% 10.5% 10.2% 10.6% 9.4% 10.1% General & Admin. Expense 6.4% 6.5% 7.0% 8.8% 7.0% 7.0% 7.4% 8.7% Other Operating Expense 1.2% 1.3% 1.4% 1.4% 1.3% 1.3% 1.5% 1.5% 14

15 Exhibit 14: Starz FCF Analysis Free Cash Flow (in millions) E 2017E 2018E 2019E 2020E Recurring EBITDA $502 $462 $426 $478 $503 $477 $472 Stock-Based Compensation (31) (33) (33) (34) (35) (36) (36) Capital Expenditures (11) (17) (11) (11) (12) (12) (12) Cash Taxes (108) (125) (100) (128) (141) (131) (129) Interest Income/ (Expense) (47) (46) (45) (50) (55) (57) (57) Working Capital (49) (44) 3 (1) (1) (1) (1) Cash spend on programming in excess of am (93) (30) (3) 4 Minority Interest 2 (0) (4) (4) (4) (5) (5) Free Cash Flow $166 $201 $240 $281 $225 $233 $237 % Change -15.7% 21.6% 19.2% 16.9% -19.8% 3.6% 1.6% Free Cash Flow ex-programming adj. $259 $197 $234 $250 $255 $236 $233 % Change 145.7% -23.9% 19.2% 6.8% 1.8% -7.2% -1.6% Fully Diluted Shares FCF/Share $1.48 $1.88 $2.39 $3.06 $2.72 $3.07 $3.34 % Change -8.4% 27.1% 26.8% 28.3% -11.2% 12.9% 8.9% FCF/Share ex-programming adj. $2.31 $1.84 $2.33 $2.73 $3.08 $3.11 $3.28 % Change 166.9% -20.5% 26.8% 17.2% 12.6% 1.2% 5.4% 15

16 Exhibit 15: Starz Annual Income Statement ($ in Millions) E 2017E 2018E 2019E 2020E Starz, LLC 1, , , , , , ,721.1 Total Revenue $1,663.9 $1,700.1 $1,622.4 $1,633.0 $1,664.4 $1,693.9 $1,721.1 Operating Expenses Selling, General & Administrative Recurring Adj. EBITDA $501.7 $461.6 $425.8 $477.8 $502.7 $476.9 $472.1 Stock Based Compensation (30.6) (32.5) (33.3) (34.1) (34.8) (35.5) (36.2) Litigation Settlements EBITDA Depreciation EBITA $457.7 $416.3 $379.2 $430.0 $453.8 $427.0 $421.1 Amortization EBIT $451.7 $410.1 $372.9 $423.6 $447.3 $420.3 $414.3 Interest Expense (46.5) (46.0) (45.5) (49.7) (54.8) (56.9) (57.0) Dividend and Interest Income Dividend/interest Income rate of return 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Other, net 4.6 (15.7) Pre-tax Profit $409.8 $348.4 $327.4 $373.9 $392.5 $363.4 $357.3 Tax Benefit (Expense) (140.8) (111.5) (117.9) (134.6) (141.3) (130.8) (128.6) Current Taxes (107.9) (124.7) (100.2) (127.9) (141.3) (130.8) (128.6) Effective Tax Rate 36.0% 33.4% 36.0% 36.0% 36.0% 36.0% 36.0% Net Income from Continuing Operations Extraordinary Items Earnings (Loss) from Discontinued Ops Cumulative Effect of accounting change, net Reported Net Income $269.0 $236.9 $209.6 $239.3 $251.2 $232.6 $228.7 After-tax Minority Interests 2.3 (0.4) (3.8) (3.7) (4.2) (4.6) (4.8) Net Income for EPS $271.3 $236.5 $205.8 $235.6 $247.0 $227.9 $223.9 Average Basic Shares Outstanding Reported Basic EPS $2.57 $2.34 $2.16 $2.71 $3.15 $3.16 $3.32 Average Fully Diluted Shares Outstanding Reported Fully Diluted EPS $2.43 $2.21 $2.05 $2.57 $2.98 $3.00 $3.16 Reported Net Income from Continuing Operations $271.3 $236.5 $205.8 $235.6 $247.0 $227.9 $223.9 Pre-tax (Income)/Loss from Nonrecurring Items (4.6) Amortization of Intangible Assets Marginal Taxes/(Benefit) Related to Nonrecur. Items and Amort (0.5) (7.3) (2.3) (2.3) (2.4) (2.4) (2.5) Fully Diluted Adjusted Income from Continuing Operations Modelware EPS $2.44 $2.35 $2.09 $2.62 $3.03 $3.06 $3.22 Adjusted Fully Diluted Average Shares Outstanding

