AMC hopes stake in BBC America will increase carriage-fee leverage

AMC Network’s $200 million deal to acquire just less than half of BBC America is a good indication of just how much tougher it has become to grow organically in the pay-TV ecosystem.

The joint venture gives AMC – home to hit shows like The Walking Dead and Mad Men – a 49.9% stake in the U.S. arm of BBC Worldwide, and will see AMC running the affiliate and ad sales operations of BBC America. For its part, BBC will have to continue churning out hit series like Orphan Black, Dr. Who and Top Gear to the standards of the publicly supported British broadcasting institution.

But the real deal is in the hoped-for leverage the JV gives AMC in carriage negotiations.

Changing TV viewing habits and increased competition from other cable networks and over-the-top providers like Netflix and Amazon Prime are changing the value metrics of cable networks, which saw years of solid growth and increasing viewership though the ‘90s and ‘00s.

That’s changed.

The Top 40 cable networks have lost about 3% of their audience over the past four years, or about 3.2 million viewers each. That decline is making it difficult for them to get the carriage fees they’re shooting for, and also has cost them in advertising revenue.

Cable networks are looking to evolve and avoid losing their position in the ecosystem.

For example, Steve Burke, CEO and President of NBCUniversal said during Comcast’s earnings call Thursday that its USA Network would begin to run more sports programming – it had a big run last winter with English Premier League Soccer while NBC and NBCSN carried the Olympic Games. He also promised more original content.

“We’re going to be investing more in original programming,” he said. “We’re changing the lens on that programming, if you went back five years or so USA was in the business of creating blue sky procedurals and we’re much more interested serialized slightly edgier content.”

Burke promised “a whole variety of changes,” but warned “the sector is unlikely to have ratings performance over the next five or 10 years, that’s as good it was over the previous five or 10 simply because its more competitive and there’s more technological change out there.”

Turner Broadcasting chief John Martin also promised changes at TBS and TNT in the coming year, vowing to double the spend on original programming from about $500 million each to $1 billion at each of the networks.

In AMC’s case, it’s hoping the stake in BBC America will give it additional clout when it tries to negotiate carriage fees for AMC, sister networks Sundance Channel and IFC, something that has been problematic in recent years.

“We will be essential to distributors because we will be essential to their customers,” AMC CEO Josh Sapan told Bloomberg. “With that, you can get pricing power.”

AMC has had several big carriage fights in recent years, one of the most notable with Dish Network in 2012 that resulted in it streaming the season premiere of Breaking Bad to blacked out Dish customers.

Also in 2012, AMC went toe-to-toe with AT&T, which also threatened to drop AMC from its U-verse lineup because AMC was “seeking an excessive rate increase.”

AMC has been able to ride Breaking Bad and Mad Men to the bank, but as The Walking Dead ages (already in Season 5, the shows executives say they have plans through 12 seasons), it may be looking for more than original content to help keep carriage fees high.

Enter BBC America.

Stay tuned.

Jim O’Neill is Editor of Videomind and Principal Analyst at Brightcove. You can follow him on Twitter @JimONeillMedia and on LinkedIn