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AMC Networks Seeks to Up Transactional VOD, Air Content on Sister Channels

26 Feb, 2013 By: Erik Gruenwedel

Pay-TV network cites timing of SVOD license agreements, Dish Network litigation for 49% drop in fourth-quarter net income

AMC Networks plans to increase transactional VOD availability of its programming while airing re-broadcasts of popular shows on sister channels, including Sundance and IFC, CEO Josh Sapan told analysts.

AMC Networks, which includes AMC, IFC, Sundance Channel, WE tv and IFC Films, is known for popular series “Mad Men,” “Breaking Bad,” “Portlandia,” and “The Walking Dead,” among others. In addition to carriage agreements with cable, satellite and telco distributors, AMC has aggressively sought license deals with subscription video-on-demand services such as Netflix.

Speaking Feb. 26 during the pay-TV provider’s fourth-quarter fiscal call, Sapan said putting past episodes of its popular shows on affiliated channels is evaluated on an individual basis. Previews of AMC series are periodically tested on sister channels.

“In the case of 'Breaking Bad,' we think it has some application for Sundance, so that’s an initiative that will be pursued with those who hold the rights,” Sapan said.

He said placing shows in-house is dependent on determining related economic, strategic, and programming benefits as whether to air programming on a preview basis to gain viewer interest or post-broadcast.

“If we pursue it properly, particularly where we own the rights, we can advantage ourselves,” Sapan said.

The executive added that there have been increased R&D efforts made with cable operators to enhance transactional VOD and electronic sellthrough opportunities around the initial broadcast of select shows. Sapan said the consumer offerings remain a work in progress without elaborating. He said any offerings would mirror what is presented to consumers currently on iTunes.

Indeed, studios, in an effort to jumpstart digital sales, have released select movies online ahead of their retail channels. By extension, AMC is apparently considering offering episodes and complete seasons of shows in an earlier window than what is currently available. 

“We think that’s an area worth being educated in and smart in,” Sapan said. “So we’ve increased investment in that.”

Meanwhile, “The Walking Dead” midseason premiere earlier this month attracted more than 8 million viewers with season-to-date traction up 15% from a year ago. It was the most-watched episode in the series’ history.

“The show is the No. 1 program on all of television among 18 to 49-year-olds, out delivering hits such as “Modern Family,” “NCIS,” “The Big Bang Theory,” and “Two and a Half Men” on broadcast,” Sapan said.

Since Netflix launched the second season of “The Walking Dead” in the third quarter, AMC was not able to recognize the license revenue in the fourth quarter as it was able to for the season 1 license revenue during the same period last year. This resulted in a year-over-year decline in SVOD revenue in Q4.

AMC reported fourth-quarter (ended Dec. 31) net income of $15 million, down 49% from net income of $29 million during the previous-year period. Revenue in the quarter increased $28 million, or 8.2%, to $367 million compared to the same period in 2011, which more than offset a decline of $7 million in international operations and digital distribution.

Net income decline reflected the impact of the litigation ($3 million in legal fees) and temporary carriage termination with Dish. Last year, the satellite TV operator terminated carriage of Sundance Channel, AMC, IFC, and WE tv, which AMC believed was due to separate litigation between Dish and Voom HD.

Last Oct. 21, Dish and AMC entered into a litigation agreement (including $700 million settlement payment by Dish), which included resumption of carriage of AMC, IFC, Sundance Channel and WE tv. The temporary carriage termination had a material impact to operating income for the three months and twelve months ended Dec. 31.

“We resolved our legal dispute with Dish Network, completed new carriage agreements with a number of leading distributors, and expanded our relationships with key advertisers,” Sapan said in a statement. “All of which, contributed to strong financial results for the full year and gives us confidence that we are well-positioned for continued success in the year ahead.”

About the Author: Erik Gruenwedel

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