AMC Networks Quarterly Earnings Beat Estimates, U.S. Ad Revenue Falls

The Walking Dead Season 8 Episode 16 - Publicity - EMBED 2018
Gene Page/AMC

The company, led by CEO Josh Sapan, had the second half of season 8 of 'The Walking Dead' in the latest period.

AMC Networks, the company behind such cable networks as AMC, IFC and SundanceTV, on Thursday reported better-than-expected first-quarter earnings.

Original series that aired in the quarter included the AMC hit series The Walking Dead, which recently wrapped up its eighth season.

The company, led by CEO Josh Sapan, reported first-quarter earnings of $157 million, or $2.54 per share, compared with $136 million, or $1.98 per share, in the year-ago period.

First-quarter adjusted earnings reached $163 million, or $2.65 per share, compared with $145 million, or $2.10 per share. The increase was "primarily related to a decrease in income tax expense and a decrease in diluted shares," the company said.

Quarterly revenue increased 2.9 percent to $741 million amid gains at both national networks and in the company's international and other business segment.

U.S. distribution revenue grew 10.8 percent, but U.S. advertising revenue fell 8.8 percent amid lower Walking Dead ratings and timing issues. "The decrease in advertising revenues principally related to lower delivery as well as the timing of the airing of original programming partially offset by higher pricing," the firm said.

The drop in TV ad revenue was offset by increased content licensing revenue to traditional and emerging distribution platforms, an area of growth Sapan focused on during a morning analyst call. "We think that doing great shows is truly at the core of what we do and feeds our base enterprise and provides momentum for growth in the future. And it has a been a great source of growth," he argued.

Sapan said AMC will continue to invest in popular TV brands and new, often ad-free businesses like Shudder, Acorn TV and Britbox that the networks operator controls or has interests in. At the same time, the exec cautioned AMC had to weigh whether it made sense to sell a show it develops and produces to a third party amid "growing demand for our content and our brands," or to one of its own services.

Sapan also addressed a shift via Peak TV to programming often becoming a commodity where digital giants with deep pockets like Netflix and Amazon Prime bid up pricing for creative talent and finished product. He argued it was "incorrect" to assume every show goes to a commodity auction and gets bid up.

"There's a certain number of shows that have signature casts or signature creative talent, and are packaged by talent agencies, and come to the market and create bidding wars. There's precipitous purchases from hungry outlets," he conceded.

But Sapan added AMC cultivates long-term relationships with creative talent and often creates series from the ground up, without incurring bidding wars. The exec pointed to the Hank Azaria comedy Brockmire, IFC's first collaboration with Funny or Die, which is now set to return for seasons three and four after season two debuted April 25.

"There was no market and there was no bidding war," he said of the inception for Brockmire. Sapan also touted other ratings successes for BBC America's Killing Eve and AMC's Fear the Walking Dead and The Terror, as AMC's streaming services Sundance Now and Shudder continue to gain traction with consumers.

May 10, 8 a.m. Updated with comments by Sapan made during an analyst call.