July 17, 2024

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UPDATED with closing price. Shares in AMC Networks dropped sharply Friday following a shaky fourth-quarter earnings report and a conference call with Wall Street analysts.

The stock initially drifted down by mid-single-digits in pre-market trading after the earnings release, which revealed a 23% drop in domestic ad revenue and a 16% decline in affiliate revenue. Although it was difficult to draw a direct line between management comments on the call and the stock movement later in the morning, the selloff intensified after the call. Shares fell 19% in the first hour of the trading day, to their lowest level since last October. They improved slightly in the afternoon but still finished down 15% at $14.41.

Execs were asked on the call to offer their guidance as to when the company’s top-line revenue might stabilize or even return to growth. “We’ve been very clear for the past year and going forward about how we’re managing the business and making it as efficient as possible,” CEO Kristin Dolan said. “On the top line, we’re really waiting out what’s going on in the industry. What I’m happy about is we continue to produce, through [Entertainment and Studios President Dan McDermott] and the team, really high-quality content.”

Dolan cited McDermott & Co.’s presentations this week at TCA Winter Press Tour. “This is part of our ongoing strategy to own and manage franchises that we can monetize over time,” she said. “As the marketplace sorts itself out, the opportunity to grow topline in the out years continues to be there. I think it’s just going to settle. We’re sort of sticking to our knitting. …. We’re going to stick to the plan and we’re optimistic that over the next year to two years that the ship will right itself in our industry and things will open up again.”

While AMC Networks is often mentioned as a potential M&A target given its size and stake in the increasingly tricky general entertainment programming sector, it has been kept out of the deal arena by the Dolan family’s control of its shares. Kristin Dolan addressed the speculation at the top of the call in her scripted comments. “It’s hard to miss the fascination with scale,” she said. “From our perspective, we see strength in being nimble and independent and value the flexibility this provides us in the marketplace. We have opportunities that are frankly not possible for non-vertically-integrated programmers who are tied to large broadcast networks or distribution businesses. We truly can dance with anyone and are enthusiastic about using this structural advantage that comes with this independence to better serve viewers and our commercial partners.”

Like its peers in the linear TV business reckoning with the onset of streaming, AMC Networks is contending with a host of challenges to its traditional business model. Dolan put a positive spin on the week’s news of the sports streaming venture involving Disney, Fox and Warner Bros. Discovery, saying it showed new possibilities for legacy companies in the streaming era. Despite the stress on affiliate revenue, she said AMC Networks is “feeling positive about our relationships with our distributors,” noting that carriage deals were completed in 2023 for about half of the company’s total footprint.

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