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AMC Networks reported on Friday that its U.S. advertising revenue rose during the second quarter and said it has seen continued streaming subscriber growth.
Domestic advertising revenue increased 13 percent to $212 million “due to higher pricing and ad-supported streaming growth, partially offset by a reduction in the number of episodes of our original programming and lower ratings,” the company said.
Domestic subscription revenue rose 14 percent to $427 million, said the company behind the AMC, IFC and Sundance Channel networks, as well as niche streaming services like horror-centric Shudder. That included a “one-time beneficial impact of a distribution agreement renewal.” Excluding that, distribution revenue would have increased 10 percent.
Overall domestic revenue was up 14 percent to $639 million, while “international and other” revenue jumped 53 percent to $138 million. That was led by a 75 percent advertising improvement, “largely related to higher pricing, better ratings and the favorable impact of foreign currency translation,” while distribution and other revenue rose 48 percent.
The company’s total quarterly revenue was up 19 percent to $771 million, while operating income jumped 40 percent to $68 million and adjusted operating income climbed 11 percent to $251 million.
“AMC Networks had a strong second quarter with impressive financial results domestically as well as internationally, driven by robust growth in revenues for our targeted streaming services, particularly strong advertising growth and high demand for our world-class content,” said AMC Networks president and CEO Josh Sapan. “We continue to advance our position as the worldwide leader in targeted streaming, with high subscriber satisfaction and strong consumption for our services. AMC+, our premium bundled offering, has quickly become our fastest-growing service, driven by expanding distribution and the strong, character-driven dramas that power it.”
During the second quarter, the firm debuted dark comedy Kevin Can F— Himself, starring Annie Murphy, on AMC+ and AMC.
Added Sapan: “Our streaming momentum and our expanding advertising efforts are enabling us to continue to meaningfully reconstitute the revenue mix of our company and to deliver continued growth and shareholder value.”
On Friday’s earnings conference call, Sapan said the company has wrapped up one of its strongest upfront advertising seasons ever, touting that as a sign of the appeal of the firm’s content and brands.
Sapan also lauded Bob Odenkirk, the star of AMC’s hit show Better Call Saul who previously appeared in its Breaking Bad, after his recent heart attack. “It is close to impossible to spend any time around Bob without developing great affection and appreciation for his talents, his spirit and who he is as a person. We are so glad he is on the mend … and wish him all the best in his recovery.”
COO Ed Carroll lauded the success of a new distribution strategy that the company used for Gangs of London. After its debut on AMC+ in October, it moved to the linear network this spring, “and that exposure sparked a second wave of strong interest in the series on AMC+, where the title’s viewership and ability to attract new customers both doubled.” The company will look to further use take advantage of this ability to use both linear and digital distribution outlets in a beneficial way, he said.
Sapan also lauded AMC for ending the flagship The Walking Dead series, while continuing three other shows in the franchise, highlighting that this kind of franchise management helps with such aspects as “vitality, freshness, news ideas, longevity and cost.” He added: “The Walking Dead franchise is – this is going to sound silly – alive and well while it is dying.” And the firm is “incredibly enthusiastic” about the franchise. “We feel like the best time is before us for The Walking Dead, not to mention movies that will be in our future.”
Asked about the potential future of other AMC franchises, Sapan mentioned Killing Eve, whose season 4 is planned to be its final one, while AMC and producer Sid Gentle Films are looking at developing potential spinoff ideas. “We have every opportunity, should we choose to determine that there is a future for it in a franchise manner,” he said. “We have creative discussions underway about whether the nasty agencies that are controlling assassins are good throughlines or the assassins themselves are good throughlines, but … we are in control of the franchise,” Sapan said.
On Breaking Bad and Better Call Saul, he noted the company’s “very, very strong relationships” with creator Vince Gilligan and the key actors.
A recent settlement around The Walking Dead participations included a 2021 revision of free cash flow guidance from around $200 million this year to break even due to a cash settlement. The long-running legal battle over Frank Darabont’s profits from the hit show came to an end in July, with the company agreeing to a nine-figure payout to the former showrunner and his agency, CAA. The settlement resolved all litigation, buying Darabont and CAA out of most of their rights to the intellectual property from the franchise.
“The Settlement Agreement provides for a cash payment of $200 million (the “Settlement Payment”) to the plaintiffs and future revenue sharing related to certain future streaming exhibition of The Walking Dead and Fear The Walking Dead,” said a July 16 AM Networks filing with the U.S. Securities and Exchange Commission.
Wells Fargo analyst Steven Cahall wrote in his earnings preview for the company: “We think AMC Networks will likely tread water in the second quarter as we don’t expect a direct-to-consumer subscriber number update, while core trends are likely to remain stable.”
Before the market open, AMC Networks shares were up more than 6 percent.
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