John Pearson

11 Penn Plaza

New York, NY, 10001

Main phone: 212-324-8500

Key Executives:

Background

AMC Networks was founded in 1980 under the name Rainbow Media.  A joint venture between NBC and Cablevision Systems Corporation, it intended to provide special interest programming to niche audiences [6].  In 2011, Rainbow Media spun off as AMC Networks to publicly trade on the NASDAQ under current President Josh Sapan, and AMC Networks was born [7].  Since, AMC Networks has surfaced to the forefront of specialty and original programming.

Programming

Currently, AMC Networks owns AMC, BBC America, IFC, Sundance TV, We TV, IFC Films, and AMC Networks International [9].  Among their most popular shows are The Walking Dead, Breaking Bad, Better Call Saul, Mad Men, and, more recently, Doctor Who and Fear the Walking Dead [10].  AMC Networks have some of the most-watched content on television.  They have incorporated Rainbow Media’s ideas of providing specialized programming rather than general content that could appeal to a broader audience [11] to great success.  The AMC channel has had great success with its original content.  To date, its series have the top three most-viewed debuts in cable television history [12].

2015 Ratings Drop

Ratings for this season of The Walking Dead dropped 15% from last year, causing AMC Networks’s stock to drop 5.1%.  Economist Michael Morris of Guggenheim Partners attributed this to the company’s over-reliance on the show.  However, he went on to say that the financial reaction may have been excessive.  The debut provided apt competition with the NFL that weekend, and has consistently sat at the top of original cable programming throughout the season’s run [13].

Other Content

In addition to the original content on the AMC channel, AMC Networks produces original content on their IFC and SundanceTV channels.  They also produce original reality content on their channel WeTV.

Recent Acquisitions

BBC America

By far AMC Networks’s most significant and instantly-rewarding act in the last year has been to enter into a partnership with BBC Worldwide in 2014, purchasing an operationally controlling, 49.9% equity stake in BBC America [16].  This allowed AMC to renegotiate BBC America’s cable costs, along with the rest of its channels, due to the increased value of content [17].  This follows CEO Josh Sapan’s interest in developing AMC Networks into more of a global company: controlling international content being distributed in the United States as well as increasing overseas distribution.

Chellomedia (AMC Networks International)

AMC Networks’s other major acquisition of the last year has been that of Chellomedia form Liberty Global.  AMC Networks owns the entirety of Chellomedia, which they have rebranded as AMC Networks International.  This has gained AMC Networks a “suite of networks” distributing to 390 million homes in 138 different countries.

These networks largely carry entertainment programming and movies, similar content and (presumably) similar audiences to those whom AMC Networks already reaches.  The deal has two big advantages: it will allow the company to expand its other international programming channel, IFC Films, and it will give original content not before distributed to these markets a second run.  This especially will come in handy for shows currently nearing their end in the company’s current markets [19].

International Concerns

AMC Networks’s international efforts have yet to pull their own weight, posting consistent losses as they find their footing in foreign markets.  Domestic production has more than made up for the losses, however, allowing AMC Networks to exercise more patience and wait for the international networks to become profitable.  For example, in its most recent quarter, the network’s International and Other divisions posted a $6 million increase in operating loss [20], but that was balanced by a 50.2% growth in operating income [21] from the National division.  The final result was a 44.5% ($49 million) overall increase in operating income.  The BBC America acquisition has affected this number by lessening the losses in operating income.  CEO Josh Sapan has repeatedly voiced his faith in the prospects of these divisions building momentum [22].

Financial Status

AMC Networks performed outstandingly in the third quarter of 2015.  Net revenues increased 21.7% ($113 million), a full $632 million overall over the same period last year.  Adjusted Operating Cash Flow (AOCF) [24] rose to $191 million, a 34.3% increase over the same period last year.  This number is perhaps the most significant as it represents an increased ability to produce new and better content.

Their stock quote as of December 2, 2015 posts an $83.10 average at a volume of 767,441, earning $4.85 per share [25].

Strategy

AMC Networks make most of their money from owning and operating some of the most critically-acclaimed, popular, and recognizable content brands on cable and distributing those brands as widely as possible.  At their disposal, their biggest strengths are a strong industry presence and portfolio of brands, a broad distribution reach on their national networks, award-winning content, a strong revenue from their affiliation agreements.  All of this makes them a highly sought-after advertising platform.

Some of their biggest difficulties include intense competition, a small number of distributors for their networks, shifting audience tastes, continuing to produce popular programming, viability of their business acquisitions, and a significant debt .

Conclusion

If AMC Networks is not the top cable network, it certainly lies among the best.  Their popularity and quality of content makes it one of the highest rated networks in most markets.  At the moment, their greatest aim is to expand their content to an international level, which would be greatly beneficial to their ratings if their original content can get a complete second run in foreign markets that have not yet seen it, even after the content’s run in AMC’s current markets has finished.  As seen in the figure below, AMC Networks is on an upward trend, its relative youth and high cost of producing high-quality content slowing its ascent relative to its peer group.  Increased international distribution and the BBC America acquisition will help to make AMC Networks more competitive in this standing [26].

CEO Josh Sapan, the skilled leader who led the network to the top after the 2011 split from Cablevision, will remain at the helm, leading the international expansion.  They have the necessary solutions in the works for the possible challenges they face in the future, viewers switching to more digital habits, a need for new high-quality original content, and the unsustainability of their international ventures.  Overall, AMC Networks is a solid company, a solid investment, and a solid advertising prospect.

