Fewer Originals Means Lower Profit for AMC
With fewer original shows airing during the third quarter, AMC Networks reported a drop in earnings that was slightly smaller than expected.
Citing an increasingly digital world, the company also said it is reducing staff and eliminating positions. By tightening its belt, AMC joins Time Warner’s Turner Broadcasting, HBO and Warner Brothers, as well as Scripps Networks in cutting payroll costs in order to invest in contest creation while maintaining profit growth.
“We are very mindful of expenses and are continually focused on refining our organization and the way we do business in order to operate as efficiently as possible,” CEO Josh Sapan said on the company’s earning call with analysts. “As part of this ongoing effort, we have taken steps in recent month to reorient and reorganize our staffing. This is an area we continue to examine carefully and constantly calibrate.”
AMC has been ramping up original programming, causing worries on Wall Street about rising costs.
The company declined to say how many positions have been eliminated, but on the call, CFO Sean Sullivan said that third-quarter earnings included $6 million in restricting charges related to the elimination of certain positions across the company. He added that there would be further charges in the fourth quarter and possible more beyond that.
In the third quarter, AMC Networks’ net income dipped to $54 million, or 74 cents per share, from $58 million, or 80 cents a share, a year ago.
Revenue rose 31.4% to $520 million because of the acquisition of Cellomedia, now called AMC Networks International. Revenue at AMC's national networks was up 4.3%.
Both figures exceeded analyst expectations of 73 cents a share in earnings and revenue of $511 million.
Distribution revenue was up 10.5% to $259 million.
Domestic advertising revenues dropped 5.8% to $138 million because AMC's cable networks aired fewer original programs during the quarter. Last year, the high-rated final episodes of Breaking Bad aired and those attracted premium prices from advertisers. The company said that while ad revenue was down at AMC, it was up at its other, smaller networks.
Sullivan said that the company expected results to improve and that the fourth quarter would be the strongest quarter of the year. “Advertising continues to be a growth driver for the company and will benefit from the return of The Walking Dead, is forecast to grow double digits at our national networks.”
"AMC Networks continued its strong financial and operating performance in the third quarter with a double digit increase in revenue and growth in AOCF," CEO Josh Sapan said in a statement. "We are particularly pleased that for the broadcast season, which ended in the third quarter, AMC Networks in aggregate was the only cable media group to have experienced double-digit growth in viewership among key demos adults 18-49 and adults 25-54. Our year over year growth is significant and speaks to the success of our core content investment strategy."
Sapan added that AMC's recently announced BBC America partnership "meets many of our core strategic objectives for our business and provides a platform for long-term growth and success."
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Jon has been business editor of Broadcasting+Cable since 2010. He focuses on revenue-generating activities, including advertising and distribution, as well as executive intrigue and merger and acquisition activity. Just about any story is fair game, if a dollar sign can make its way into the article. Before B+C, Jon covered the industry for TVWeek, Cable World, Electronic Media, Advertising Age and The New York Post. A native New Yorker, Jon is hiding in plain sight in the suburbs of Chicago.