AMC Networks delivered lackluster earnings for the fourth quarter that were dragged down by write-downs in the international unit and declining advertising revenue for its U.S. networks.
The results underscore the crossroads that pure-play programmers such as AMC Networks have reached in terms of growth potential for the traditional linear channels that are its core business: AMC, SundanceTV, IFC, We TV, BBC America and BBC World News.
AMC Networks saw revenue top expectations at $785 million for the quarter, up 1.6% from the year-ago frame. Adjusted operating income fell 8.7% to $200 million. The quarter included write-downs of $107 million in the International and Other division, and $11 million in restructuring and related charges. All of that led to net income swinging to a loss of $8.6 million for the quarter.
AMC’s National Networks division saw revenue dip by 0.6% to $589 million. Adjusted operating income fell 13.1% to $182 million. Advertising revenue slumped 7.8% to $251 million, something AMC attributed to lower ratings. AMC took a $23 million charge for domestic programming expenses in the quarter, compared to $29 million in the year-ago quarter. Distribution revenue was the bright spot for the division, with a 5.5% gain to $338 million, powered by content licensing deals.
AMC Networks executives emphasized the company’s focus on growing its suite of niche-targeted SVOD services as the linear businesses are buffeted by the changing pay TV landscape. AMC has a total of about 2 million subscribers for Acorn TV (which offers British TV Series, Shudder, Sundance Now, and Urban Movie Channel. AMC is looking to step up the international expansion of those services in the coming year.
But Wall Street analysts on AMC’s conference call were largely focused on how the company plans to manage the decline of its core business. AMC Networks CEO Josh Sapan conceded that the big challenge at present is making the calls on “how to invest properly and be prepared for both headwinds and the tailwinds that occur in the United States and beyond.” Sapan pointed to the April 12 debut of the latest “Walking Dead” spinoff, “The Walking Dead: World Beyond,” as having good potential to provide a boost for this year’s Q2.
Sapan said the company is giving significant consideration to whether it should assemble a more expansive SVOD package for the domestic market. He noted that the company’s rethinking its strategy of selling rerun rights to its programs to third-party SVOD outlets such as Netflix and Hulu.
“We have some decisions to make when shows come back now from licensing (deals) with third parties,” he said, noting that older shows such as “Halt and Catch Fire” and “Rectify” are coming to the end of existing contracts.
(Pictured: “The Walking Dead: World Beyond”)