AMC Networks Earnings: Streaming and Licensing Growth Offsets Continued Linear Struggles

AMC AMCX posted a slightly better-than-expected start to 2023 as revenue was in line with, and adjusted EBITDA strongly beat, FactSet consensus. The bottom-line beat was driven by cost management, particularly at the corporate level. However, the struggles in domestic linear advertising persisted, and we expect the ad market to remain soft. We still believe that AMC does not have the financial resources required to operate as a strictly streaming business, and the Dolan family should consider a sale or merger in the near to medium future. We maintain our $27 fair value estimate.

Revenue was roughly flat versus a year ago, with streaming growth and a one-time bump in licensing revenue offsetting a very weak core traditional television business. AMC reported that it had 11.5 million total streaming customers across its various services at the end of the quarter, down from 11.8 million at the end of 2022. Management indicated the decline was the result of a shift to focus on more valuable customers and holiday promotions rolling off. However, streaming revenue growth decelerated to 29% year over year from 41% last quarter. Streaming revenue of $141 million accounted for about 20% of total sales during the quarter.

U.S. affiliate revenue declined 12% because of the continued loss of traditional television customers, exacerbated by the decision to walk away from an agreement with Fubo, a smaller online television provider. Affiliate revenue per customer increased versus a year ago, indicating that total subscribers to AMC’s suite of cable channels has declined faster than 12%. U.S. ad revenue declined 20%, reflecting smaller audiences and the broader weakness in the ad market, which has hurt pricing. We estimate total affiliate and ad revenue from the traditional U.S. cable channels declined about 15% to roughly $370 million.