Nearly two years ago, AMC Networks decided it needed to steer the ship of its business in another direction — one where the company prioritized the development and licensing of quality content that reaches TV fans across different video platforms.
The reason? Cable TV — the biggest part of AMC’s business — was spiraling, making its channels less of a destination for fans of premium TV dramas and comedies. The audience was fragmenting, with most choosing streaming platforms for their entertainment, a lane that AMC knew it needed to be in, too.
So, it began to develop and execute on a strategy of putting it shows in front of people, wherever they are. It operates around a dozen free, ad-supported streaming TV channels that repopulates popular shows like “Mad Men,” “The Walking Dead” and “Portlandia.” It launched AMC+, its own premium streaming service that charges a small monthly fee for on-demand viewing, and which is one of the few streaming platforms to include access to its linear cable networks over the web. It forged partnerships with Netflix and Max that involved licensing out some of its hit TV series in exchange for promotion of the AMC brand. And it allowed some pay TV providers like Philo and Charter to incorporate the ad-supported tier of AMC+ in its linear TV programming packages.
Eighteen months after first outlining its three-prong strategy — “programming, partnerships and profitability” — the company is still executing on it, something made clear by AMC’s Q1 results and associated conference call with investors on Friday.
First, a breakdown of the company’s Q1 financials:
- Subscription revenue continues to be impacted by higher churn in the cable TV business, with AMC earning $313 million during Q1, down 3% compared to last year.
- That figure was partially offset by higher streaming subscription revenue, which increased 8% to $157 million, influenced by a price adjustment on AMC+. The company now also includes revenue from certain streaming bundles as well as pay TV companies, like Charter and Philo, that include AMC+ in certain programming tiers.
- Cable and satellite TV fees dipped 12% to $156 million, driven by cord-cutting.
- Advertising revenue dropped to $115 million, a 15% decrease based on lower spend against AMC’s cable channels due to higher cable and satellite churn that wasn’t materially offset by higher uptake in AMC’s streaming service and FAST channels.
- Content licensing revenue dropped 13% to $54 million, with the year-over figure mainly affected by AMC’s decision to sell off its rights to the BBC America show “Killing Eve” in 2024.
- All told, net revenue dipped 7% to $555.23 million during Q1.
AMC’s streaming strategy is primarily rooted in necessity: For much of the company’s history, cable advertising was the lucrative part of the business. With consumers ditching cable and satellite at an accelerated rate, the linear networks don’t offer the type of “reach” they once did — and the writing has been on the wall for some time.
Yes, AMC Networks has had cable hits in the past, and continues to have some today. “Dark Winds” is a great example, with AMC touting 2.2 million viewers for the premiere episode of its third season. But AMC didn’t generate this buzz on its own — the show debuted to lackluster ratings in 2022, and only gained popularity when prior episodes were licensed to Netflix.
That isn’t an outlier — “Breaking Bad” experienced the same fate more than a decade ago, where the show flew under the radar on cable, at a time when pay TV was still a viable pipeline. When the show’s back catalog landed on Netflix, it developed an audience that eventually tuned in to AMC Networks for new episodes. And the situation repeated itself with “Portlandia” on AMC’s sister network IFC around the same time.
AMC executives have previously touted their licensing agreements with Netflix and Max as one rooted in a broader marketing strategy for AMC+. The thinking is, TV fans will see older episodes there, and they’ll take AMC+ for new episodes. So far, that strategy seems to be working, with AMC counting 10.4 million streaming subscribers, most of whom pay for AMC+ or have access to it within a pay TV package.
On a year-over basis, AMC’s subscriber count actually dropped due to price increases. But Chief Financial Officer Patrick O’Connell told investors Friday that price adjustments were part of AMC’s strategy to attract higher-quality streamers. He noted AMC was already seeing “the benefits of the further strengthening of our subscriber base, with strong retention and engagement across the portfolio.” Translation: Customers who are willing to pay more are engaging with our shows at a higher rate and paying us longer than those who want lower-priced options.
With its focus on quality content and subscribers, AMC has perfectly positioned itself as a leading competitor to HBO, Starz and Showtime — prestigious brands that started as premium multiplex cable networks and which now have standalone streaming services of their own.
But AMC continues to engage in parts of the business that are not in line with its strategy. It operates a handful of FAST channels that, despite being widely available (including on some pay TV platforms like YouTube TV), few people watch and even fewer advertisers buy. It runs smaller streaming platforms like Acorn TV, Shudder and HiDive that attract niche content viewers — not the premium subscribers AMC executives desire. And it continues to offer its newest TV programs on basic cable, rather than converting the networks into a premium multiplex that compete with the likes of HBO.
All of that points to a messy execution, one reflected in its earnings reports. Executives likely take the view that the streaming wars are a marathon, and not a sprint — but even marathon runners increase their pace as the finish line comes into view, and with the industry due for a shake out, AMC needs to quickly transform its business and execute across all elements of its premium strategy if it wants to be on the podium.
