AMC sees third-quarter 2020 income slip as subscriptions grow

The Walking Dead
AMC's CEO said its subscription streaming service is becoming the company's fastest area of growth.(AMC Networks)

AMC Networks saw its third-quarter income slip as the Coronavirus pandemic continued to disrupt its business, but the company sees two bright spots: zombies and subscriptions.

The New York firm reported operating income of $139 million, down 17.2% from the third quarter of 2019, on net revenue of $654 million, a 9% drop from the year-ago quarter. Its adjusted earnings per share of $1.32 barely missed analyst consensus estimates by $.02.

Much of that decline came from a continued slump in advertising revenue, which crumbled by 15.5% — more than the 14.6% decrease in AMC’s second quarter — to $164 million.

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On AMC’s earnings call, executives pointed to the continued appeal of its Walking Dead zombie franchise and its ability to draw viewers both on its traditional providers and its ad-free subscription video services.

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“Our successful execution in these areas is powering our ability to begin to fundamentally reconstitute the revenue mix of our company, most notably with increasing revenue from our subscription streaming services becoming our fastest areas of growth,” AMC CEO Josh Sapan said on the call.

He said its standalone offerings — Acorn TV, Shudder, Sundance Now, UMC (Urban Movie Channel), and the newer AMC+ service — would hit 5 to 5.5 million subscribers combined by the end of the year, helping to insulate the company from cord-cutting losses at cable and satellite TV providers.

“In 2020, our streaming business will generate approximately $200 million in revenue,” Sapan added. “That represents year-over-year growth of roughly 100%.”

AMC+, an $8.99 ad-free offering, debuted on Comcast’s Xfinity TV and Xfinity Flex platforms, expanded to Dish Network and its Sling TV service, and in October arrived on Apple TV and Amazon Fire TV devices.

AMC’s flagship channel continues to see wide distribution on both traditional and over-the-top video services; for example, it’s part of the $10 Vibe option on T-Mobile’s new TVision service.

AMC was also able to resume producing original content after lengthy shutdowns required to slow the pandemic. That relaunched activity includes episodes for two Walking Dead series. AMC has also greenlit two additional Walking Dead series to flesh out that zombie-apocalypse universe further.

Chief Operating Officer Ed Carroll estimated that by the time production wraps on every series in the franchise, “we'll have well over 225 hours” of Walking Dead content.

The advertising business, however, looks to be a continued soft-spot for the company, which is known for its advertising-business drama Mad Men. Interim CFO Donna Coleman said some of this drop in income resulted from delays in airing such AMC originals as the current season of Fear the Walking Dead.

But, she warned, the slump seems likely to continue: “We expect the year-over-year decrease in fourth quarter advertising revenue to be relatively consistent with the percentage we reported year-over-year in the third quarter.”

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