AMC Networks came into the third quarter facing tough year-over-year comparisons because of the boffo performance of “Breaking Bad’s” final season last year. But the zombies of “The Walking Dead” are the cavalry that is sure to give the company a rosier earnings picture for the year overall.
Josh Sapan, prexy-CEO of AMC Networks, cited “Walking Dead’s” record-setting premiere numbers last year with some understandable astonishment.
“It beats everything out there,” he said. “It is essentially our version of the NFL.”
The turnout for “Walking Dead” emboldened AMC to project double-digit advertising growth for the fourth quarter. Although the Q3 results reflect the softness in the overall TV market, Sapan noted that total ad growth for the year is pacing at about 11%.
Sapan also talked up AMC Networks’ recent investment in BBC America. The $200 million was a no-brainer for the company as it gives AMC control of the channel and the ability to consolidate its financials. BBC America is a tonal fit with the company’s focus on high-end dramas.
With so much multi-platform competition out there, Sapan emphasized that the focus is on “the elevation of content. We think having BBC America aligned with (AMC channels) creates a collection of channels and shows that are stronger together.”
AMC will give BBC America a boost in marketing, ad sales and affiliate sales given that the Beeb’s Yank outpost has been operating essentially as a stand-alone indie for years, Sapan said. The company’s programs also perform well on digital platforms, which is an increasing focus for AMC and other cable programmers, Sapan added. “There is a reservoir of content greatness … from two sides of the ocean,” he said of BBC America’s deep library. “That opportunity is under-exploited for the BBC and for us.”
He noted that the Beeb partnership also makes AMC Networks the domestic sales advertising and affiliate sales rep for BBC World News channel. The service has about 30 million homes at present, and Sapan sees strong upside. “It is in our opinion without peer in terms of news quality,” he said, adding that he anticipates “many interesting opportunities to elevate it and grow it in the U.S.”
AMC Networks also took a $9 million write-down on its decision to scrap a number of unscripted series that had been ordered to production in order to plow more resources into drama.
“Our desire is (to focus on) what creates the greatest engagement with viewers in a very crowded content environment and what creates the greatest return,” Sapan said of the unscripted about-face.
Among other tidbits from the earnings call, AMC chief operating officer Ed Carroll noted that the flagship AMC channel may well add a third night of original programming next year beyond its current slate of Saturday and Sunday shows.
Carroll said WE tv will remain a largely unscripted network but will proceed with one original scripted drama for 2015, the horror-themed “South of Hell.” The channel axed its first original drama, “The Divide,” after one season last week.
AMC’s third-quarter net income of $54 million, or 74 cents per share, was down from the year-ago quarter ($58 million) but on target with the Street’s forecast of earnings per share of 73-74 cents. Revenue for the quarter came in at $520 million, a 31.4% gain reflecting the acquisition in January of the Chellomedia international channels group, now operated as AMC Networks Intl.
AMC was facing tough year-over-year comps this quarter because last year’s Q3 reflected the advertising windfall from the success of “Breaking Bad’s” final season. Operating income at AMC’s national networks division, housing AMC, SundanceTV, IFC and WE tv, fell 17.3% to $115 million. Advertising revenue at the national networks dropped 5.8% to $138 million, with declines at AMC offsetting increases at Sundance, WE and IFC.
Revenue at AMC’s International and Other unit, which houses the IFC Films, soared by $109 million over the year-ago period to reach $123 million, thanks to the Chellomedia acquisition. The international growth helped the unit trim its operating loss to $5 million, a $13 million improvement on the year-ago quarter.