AMC Networks Posts 29% Jump in Q1 Streaming Revenue Even As Subscribers Slip

AMC Networks saw its streaming revenue jump 29% year over year to $141 million in the first three months of the year despite slipping subscriber numbers.

The parent of IFC and Sundance TV said it grew streaming subscribers about 22% year over year to 11.5 million from 9.5 million in the first quarter of 2022. While a big jump from last year, that represented a decline from 11.8 million subscribers in the fourth quarter, even amid the premiere of the hit “Anne Rice’s Mayfair Witches,” which has already been renewed.

“While this represents a slight decline from last quarter, the bigger context is our focus on attracting and retaining higher value subscribers,” CEO Kristin Dolan said on the conference call to discuss the results. She said “Mayfair Witches” was the most-watched season of any show on its services and channels.

AMC Networks reported revenue of $717.4 million for the first quarter of 2023, up less than 1% from $712.2 million in the year-ago first quarter. That bested the $677.5 million revenue forecast by analysts surveyed by Zacks Investment Research. Domestic revenue rose 1% to $611.9 million.

CFO Patrick O’Connell said the decline in subscribers reflected “roll-off” of customers who signed on during holiday promotions. “The decline in subscribers was largely due to our focus on higher-value subscribers,” he said. “The rationalization of our subscriber base, along with pricing actions taken last year, increased the average revenue generated per subscriber.” The company did not provide specific revenue per user figures.

The year-over-year streaming gains — AMC Networks operates multiple services, including AMC+, Acorn TV, AllBlk and Shudder — were partially offset by declines in linear subscribers, but the company also did not provide more specifics on how many traditional cable viewers lost. Dolan said its Hidive streaming service “is making gains as an increasingly sought-after destination for passionate anime fans, a very potent category.”

This reflected AMC’s overall strategy of providing streaming services to targeted audiences, she added.

“Our streaming strategy of superserving fans of a particular genre represents our differentiated approach that sets us apart from the general entertainment services, with very reasonable levels of content spending,” Dolan said. “I do believe we only begun to scratch the surface with all of our services, particularly in terms of our opportunity to expand the depth and breadth of our content offerings and attract larger audiences.”

The company reiterated its forecast for the full year for revenue of $2.9 billion, matching analyst estimates.

The results drove AMC Networks shares up as high as 13.2% in early trading, adding $2.01 to $17.29, before settling back to a 7% gain. The stock closed at $15.28 Monday, down nearly 4% since the start of the year.

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Advertising revenue plunged 20% to $161 million, which the company attributed to “anticipated linear ratings declines, softness in the advertising market and fewer original programming episodes within the quarter.” Notably, the prior year was supported by the hugely popular “The Walking Dead” and “Better Call Saul,” which both ended in 2022.

The company said the drop, which was anticipated, was partly offset by digital and “advanced advertising” revenue growth, but did not break out details.

“We expect 2022 trends to continue to 2023, including lower linear ratings, and a soft overall ad market, partially offset by digital and advanced advertising revenue growth,” O’Connell said during the call.

Most of the quarter’s revenue gain came from a 69% leap in content licensing revenue to $103 million, which included $56 million for the delivery of the remaining episodes of “Silo” an AMC Studios series produced for AppleTV. During the call, the prospect of further revenue generation of this sort.

“I will characterize it as a highly tactical approach,” O’Connell said. “There’s no project that we have to do. You know, we program our own networks. That gives us a fantastic sort of perch and web of relationships that we can monetize. Our production of ‘Silo,’ which premiered a couple days ago, is evidence of that. If there’s an economic equation that makes sense, that we can earn a reasonable margin at a reasonable risk, we will take those swings. But we don’t have to be in the market chasing deals to generate revenue, because we we produce for ourselves.”

International and other revenue slipped 2% to $108 million, including a small gain in distribution and other venue thanks to the timing and nature of productions at its content producer 25/7 Media. Advertising revenues decreased 17% to $19 million, which AMC Networks said was due to the wind-down of two channels in 2022 and marketplace declines in the U.K.

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The company posted net income of $103.6 million, down less than 1% from $104.2 million in the year-ago quarter, while earnings per share slipped to $2.36 from $2.38 last year. The results included $5.9 million in restructuring and related charges that reflect layoffs and other cost-cutting efforts.

Adjusted for the restructuring charges and other one-time items, earning per share came in at $2.62, solidly topping the $1.81 analysts surveyed by Zacks expected.

In the fourth quarter, AMC Networks took a $403.8 million write-off related to content costs, contributing to a large loss in the quarter.

In February, AMC Networks named Dolan, a former marketing executive at the company and the wife of owner James Dolan, as its CEO. Her predecessor, Christina Spade, stepped down in November.

AMC Networks previously said it does not expect the ongoing Hollywood writers’ strike to affect production of shows including the “Walking Dead” spin-off “Dead City” and a third series in the Anne Rice universe focused on the secretive “Talamasca” organization menioned in several of her novels.

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“I think we’re very well positioned for all of this year and into next year,” Dolan said on the call. “So we have no real concerns about the writers strike at this point.”

Dolan said the company is looking at an October launch for its AMC+ ad-supported tier, which was announced last month. She declined to offer a forecast for pricing or anticipated average revenue per user.