17 Exhibit 16: Starz Quarterly Income Statement E ($ in Millions) 1Q 2Q 3Q 4Q 1QE 2QE 3QE 4QE Starz, LLC Total Revenue $450.7 $417.7 $404.1 $ $419.7 $410.2 $390.5 $402.0 Operating Expenses Selling, General & Administrative Recurring EBITDA $155.5 $123.4 $114.7 $ $130.5 $118.5 $111.0 $65.7 Stock Based Compensation (8.3) (8.1) (8.1) (8.0) - (8.5) (8.3) (8.3) (8.2) Litigation Settlements EBITDA Depreciation EBITA $144.0 $112.0 $103.3 $ $118.7 $106.9 $99.4 $54.2 Amortization EBIT $142.5 $110.5 $101.8 $ $117.1 $105.3 $97.8 $52.6 Interest Expense (11.2) (11.3) (11.5) (12.0) - (11.5) (11.5) (11.5) (11.0) Dividend and Interest Income Dividend/interest Income rate of return 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Other, net (2.2) (2.1) (4.5) (6.9) Pre-tax Profit $129.1 $97.1 $85.8 $ $105.6 $93.8 $86.3 $41.7 Tax Benefit (Expense) (43.0) (34.1) (26.3) (8.1) - (38.0) (33.8) (31.1) (15.0) Current Taxes (1.8) (67.6) (23.2) (32.1) - (38.0) (33.8) (31.1) 2.7 Effective Tax Rate 33.3% 35.1% 30.7% 22.3% 36.0% 36.0% 36.0% 36.0% Net Income from Continuing Operations $86.1 $63.0 $59.5 $ $67.6 $60.0 $55.3 $26.7 Extraordinary Items Earnings (Loss) from Discontinued Ops Cumulative Effect of accounting change, net Reported Net Income $86.1 $63.0 $59.5 $ $67.6 $60.0 $55.3 $26.7 After-tax Minority Interests (1.5) (1.2) (1.7) (0.7) (0.2) Net Income for EPS $84.6 $63.4 $60.2 $ $66.4 $58.4 $54.6 $26.5 Average Basic Shares Outstanding Reported Basic EPS $0.84 $0.63 $0.59 $ $0.67 $0.61 $0.58 $0.29 Average Fully Diluted Shares Outstanding Reported Fully Diluted EPS from Continuing Operations $0.79 $0.59 $0.56 $ $0.64 $0.58 $0.55 $0.27 Reported Net Income from Continuing Operations $84.6 $63.4 $60.2 $28.3 $66.4 $58.4 $54.6 $26.5 Pre-tax (Income)/Loss from Nonrecurring Items Amortization of Intangible Assets Marginal Taxes/(Benefit) Related to Nonrecur. Items and Am Fully Diluted Adjusted Income from Continuing Operations Fully Diluted Adjusted EPS from Continuing Ops (MW) $0.83 $0.62 $0.62 $0.34 $0.65 $0.59 $0.57 $0.29 Adjusted Fully Diluted Average Shares Outstanding

18 Exhibit 17: Starz Annual Balance Sheet E 2017E 2018E 2019E 2020E Cash and Cash Equivalents $13.4 $10.7 $57.9 $90.9 $67.4 $26.3 $42.2 Restricted Cash $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 Trade and Other Receivables, Net Current Deferred Taxes Program Rights Other, net Total Current Assets $637.0 $669.8 $704.7 $723.6 $721.3 $688.9 $709.7 Gross PPE $213.2 $223.7 $228.0 $234.9 $241.9 $248.9 $255.9 Accumulated Depreciation Net PPE $89.8 $89.2 $87.3 $85.1 $82.8 $80.2 $77.5 Goodwill, net Investment in films and television programs Program Rights Deferred Taxes & Other Assets Total Assets $1,573.2 $1,564.2 $1,581.8 $1,578.1 $1,581.5 $1,540.4 $1,547.8 Accounts Payable $10.1 $8.0 $7.7 $7.5 $7.5 $7.9 $8.1 Accrued Liabilities Deferred Revenue Accrued Stock Compensation Due to Affiliate (The Weinstein Company) Current portion of LT Debt Other Current Liabilities Total Current Liabilities $350.2 $291.6 $278.6 $280.1 $285.3 $290.5 $295.1 Long-term Debt $1,174.2 $1,032.2 $1,124.2 $1,188.8 $1,251.0 $1,186.7 $1,174.6 Accrued long term incentive plan Long-term Deferred Taxes Other Liabililities Minority Interests in subsidiaries (8.7) Total Equity $48.5 $ (13.6) (0.2) 9.9 Total Liabilities and Equity $1,573.2 $1,564.2 $1, $1,578.1 $1,581.5 $1,540.4 $1,

