Editor's note: An earlier version of this article said that Starz stock is down 70% over the past year, which is incorrect. Starz began trading as an independent entity on Jan. 14, and its shares have roughly doubled since. The Fool regrets the error.
Starz (NASDAQ:STRZA) began production on Outlander this week, its latest try at a hit original TV show.
The show is based on the hit book series from author Diana Gabaldon and tells the tale of a married former WWII combat nurse transported in time to feudal Scotland, where she proceeds to fall in love with a young warrior. Ron Moore, one of the principal architects of the reimagined Battlestar Galactica series that won awards for the Syfy channel, is executive producing Outlander for Starz.
We've seen this strategy work before. HBO has turned George R.R. Martin's A Song of Ice and Fire series into the monster hit Game of Thrones. Another Time Warner show, ratings winner The Vampire Diaries, is based on the L.J. Smith books of the same name. Over at Showtime, screenwriter James Manos Jr. turned author Jeff Lindsay's novel Darkly Dreaming Dexter into an epic drama that just finished its eighth and final season.
So that's the good news. The bad? Starz has a checkered history with originals. Boss and Magic City ended after two disappointing seasons. The White Queen, a 10-episode series developed in concert with the BBC, scored well in the U.K. but remains a one-off. Starz shows earned just three Emmy nominations during what amounts to a Golden Age for cable television programming.
Comparing that record with what HBO has achieved would be unfair. But what about Showtime, Starz's other pay TV peer? Californication has already run six seasons and is due for a seventh. Nurse Jackie has five seasons in the books. And Homeland, about to enter its third season, was a serious contender for Outstanding Drama Series at this year's Emmy Awards. Actress Claire Danes won Outstanding Lead Actress In a Drama Series for her role as CIA analyst Carrie Mathison.
Production success has led to financial rewards. According to CBS' (NYSE:CBS) latest quarterly report, Showtime serves 77 million subscribers currently, up from 75 million last year at this time. What's more, cable networks revenue grew 16% in Q2 versus 8% in the June 2012 quarter because of, among other things, "higher licensing revenues from digital streaming of Showtime original series."
If only Starz could claim similar success. Then again, the network has to start somewhere.
I'm rooting for Outlander and Starz's other forthcoming original, Black Sails. Heck, as a Battlestar Galactica fan, I'll probably watch Outlander on principle. But if history is any guide, I'll be in the minority. Therein lies the problem for investors. I'd find it tough to recommend Starz stock without first seeing ratings momentum among its original properties.
Think I'm wrong? Are you watching Starz originals? Tell us about it in the comments box below.
Fool contributor Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team and the Motley Fool Supernova Odyssey I mission. He owned shares of Time Warner at the time of publication. Check out Tim's Web home and portfolio holdings, or connect with him on Google+, Tumblr, or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.
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