Hooked

AMC has found a way to make even more money out of the world’s addiction to shows like “Breaking Bad”

October 28, 2013
Obsession
How We Buy
October 28, 2013

It might not be as risky or outlandish as Walter White’s plan to export crystal meth to the Czech Republic, but AMC Networks has a plan to expand in Europe.

There’s been a lot of conjecture about how the American cable TV network owner would deal with with the conclusion of not just one, but two if its über-popular hit shows: Breaking Bad, the drug-trade drama which reached a dramatic crescendo last month, and Mad Men, the cult show about the advertising industry, which was supposed to end next year, but will now conclude in 2015 after seven seasons.

This morning AMC revealed something about how it intends to maintain its impressive growth: It’s going to pay about $1 billion to buy Chellomedia, the owner of a portfolio of European and Latin American cable TV stations, with access to 390 million homes in 138 countries.

As we have previously discussed, AMC makes most of its money in the US out of distribution rather than advertising. The company’s total revenue, made up mainly of retransmission fees (which it charges cable companies to carry its channels) has been on a steady upward trajectory, thanks to an equally steady stream of hit shows.

AMC-quarterly-revenue-Sales_chartbuilder

Now AMC is looking to apply the formula that has worked so well in the US overseas.

AMC already has a growing international audience,  but that accounted for just 8% of its total revenue last year. At the moment, AMC’s hit shows are mainly licensed out to other networks in offshore markets (The Walking Dead, for example, is carried by FOX networks in Europe and Asia). Now, AMC will be able to stuff the channels it has acquired full of its own content, hoping that this will make more people want the channels and it will be able to charge overseas cable companies more to carry them, as it has done in the US.

“We now have combined footprint that is large enough that it gives us the opportunity to consider over [the] mid and long term of distributing our increasingly successful programming on our own networks around the globe, helping to build not just the value with our shows, but our brands and channels as well,” explained CEO Josh Sapan on a  conference call following news of the deal.

The Chellomedia channels are already generating up to $120 million in operating profits,  Stifel Nicholas analyst Ben Mogil estimates, the bulk of which comes from retransmission fees. This extra cash may prove handy amid concerns about rising programming costs as AMC searches for its next hit.

And AMC is moving quickly to replace popular shows that are ending. It’s developing a Breaking Bad prequel, titled Better Call Saul, and an as-yet-unnamed Walking Dead spinoff.  Whether it can avoid the post-Sopranos, pre-Game of Thrones lull suffered by another much loved channel, HBO, remains an open question. But the Chellomedia deal means that if it does unearth another hit,  by cutting out the middlemen abroad, it is likely to hold on to more of the upside from these shows’ global appeal.

 

Top News

Powered by WordPress.com VIP
Follow

Get every new post delivered to your Inbox.

Join 23,927 other followers