19 Exhibit 18: Starz Annual Cash Flow Statement E 2017E 2018E 2019E 2020E Net Income (Loss) $271.3 $236.5 $205.8 $235.6 $247.0 $227.9 $223.9 Depreciation Amortization Stock-based Compensation Payments of Stock Compensation Amortization of Program Rights Amortization of Investment in Films and Television Programs Program Rights (389.1) (408.4) (365.5) (254.3) (294.1) (300.0) (306.0) Investment in Films and Television Programs (389.5) (349.1) (394.0) (417.4) (433.3) (445.6) (453.0) Other non-cash items Deferred Taxes 19.3 (12.6) Loss (income) from discontinued operations Minority Interests in Subsidiaries (2.3) Changes in Current Assets and Liabilities: (49.3) (44.2) 2.7 (0.7) (1.2) (0.8) (0.8) Impairment of Long-lived Assets Other (0.0) Net Cash from Operating Activities $206.5 $250.6 $288.5 $329.9 $275.9 $285.2 $290.0 Capital Expenditures (11.2) (17.2) (11.4) (11.4) (11.7) (11.9) (12.0) Investments in Equity and Cost Investees (19.1) (6.3) Proceeds from derivative instruments Proceeds from dispositions/(acquisitions) Other, net Net Cash from Investing Activities ($19.6) ($23.5) ($11.4) ($11.4) ($11.7) ($11.9) ($12.0) Changes in Debt (129.2) (64.4) (12.1) Intergroup Cash Transfers Issuance (Repurchase) of Common Stock (328.3) (104.1) (325.0) (350.0) (350.0) (250.0) (250.0) Dividends Other Net Cash from Financing Activities ($199.2) ($229.8) ($230.0) ($285.4) ($287.8) ($314.4) ($262.1) Cash from Discontinued Ops Effect of foreign currency rates on cash Beginning Cash Balance $55.8 $13.4 $10.7 $57.9 $90.9 $67.4 $26.3 Net Increase/(Decrease) in Cash ($12.3) ($2.7) $47.2 $33.1 ($23.6) ($41.0) $15.9 Adjustment From Prior Year ($30.1) $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 Ending Cash Balance $13.4 $10.7 $57.9 $90.9 $67.4 $26.3 $

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21 COVERAGE UNIVERSE INVESTMENT BANKING CLIENTS (IBC) STOCK RATING CATEGORY COUNT % OF TOTAL COUNT % OF TOTAL IBC % OF RATING CATEGORY Overweight/Buy % % 26% Equal-weight/Hold % % 23% Not-Rated/Hold 69 2% 3 0% 4% Underweight/Sell % 89 12% 13% TOTAL 3, Data include common stock and ADRs currently assigned ratings. Investment Banking Clients are companies from whom Morgan Stanley received investment banking compensation in the last 12 months. Analyst Stock Ratings Overweight (O). The stock's total return is expected to exceed the average total return of the analyst's industry (or industry team's) coverage universe, on a risk-adjusted basis, over the next months. Equal-weight (E). The stock's total return is expected to be in line with the average total return of the analyst's industry (or industry team's) coverage universe, on a risk-adjusted basis, over the next months. Not-Rated (NR). Currently the analyst does not have adequate conviction about the stock's total return relative to the average total return of the analyst's industry (or industry team's) coverage universe, on a risk-adjusted basis, over the next months. Underweight (U). The stock's total return is expected to be below the average total return of the analyst's industry (or industry team's) coverage universe, on a risk-adjusted basis, over the next months. Unless otherwise specified, the time frame for price targets included in Morgan Stanley Research is 12 to 18 months. Analyst Industry Views Attractive (A): The analyst expects the performance of his or her industry coverage universe over the next months to be attractive vs. the relevant broad market benchmark, as indicated below. In-Line (I): The analyst expects the performance of his or her industry coverage universe over the next months to be in line with the relevant broad market benchmark, as indicated below. Cautious (C): The analyst views the performance of his or her industry coverage universe over the next months with caution vs. the relevant broad market benchmark, as indicated below. Benchmarks for each region are as follows: North America - S&P 500; Latin America - relevant MSCI country index or MSCI Latin America Index; Europe - MSCI Europe; Japan - TOPIX; Asia - relevant MSCI country index or MSCI sub-regional index or MSCI AC Asia Pacific ex Japan Index. Stock Price, Price Target and Rating History (See Rating Definitions) Important Disclosures for Morgan Stanley Smith Barney LLC Customers 21

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