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AMC Networks Misses on Q3 Earnings, Takes $19 Million Programming Write-Down

AMC Networks failed to meet Wall Street’s expectations with its third quarter results revealed Thursday that include a $19 million write-down on the AMC drama series “Feed the Beast” and other programming costs.

The media company pulled in $635 million in revenue, below consensus analyst estimates of $660.58 million. Earnings per share were $0.91, well under the estimate of $1.02.

The national networks — AMC, BBC America, Sundance TV, WE tv, and IFC — brought in $526 million in revenue, a slight increase over the same period last year thanks to increased licensing revenue and higher affiliate fees. But operating income fell 19%, to $139 million.

The company is attributing this decrease to higher programming expenses, including a $19 million write-down on programming assets, primarily tied to the decision not to order a second season of “Feed the Beast.” Last year in the same period, AMC had a $12 million write-down.

There was also a 9.9% decrease in ad revenue for the quarter compared to 2015, attributable to lower ratings for AMC series like “Fear the Walking Dead.” For the three months ending in September, AMC Networks made $189 million at its five U.S. networks.

In AMC Networks’ international and other segment, including IFC Films, operating losses increased to $16.67 million for the quarter, an increase of more than 50% on the same period last year, which posted an operating loss of $11.09 million. The company attributed this increased loss to a decrease in revenue at IFC Films and $19 million in restructuring costs related to this summer’s buyouts. Those costs also affected the national networks.

AMC Networks CFO Sean Sullivan said restructuring costs would continue in the fourth quarter and were were an effort to “right-size” its workforce.

Sullivan and AMC Networks CEO Josh Sapan emphasized that the company was anticipating improved results in the fourth quarter and generally “solid” results for full-year 2016. And that’s even with tough year-over-year Q4 comps for AMC and BBC America with the absence of “Into the Badlands” and “Dr. Who” from their respective schedules versus Q4 2015. The big splash that “The Walking Dead” made in its seventh season premiere last week will go a long way to boost advertising revenues.

Sapan was pressed by analysts on the call about the two hot topics for media companies at the moment: the expansion of the virtual MVPD market and reactions to the AT&T-Time Warner merger agreement.

On AMC Networks’ prospects in the new world of skinny bundles, Sapan said the company has deals with the three existing services — Dish Networks’ Sling, Sony’s PlayStation Vue and DirecTV Now — and is in talks with nascent players, presumably Hulu, YouTube and possibly Apple. Sapan said AMC Networks’ lower per subscriber fees relative to its competition and marquee shows such as “The Walking Dead” make them an attractive programming partner for new services.

“We really do think that AMC Networks’ wholesale price is extremely low for the value that we put on the screen,” he said. “We think we have really killer shows and killer brands and we priced very well below alternative packages (from competitors).”

On AT&T-Time Warner, Sapan said the deal was good news for anyone in the content business. AMC Networks is seen as a prime takeover target as M&A activity in media and entertainment steps up, as indicated by AT&T’s rich $85.4 billion agreement for Time Warner.

The AT&T-Time Warner deal is “basically a confirmation that what we’ve been in pursuit of is the right thing to pursue,” Sapan said.

 

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