LOS ANGELES (TheStreet) -- -- Starz (STRZA), the premium cable-TV channel controlled by billionaire John Malone, is negotiating with cable operators and could launch an over-the-top video streaming service in partnership with some of those operators by the end of the year, according to a person with knowledge of the discussions.
Starz, pay-TV's second-most popular premium-TV service with 23.5 million subscribers, is looking to join Time Warner's (TWX) HBO, the most-watched premium service, and CBS's (CBS - Get Report) Showtime, which both began their own branded video streaming services earlier this year.
Though discussions are still fluid, and details could change, Starz is promoting the concept of a so-called "house" brand by which the service would be part of a cable operators' online offering. Starz is eager to find ways to work with pay-TV operators rather than offer viewers an additional reason to eliminate their pay-TV contract.
Signs of cord-cutting sparked a second day of media sector declines on Thursday with Sumner Redstone's Viacom (VIAB - Get Report) plummeting 18% to $42.11 and Rupert Murdoch's 21st Century Fox (FOXA) losing 13% to $27.85. Shares of Englewood, Col-based Starz were falling 4.4% to 36.35.
Still unclear is whether becoming a pay-TV streaming partner, modeled on Netflix (NFLX - Get Report), would require Starz to give up its brand name, possibly assuming the name of the respective broadband service, according to the person. The cable operator would pay Starz a fee for including the service as part of its broadband offering.
Such an online streaming service might be similar to Starz Play, the service that allows existing cable or satellite subscribers to stream Starz programming like Black Sails and Spartacus to other devices, according to another person with knowledge of the plans.
Starz Play is available to subscribers with existing cable or satellite subscriptions on Google's (GOOG - Get Report) Chromecast, Microsoft's (MSFT - Get Report) Xbox, Apple's (AAPL - Get Report) iPhone, iPad, and other devices. Last year, Starz began an online only streaming service in several foreign countries in the Middle East and North Africa.
A spokeswoman for Starz did not respond to a list of email questions that the company requested. A spokeswoman for John Malone's Liberty Media (LMCA) did not respond to an email and phone call seeking comment.
Charter Communications (CHTR - Get Report), the cable operator that is 26 percent owned by Malone's Liberty Broadband's (LBRDA - Get Report), is likely to be one of the first operators to partner with Starz, Liberty Broadband's President and CEO Greg Maffei hinted during the Aug. 5 earnings call of Malone's Liberty Media Corp.
"There is a lot of potential for Starz to be, if not the house brand, a more friendly brand to cable (operators)," said Maffei. " I'd love to see us do more with the cable operators, and particularly Charter, given our relationship."
Maffei is the CEO of both Liberty Media and Liberty Broadband as well as chairman of Starz.
Charter, which has 5.1 million internet subscribers, agreed to merge with Time Warner Cable (TWC) , which has 12.3 million high speed subscribers, according to a Charter presentation to investors. Charter also plans to acquire Bright House Networks and its 2.1 million broadband subscribers. The deals await approval from federal regulators.
In response to a question during Starz' earning call, CEO Chris Albrecht said, "We continue to have interesting discussions with our distributors. We're going to keep the faith a little while longer while we view what seems to be an evolving, sometimes quickly, landscape that is highlighting the premium brands and that are offering potential opportunities."
HBO and Showtime both launched independent services with broadband distributors while keeping their brands. HBO Now is offered by Apple, Amazon (AMZN), Cablevision (CVC) and Verizon (VZ) according to its web site. Showtime's over the top streaming service is offered by Apple, Roku, Sony's Playstation Vue and the Hulu service, according to its site.
Starz has a less well-known brand name than either HBO or Showtime and starting in 2016 will lose its rights to movies from Walt Disney (DIS), leaving it with movies from Sony (SNE) among the major studios. It produces shows including Power and Outlander., and has stepped up its production of original programs.
Cultivating cable operators as their partners is critical for Starz, figures Blair Westlake, former chairman of Universal TV and the former top programming executive for Microsoft's Xbox gaming console. "The challenge of marketing direct to consumers can't be underestimated," said Westlake. "They don't have the cache or draw of a brand that HBO and Showtime enjoy that would allow them to do it themselves."
"It makes a lot more sense to promote an over-the-top service partnering with the companies that already have a direct relationship with the consumer," he added.