Has the Shrinking AMC Networks Become the Walking Dead of the Streaming Wars? | Analysis

As the streaming industry matures, AMC Networks — the cable-reliant company that introduced such hits as “Mad Men,” “Breaking Bad” and “The Walking Dead” — is among the smaller businesses that may be left behind in the competitive streaming wars, industry insiders tell TheWrap.

AMC Networks, majority-owned and controlled by the Dolan family, launched its flagship streamer, AMC+, in the summer of 2020, at the height of the pandemic and amid the boom of new platforms like the rebranded HBO Max. Just months afterward, in November, the company announced layoffs affecting 100 staffers, roughly 10% of its workforce at the time, in a restructuring meant to streamline linear network operations with streaming, then considered one of AMC Networks’ areas with the greatest potential for growth.

Last week, the company once again announced a “large-scale layoff” affecting roughly 20% of its staff as well as the abrupt departure of CEO Christina Spade after just three months. (Board chairman James Dolan will serve as interim executive chairman as the company looks for its fourth CEO in two years.) Shares in the company have nosedived by roughly half since the start of the year, closing Monday at $18.70.

“It’s a catastrophic time ahead for the TV industry because advertisers are beginning or have already begun to go knee-into-chest and the anxiety and the behavioral change that comes from that anxiety has yet to fully reach its zenith,” said Eric Schiffer, chairman and CEO of private equity firm Patriarch Organization. “There’s a lot more pain to come. This is going to be a very hard time and AMC is trying to get in front of it.”

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Insiders say the company has struggled to put forth a singular brand identity, a challenge magnified by the dwindling relevance of cable and the dominance of major players like Netflix in the streaming space.

David Offenberg, an associate professor of finance at Loyola Marymount University, pointed to Dolan’s internal memo announcing upcoming job cuts which resulted from a failed belief that “cord cutting losses would be offset by gains in streaming. This has not been the case. We are primarily a content company and the mechanisms for the monetization of content are in disarray.”

Offenberg wasn’t buying it. “I thought James Dolan’s letter was funny because he said that they were a content company, but you look at their financials, their revenue comes from cable channels and throwing advertising on those cable channels,” he told TheWrap. “And the problem is cable subscriptions have been going down for years now.”

In its Q3 earnings, AMC Networks saw streaming subscriber growth of 44%, coupled with an overall loss of revenue as a result of a slump in ad sales. While shares rose slightly, AMC saw a drop of 16% from last year’s third quarter, in addition to falling short of the $786.78 million predicted by analysts.

At the time, Spade said the company had reached 11.1 million subscribers — a far cry from the projected 25 million it hopes to have by the end of 2025. By comparison, smaller streamers like Paramount (which includes Paramount+, Showtime and BET+) has 67 million subscribers, while NBCUniversal’s latecomer Peacock has 15 million. The largest player, Netflix, bounced back from subscriber losses earlier in the year to sit at a cool estimated 223 million.

The challenges for AMC Networks — whose channels include AMC, WE tv, BBC America, IFC, SundanceTV and AMC Studios, along with SVOD services AMC+, Acorn TV, Shudder, Sundance Now, ALLBLK (formerly UMC) and Sentai-owned HIDIVE — are “really no different than what we’re seeing with any other broadcaster-slash-streamer,” longtime streaming analyst Dan Rayburn told TheWrap. “Companies need to change, adapt, evolve. If they don’t, they go under, they get outmaneuvered, someone comes out with a better product at a better price, a better service.”

AMC Networks’ aim is to attract distinct audiences within niche spaces, via its streaming platforms like the horror-focused Shudder, a company spokesperson said. The company’s strategy isn’t to compete directly with major players like Netflix and will instead remain focused on building out a strong audience base through content development.

“AMC Networks has a long history of bringing viewers high-quality programming across multiple platforms and this remains our strategy going forward,” the statement read. “The cost measures we are taking are focused on helping us navigate the current challenges being felt across the media industry as well as the broader economic outlook.”

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AMC, formerly a subsidiary of Cablevision, is among many smaller companies like Lionsgate and Paramount that are struggling to compete with bigger, better-funded conglomerates, said Offenberg, adding that the company must do “something drastic” to save itself.

