AMC Networks, the company behind popular cable channels such as AMC, IFC, and Sundance TV, as well as streaming services like AMC+ and Acorn TV, reported a 17 percent drop in second-quarter U.S. advertising revenue. The decline, which amounted to $167 million, was attributed to anticipated linear ratings declines, softness in the ad market, and fewer original programming episodes within the quarter. However, digital and advanced advertising revenue growth partially offset the decrease.
The company also revealed that its streaming subscribers decreased from 11.2 million at the end of the first quarter to 11.0 million at the end of June. This decline follows a previous drop from 11.8 million at the end of 2022 to 11.5 million at the end of March. The company did not provide specific reasons for the difference in the first-quarter figures. AMC Networks mentioned that the sequential decrease in subscribers reflects their focus on higher-value subscribers and the roll-off of promotional activities.
Management had previously set a goal of reaching 20 million to 25 million subscribers for its collection of niche-oriented streamers by 2025. However, with the recent decline in subscriber numbers, achieving this goal may prove challenging.
This decline in U.S. ad revenue follows a 20 percent decrease in the first quarter and a 12 percent drop in the fourth quarter. To further compound the company’s challenges, AMC Networks disclosed restructuring and other related charges, amounting to an unspecified sum.
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The second quarter saw the release of new episodes of popular original series such as Fear the Walking Dead and Lucky Hank.
The CEO position at AMC Networks recently experienced some changes. Kristin Dolan, wife of chairman James Dolan, took over the role at the end of February. Prior to this, Christina Spade briefly held the top post starting in September. However, in a surprise announcement in November, AMC Networks announced that Spade had stepped down from her role without providing a reason. James Dolan, who assumed interim oversight, later sent a staff memo outlining a large-scale layoff and cuts to every operating area due to the belief that cord-cutting losses would be offset by gains in streaming, which did not materialize.
Despite these challenges, Dolan remains optimistic about the company’s ability to produce high-quality content and make it available across various platforms. AMC Networks has a focused strategy that drives free cash flow and has witnessed year-over-year increases in free cash, streaming subscribers, streaming revenue, and healthy margins. The company believes it has the programming, platforms, and partners necessary to continue operating a profitable business and deliver long-term shareholder value.
During the first-quarter earnings conference call, Dolan mentioned AMC’s plan to make its content available across the entire distribution ecosystem. CFO Patrick O’Connell later elaborated on how media and entertainment companies are shifting towards streaming sustainability and the need for economic repair in the industry.
In light of AMC Networks’ challenges, Wells Fargo analyst Steven Cahall reduced his stock price target on the company and maintained an “underweight” rating. Cahall argues that the company is facing increasing pressure on earnings and suggests that it consider monetizing its content through M&A to unlock the value of AMC Studios.
In conclusion, AMC Networks reported a decline in second-quarter U.S. advertising revenue and a decrease in streaming subscribers. The company faces challenges due to anticipated linear ratings declines, industry-wide uncertainty, and changes in consumer behavior. However, AMC Networks remains confident in its ability to produce high-quality content and adapt to the evolving media landscape.
