AMC Networks to slash content spending by almost 20% to $1.1bn in 2023

AMC Networks plans to reduce its content spending by almost 20% from US$1.35bn in 2022 to US$1.1bn this year.

Before the pandemic, the company had historically spent around US$1bn on content, before increasing that to around US$1.3bn in 2021 and US$1.35 in 2022.

Beyond 2023, the US-based company anticipates that its cash content investment will be about US$1bn annually, according to interim executive chairman James Dolan and exec VP and chief financial officer Patrick O’Connell, who laid out the spending plan during the company’s fourth-quarter earnings call on Friday.

“We’re trying to strike the right balance between continued investment in the business and generating sufficient profits and cashflow in the near term,” said O’Connell.

Like almost all companies in the content business, AMC Networks is looking reduce costs and find a path to profitability in its streaming business.

At the end of 2022, the company revealed that it would reduce headcount by around 20% in addition to taking a US$400m content write-down. The latter resulted in the cancellation of a slew of shows including Pantheon, Demascus, 61st Street, Invitation to a Bonfire and Moonhaven.

“In terms of where the cuts are coming from specifically, we took a hard look at all of our platforms and are trying to maintain as much programming efficiency as possible across all of them,” said O’Connell.

“When we took a look at our cupboard, we had to pull out things that weren’t as ‘on-brand’ or ‘on-strategy’ as some others. It was across the entire portfolio. We reduced some of our spend on the international side as well.”

While AMC Networks’ programming slate has been reduced significantly, the execs said they were encouraged by the performance of existing titles such as its gothic horror franchise Immortal Universe, based on the books by Anne Rice.

The first title in the franchise, Interview with the Vampire, was renewed ahead of its season one premiere in October. Meanwhile, the franchise’s second series, Mayfair Witches, starring Alexandra Daddario, became the most-watched series ever on AMC+ based on the first 30 days of viewership, noted O’Connell.

In addition, the company is set to expand its The Walking Dead franchise with several spin-offs, including The Walking Dead: Dead City and a series focusing on character Daryl Dixon.

The franchise extensions are in a good position to succeed, said O’Connell, given that the 11th and final season of the flagship show “commanded the highest pricing the series has ever seen.” The original spin-off, Fear the Walking Dead, returns for its eighth season in May.

When asked by an analyst if commissioning lower-cost, unscripted programming could be an effective way to reduce costs, Dolan dismissed the idea. “No, I don’t think we’re going to change [the] strategy, we’re just going to try and keep it more efficient and work on the monetisation models,” he said.

However, the company will look to deploy its programming across more of its platforms, said O’Connell, noting that there would be “a tinge less exclusive programming on AMC+.”

During the fourth quarter, AMC Networks added around 700,000 streaming subscribers to hit 11.8 million in total across its streaming portfolio, which includes AMC+, Acorn TV, Shudder, Sundance Now and ALLBLK. On the linear side, it owns cablenets including AMC, Sundance TV and IFC.

Overall, revenue increased by 20% in the fourth quarter to US$965m compared with the previous year – well above estimates. Within that, streaming revenue rose 35% to US$502m. The company also reported an operating loss of US$392m, compared with a US$63.6m profit a year earlier, which included US$423m in restructuring costs.

Since the turn of the year, the stock price has risen from around US$17 per share to US$27.13 on Friday.

Elsewhere on the call, Dolan was asked whether he believed 2023 could see significant levels of consolidation across the content sector. He replied that, from his perspective, companies in the TV and streaming space need to figure out how to monetise their content effectively before looking to combine with others.

“It would be difficult right at this moment. I don’t think you’ll see the industry pursue a strong consolidation movement because the industry doesn’t yet know how to monetise the content. Once they reorganise themselves and start to get a better handle on that and a better strategy with that, then you could see consolidation,” he said.

“Right now, in my opinion, I don’t see anyone who has the answer to this yet. And without that answer, I don’t get the rationale for pursuing a consolidation strategy.”

Dolan also addressed whether AMC Networks, which has been the subject of persistent takeover rumours for several years, could be sold in the coming years. He said he was “very much open” to remaining as a standalone company and to some form of M&A or strategic transaction.

“Right now, we’re trying to guide it through as if it’s going to remain standalone. But that doesn’t mean we wouldn’t consider M&A and see if we can improve the shareholder value that way,” he said.

His comments come after a recent report in The Wall Street Journal (WSJ) said AMC Networks was approached by Roku and Providence Global about a possible takeover around 18 months ago. Talks ultimately stalled.

The WSJ also said Sony Pictures Entertainment, Lionsgate, Apollo Global and Blackstone were among other companies that had discussed potential deals for all or parts of the company.