AMC Networks‘ second-quarter results Friday illustrated the ongoing challenge of running cable networks, but don’t expect the company to join rivals looking to sell or spin off the assets.
CFO Patrick McConnell told Wall Street analysts on an earnings call that new operations like Versant, which is separating from Comcast, and Warner Bros. Discovery’s pending spinoff “are cable businesses at their core.” AMC Networks, he said, is “very different” from those rivals, in part because streaming will comprise the majority of company revenue in 2025.
All cable network owners are coping with dramatic declines in subscriber levels due to cord-cutting and the rise of streaming, which have seen pay-TV penetration retreat to 1980s levels. That downturn means lower revenue from distribution and advertising. The business of pay-TV continues to generate abundant cash, just not at the startlingly high levels of the 1990s and 2000s.
Despite strong cash flow (which the company sees hitting $250 million this year), a year-over-year decline of 18% in ad revenue and other traditional headwinds pulled down shares in AMC Networks 6% early Friday. A bit later in the morning, the stock pulled off a startling reversal, rising 21% on above-average trading volume, though it has fallen more than 25% this year to date.
The company’s quarterly numbers did exceed analysts’ forecasts, but revenue dipped to $600 million from $625.9 million in the year-earlier period.
Asked by an analyst whether the company has contemplated some sort of M&A for part or all of its cable portfolio, which includes AMC, We TV, IFC, Sundance TV and BBC America, McConnell emphasized the collective.
“We have a studio, we have a big streaming business,” he said. “There’s a lot of IP housed within this company. And so we’ve also got an amazing portfolio of streaming products that work really hard alone, and they work even harder together. And I think that’s sort of thematically how we think about the business as a whole, you know, all the pieces kind of work together, and it’s sort of strength compounding strength.”
The company sees “continued opportunity” to make money from its “great set of assets,” the CFO added.
Left unaddressed in the comments was the fact that AMC Networks is under the control of the Dolan family, whose fortune was made by the cable business. Its motivations for remaining in the programming business cannot be directly linked to strictly financial risks and rewards. AMC Networks is a comparatively small piece of an empire that includes prized assets like New York’s Madison Square Garden and its anchor tenants, the NBA’s Knicks and NHL’s Rangers.
Along with Versant and the pending WBD spin, A+E Global Media co-owners Disney and Hearst are fielding offers for the parent of cable networks including A&E, History and Lifetime. Paramount, which just closed its $8.4 billion merger with Skydance, is also likely to shed cable assets, though President Jeff Shell said at a press conference Thursday that a full spin “wouldn’t make sense for us” given the overall financials.
Affiliate revenue for AMC Networks declined 12% from the same quarter a year ago to $151 million. The company blamed “basic subscriber declines and, to a lesser extent, contractual rate decreases in connection with renewals.”
Streaming revenue increased 12% year-over-year to reach $169 million, with AMC Networks crediting the impact of price increases. The number of subscribers also inched up 2% to 10.4 million.
The 18% drop in advertising revenue, to $123 million, was “primarily due to linear ratings declines and lower marketplace pricing, including digital CPMs,” the company said.