“We have a whole bunch of companies that have to figure out how to make the economics of streaming work, and only one has so far and that’s Netflix,” Offenberg explained. “So AMC is not alone here, but it’s the companies that have these strong legacy ties to cable and to theatrical that are really going to struggle.”

For now, the company is looking to capitalize on upcoming projects like spinoffs for its long-running franchise “The Walking Dead” and “Orphan Black,” as well as series based on Anne Rice’s vampire universe, for which it has acquired the adaptation rights. In October, AMC debuted “Anne Rice’s Interview With the Vampire,” touting the critically acclaimed show as one of its biggest new releases, with more series including “Mayfair Witches” and “Invitation to a Bonfire” due next year. However, future streaming and international sales might not generate enough revenue at a time when ad sales continue to decline.

“There’s so much original content now, and it’s so hard to cut through the clutter,” Offenberg said. “Even having a great author like Anne Rice doesn’t guarantee them an audience.”

Worse, AMC cannot afford any misfires, especially compared to its better-funded rivals. “It doesn’t have enough cash to give themselves nearly as many at-bats as the big players in streaming,” he said. “And this is a business where you need a lot of at-bats.”

Although AMC has created multiple TV hits over the years, the company may have hurt its brand by licensing many of its biggest shows to other streaming platforms. “Breaking Bad” and its prequel “Better Call Saul” are only available for streaming on Netflix, not AMC+, while “The Walking Dead” shares streaming rights across both platforms.

“Two of the most popular, most well-known AMC shows are sitting under the Netflix brand,” said Michael D. Smith, a Carnegie Mellon University professor of information technology and marketing. “To me that encapsulates the challenges a small streaming platform like AMC faces in a world dominated by big brands like Netflix, Amazon and Disney+.”

Even so, AMC Networks might not have other options, especially since its series may generate more revenue from licensing fees from Netflix than they could building a subscriber base on AMC+ for $9 per month. And luring subscribers for original content, from “TWD” to Rice’s beloved vampire sagas, takes time and deep pockets.

“We’ve known for four or five years that this was coming. And not necessarily for AMC specifically, but we knew that the streaming world was going to boom and then consolidate, and so it’s like a roller coaster,” Offenberg said. “We went up that big hill where all the services were announced … and now we’re on that huge drop as companies burn cash… By the time we get to the bottom of that first hill, companies have to fail. Either they fail or they get acquired.”

The measure for success in streaming has also shifted within the last year, as analysts look to the average revenue per user, along with overall profitability, rather than just subscriber growth. (AMC+ has not publicly disclosed its ARPU.)

As of now, Netflix is the only streamer to become cash-flow positive, earning more from subscription fees than it spends on acquiring and producing content. “Wall Street now looks at these companies not based on growth at all costs, but rather get the profitability faster,” Rayburn said. “It’s harder to get the profitability when you’re spending more money on content for acquisitions. Profitability is where it’s at; that is the key.”

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The “obvious and terrifying” answer to AMC Networks’ troubles, Smith said, is for another company to acquire its content library. “We’re gonna see consolidation and this may be the start of it,” he said. “In a cable world, we can have 50 different channels all perfectly successful. In an online streaming world, it’s going to be a handful of survivors of this shakeout.”

Rayburn said a buyout wouldn’t “surprise him,” but Schiffer dismissed the idea of an AMC acquisition as “speculation.”

Offenberg’s prognosis was more stark. “AMC tragically missed the window to get acquired,” he said, adding that he could only imagine the scenario if AMC Networks goes through Chapter 11 bankruptcy. “The thing that would have saved them is that they could have gotten acquired before the stock market tanked and before interest rates shot up. And I would argue that they didn’t get acquired because the potential partners looked at their business, looked at their library, looked at their streaming services and said, ‘None of this makes sense in the future,’ because the library is more or less ‘The Walking Dead’ and it’s shrinking, it’s aging.”

Ultimately, bundling AMC+ or the company’s separate horror-centric steamer Shudder with other platforms would also present a challenge, given that top shows have licensing deals at other streamers and the company’s lack of resources to incur losses before seeing any margins of profit gained.

“Investors want [monetary] traction and if they’re not seeing that it can be very brutal,” Schiffer said, adding that the company needs a CEO who will “enable creative storytelling” in a way that’s going to draw in audiences. “And so AMC is positioning, knowing the challenges with consumer budgets and competition, and the capital market’s need for greater traction.”

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