Sources

[1] amcnetworks.com, retrieved November 14 from www.amcnetworks.com

[2] amcnetworks.com, “Josh Sapan,” retrieved November 14 from http://www.amcnetworks.com/about-us/leadership/joshua-sapan

[3] amcnetworks.com, “Ed Carroll,” retrieved November 14 from http://www.amcnetworks.com/about-us/leadership/ed-carroll

[4] amcnetworks.com, “Sean Sullivan,” retrieved November 14 from http://www.amcnetworks.com/about-us/leadership/sean-sullivan

[5] Bigvoice313, “Rainbow Media Holdings Logo,” retrieved December 1 from http://logos.wikia.com/wiki/File:Rainbow_Media_Holdings_logo.png

[6] Fabrikant, Geraldine, “NBC and Cablevision Plan Joint Programming Venture,” retrieved November 20 from http://www.nytimes.com/1988/12/23/business/the-media-business-nbc-and-cablevision-plan-joint-programming-venture.html?src=pm

[7] Jarzemsky, Matt, “Cablevision to Rename Rainbow,” retrieved on November 27 from http://www.wsj.com/articles/SB10001424052748704823004576192942165989226

[8] AMC, “The Walking Dead,” retrieved November 27 from http://www.amc.com/shows/the-walking-dead/talk/2013/09/the-walking-dead-season-4-poster-revealed

[9] amcnetworks.com, retrieved November 30 from amcnetworks.com

[10] AMC Networks, “AMC Networks Inc. Reports Third Quarter 2015 Results,” retrieved on December 1 from http://files.shareholder.com/downloads/ABEA-66DSMZ/1100377276x0x859197/B19048DF-3B85-4BB7-A915-F4682D97A48A/AMC_Networks_3Q15_Earnings_Release_11_5_15_FINAL.pdf

[11] Rainbow Media Holdings, “About Rainbow: Our Story,” retrieved on December 1 from http://web.archive.org/web/20080222055629/http://www.rainbow-media.com/about/ourstory_timeline80.html

[12] Kissell, Rick, “AMC’s ‘Fear the Walking Dead’ Has the Highest-Rated First Season in Cable History,” retrieved on December 1 from http://variety.com/2015/tv/news/ratings-fear-the-walking-dead-cable-record-1201610178/

[13] Lieberman, David, “AMC Networks Shares Hit By ‘Walking Dead’ Ratings Drop, But Is It Overkill?” Deadline retrieved on December 1 from http://deadline.com/2015/10/amc-networks-shares-fall-walking-dead-ratings-drop-1201579442/

[14] American Cable Association, “AMC Networks,” retrieved on December 1 from http://www.americancable.org/aca_associate_members

[15] Neededog, Jethro, “AMC Networks in Talks to Buy 50 Percent of BBC America,” The Wrap, retrieved on December 1 from https://www.thewrap.com/amc-networks-in-talks-to-buy-50-percent-of-bbc-america-report/

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[17] Neededog, Jethro, “AMC Networks in Talks to Buy 50 Percent of BBC America,” The Wrap, retrieved on December 1 from https://www.thewrap.com/amc-networks-in-talks-to-buy-50-percent-of-bbc-america-report/

[18] AMC Networks International, retrieved on December 1 from http://www.amcnetworks.com/amcni

[19] Farrell, Mike, “AMC to Rebrand Chellomedia,” Multichannel News, retrieved on December 1 from http://www.multichannel.com/news/news-articles/amc-rebrand-chellomedia/375755

[20] Investopedia, “Operating Loss – OL,” Investopedia, retrieved December 2 from http://www.investopedia.com/terms/o/operating-loss.asp

[21] Investopedia, “Operating Income,” Investopedia, retrieved December 2 from http://www.investopedia.com/terms/o/operatingincome.asp

[22] AMC Networks, “AMC Networks Inc. Reports Third Quarter 2015 Results,” retrieved on December 1 from http://files.shareholder.com/downloads/ABEA-66DSMZ/1100377276x0x859197/B19048DF-3B85-4BB7-A915-F4682D97A48A/AMC_Networks_3Q15_Earnings_Release_11_5_15_FINAL.pdf

[23] NASDAQ, “AMC Networks Inc. Stock Chart,” nasdaq.com, retrieved on December 1 from http://www.nasdaq.com/symbol/amcx/stock-chart

[24] Investopedia, “Operating Cash Flow – OCF,” Investopedia, retrieved on December 2 from http://www.investopedia.com/terms/o/operatingcashflow.asp

[25] NASDAQ, “AMC Netowrks Inc. Stock Quote and Summary Data,” nasdaq.com, retrieved on December 1 from http://www.nasdaq.com/symbol/amcx

[26] AMC Board of Directors, “AMC Networks, Form 10-k,” United States Securities and Exchange Commission, retrieved on December 2 from http://secfilings.nasdaq.com/edgar_conv_html%2f2015%2f02%2f26%2f0001514991-15-000007.html#FIS_BUSINESS

[27] “Comparison of Cumulative Total Return,” United States Security and Exchange Commission, retrieved on December 2 from http://secfilings.nasdaq.com/edgar_conv_html%2f2015%2f02%2f26%2f0001514991-15-000007.html#FIS_BUSINESS