AMC Networks U.S. Ad Revenue Rises on Higher Prices, More 'Walking Dead' Episodes

The Walking Dead _ Season 9, Episode 16 - Norman Reedus as Daryl Dixon  2 - H 2019
Gene Page/AMC

The cable networks company, led by CEO Josh Sapan, posts lower earnings but higher U.S. advertising revenue, with the exec touting 'Killing Eve' and 'The Walking Dead.'

AMC Networks, the cable networks company that operates AMC, IFC, WE tv, BBC America and SundanceTV, on Wednesday reported lower first-quarter earnings but higher U.S. advertising revenue, thanks in part to more episodes of hit series The Walking Dead despite lower ratings.

The company, led by CEO Josh Sapan, posted a first-quarter profit of $143 million, or $2.48 per share, compared with $157 million in the year-ago quarter and earnings per share of $2.54. Wall Street had been looking for earnings of $2.25 per share. Adjusted earnings hit $152 million, or $2.64 per share, compared with $163 million, or $2.65 per share.

Quarterly revenue rose 5.9 percent to $784 million, driven by a nearly 54 percent improvement in the "international and other" segment, which was boosted by the acquisitions of comedy venue operator Levity Entertainment and RLJ Entertainment.

Sapan on a morning analyst call touted the cable channels group's continuing investment in high-end content that secures worldwide acclaim and audiences amid industry consolidation and disruption. He argued The Walking Dead franchise was "early in its life cycle," despite the zombie drama having its lowest-rated season to date with its ninth cycle, only to be capped by its lowest-rated finale to date.

He reiterated The Walking Dead remains the No. 1 series on cable (excluding sports and news). Sapan also said the company had received "vigorous interest" in the popular zombie property from potential worldwide partners as AMC Networks triples down on the franchise with a third series.

"With its focus on the next generation of survivors led by two young female protagonists, we think this third series is a perfect gateway to advance the narrative of this universe in ways that are multi-generational, fresh and unexpected," Sapan said. Matt Negrete will show run the new 10-episode series, as yet untitled, that he co-created with franchise chief content officer Scott M. Gimple.

Walking Dead 3 has a pilot script and a writers room and, while no premiere date has been set, a 2020 air date is anticipated. Sapan also touted showrunner Angela Kang's ninth season of The Walking Dead, as he told analysts "the series has hit a new stride," while also pointing to higher than expected advertising sales.

"Nine years in, we believe we are just beginning to tap its full economic potential and we're extending the franchise as any media company would," he argued. Sapan remained coy, however, during the analyst call about whether the international monetization of the zombie drama franchise includes a possible The Walking Dead movie.

"We have a broad spectrum of rights ... We have a path to get to essentially every place that we'd like to get, with the necessary agreements in some circumstances," he said.

During its latest quarter, AMC Networks posted a 2.7 percent U.S. revenue drop, driven by a 7.4 percent decline in distribution revenue, "primarily attributable to a decrease in content licensing revenues partially offset by an increase in subscription revenues." This more than offset a 5.9 percent gain in advertising.

"The increase in advertising revenues primarily related to higher pricing as well as the timing of the airing of original programming partially offset by lower delivery," said the firm, which benefited from three extra episodes of The Walking Dead on flagship network AMC. The company also aired two more episodes of Into the Badlands in the first quarter than in the year-ago period, offset by the absence of two episodes of The Terror and McMafia.

Some on Wall Street had predicted lower U.S. ad revenue due to the continued ratings declines. "With ratings down in the 30-40 percent year-over-year range for comparable new episodes, even the extra episodes were not enough to offset the declines this quarter," MoffettNathanson analyst Michael Nathanson recently predicted, forecasting a U.S. ad decline of 1 percent. 

May 1, 6:45 a.m. Updated with comments by CEO Josh Sapan made on an analyst call.