AMC Networks Earnings: Pressured by Declining TV Business, Firm is Experimenting Modern Approaches

The importance of partnerships was the key theme in AMC Network’s AMCX third-quarter earnings report as the firm struggles against steadily declining revenue. AMC’s small size leaves it in a weakening position as the traditional television business shrinks, cutting into the firm’s ability to get content in front of audiences and otherwise monetize the content. We’d still prefer the firm find a suitor, but until then, working with better-positioned rivals makes sense, in our view. We are maintaining our $25 fair value estimate.

Management was particularly pleased with the success of the recently concluded two-month “pop-up” of its content on Warner Bros. Discovery’s Max streaming service. Several of the seven AMC original series on Max surfaced on daily top 10 lists and helped drive traffic to AMC+ for newer seasons. The firm is also excited about Xumo, the new video platform from Comcast and Charter, which will feature AMC content. Recent comments from Comcast indicate that it views Xumo as a tool to bundle various streaming services. AMC’s long-term negotiating position in these relationships is unclear, which is why we’d prefer the firm find a permanent home inside a larger media firm. The Max deal, while only an early experiment, doesn’t appear to have generated licensing revenue for AMC.

Total revenue declined 7% versus a year ago, with streaming growth and a small bump in licensing revenue more than offset by the weak core traditional television business. AMC ended the quarter with 11.1 million total streaming customers across its various services, up from 10.7 million a year ago. The firm has clearly shifted away from pushing AMC+ as a stand-alone offering, instead preferring to view it as an extension of its traditional television offering. Again, this speaks to the firm’s reliance on other firms to deliver its content.