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Courtesy of AMC

AMC Networks delivered double-digit gains in advertising and affiliate fee gains for the fourth quarter. But the plus signs in its fourth quarter and full-year financials released Thursday weren’t enough to stop a sell-off in shares during the first few hours of trading.

AMC shares sank more than 8% before noon ET before recovering some ground. Investors were bearish on most media stocks Thursday but AMC’s declines were the sharpest among the pack because of its earnings release. The drop reflected Wall Street’s laser-focus on long-term affiliate fee earnings trends for major cable players. AMC’s disclosure of more subscriber losses at the flagship AMC cabler, even after the company completed a number of MVPD renewal deals, was not the news Wall Street was looking for, despite AMC’s wealth of ratings from “The Walking Dead” and “Fear the Walking Dead.” Wall Streeters are also concerned about the degree of AMC’s reliance on the “Walking Dead” franchise to power the entire company.

AMC Networks generated affiliate fee growth thanks to new MVPD contracts with rate increases for AMC and overall subscriber gains in 2015 for SundanceTV (up 3 million to 59.6 million) and We TV(up 1.1 million to 86.5 million). But still, sub losses outpaced the gains with a year-over-year drop of 1.4 million for AMC last year to 93.6 million at the end of 2015. BBC America fell by 1.1 million to 86.5 million and IFC ebbed 2.5 million to 71.2 million.

AMC Networks CEO Josh Sapan did not challenge the sub numbers from Nielsen. Disney last year challenged Nielsen’s methodology in calculating ESPN’s sub losses, which led Nielsen to revise its ESPN estimate upward. Sapan acknowledged that the AMC Networks numbers were “a reasonably good representation of what we’ve seen over time.”

AMC Networks said fourth-quarter profit rose 16%, due largely to the success of “The Walking Dead” and “Into The Badlands” on its flagship network during the period, which generated sizable ratings and drew advertiser interest. AMC jumped into the top 5 among cable networks for the first time in the fourth quarter thanks to “Walking Dead,” even as the show saw a slight decrease in viewing. For advertisers, however, it’s a magnet that has become “an increasingly legitimate broadcast replacement,” Sapan said, because of the mass audience that it draws — about 13 million viewers on average in live-plus-3 during its fourth-quarter run.

All told, AMC Networks’ profit in the quarter totaled nearly $90.1 million, or $1.23 a share, compared with approximately $77.6 million, or $1.06 a share, in the year-ago period.

Revenue in the quarter rose 11.4%, or $70 million, to $679 million.

AMC Networks took a $16 million write-down on programming for the quarter. That was higher than analysts’ expectations. AMC didn’t specify the shows that led to the charge, but among the program cancellations across the AMC portfolio during the quarter were two first-year comedies at IFC, “Benders” and “Gigi Does It.”

AMC’s U.S. networks unit saw a 1% decline in its adjusted operating cash flow to $189 million for the quarter that reflected softness in the advertising market — even as it delivered industry-leading ad revenue growth of 13.4% to $289 million — and higher programming and marketing costs. AMC’s distribution revenue grew 11.6% to $273 million, which was slightly lower than analysts’ expectations. AMC’s distribution revenue number includes content licensing but is largely comprised of affiliate fees.

The intense focus by investors on long-term affiliate fee trends comes as the television world debates the fate of the MVPD bundle that has long been a driver of showbiz earnings. There’s a big focus on whether congloms have channels that are legitimately must-have as distributors assemble smaller, lower-priced channel packages. Sapan noted that to date there’s been a lot more talk about the coming era of “skinny bundles” and a la carte channel offerings than there has been action.

“The experience to date may be different from what everybody is conjecturing about,” Sapan said. “Our position in strong. We think we are very well positioned for a longer horizon. That’s the backdrop we’ll have to affect and act in.”

(Pictured: “The Walking Dead”)

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