AMC Networks says it expects to have 5 million to 7 million subscribers to its SVOD services, and to see $500 million in revenue from the four, by 2024. Not bad, considering they added about 400,000 subs in the quarter, and expect to top 2 million by the end of the year, CEO Josh Sapan told analysts during today’s Q2 2019 earnings call.
“We see significant opportunities with our specialty SVOD services that offer a new way to serve fans,” he said. The four services – Shudder, Sundance Now, Acorn TV and Urban Movie Channel, target very different audiences. Shudder is all about horror. Sundance Now features content “told by unique voices,” Acorn TV is home to British mysteries and dramas and Urban Movie Channel is home to content with a more urban twist.
The services are decidedly niche, and they hold very disparate audiences with little overlap in content. They also all are subscription supported – and likely to stay that way.
“Our services are commercial free; there are no ads in them,” he said. “Today, there are no ads contemplated for them for the future. So, everything we talked about, really does presume and assume, and is commercial free subscription around passion at targeted groups.”
That’s not to say AMC Networks hasn’t looked at ad-supported video-on-demand. It licenses content to AVOD services and is an active participant in AVOD as a result.
But, Sapan said, “the optimum model” for the streaming business remains undetermined. It’s unclear, he said, whether freemium trials, limited ad-formats, and other ad-based models are the right options for building viewership.
“The jury has not made a determination in any geography” about whether the commercial-free option to create traffic is the best entry point, he said.
AMC Networks and change
AMC Networks has seen its revenue streams change dramatically in recent years, with revenues from traditional pay-TV delivery declining to 60% from 90% just a few years ago. And, that’s likely to continue as more subscribers abandon traditional pay-TV and eschew ad-supported programming in the process.
“We believe D2C and owning own intellectual property represents significant growth areas for us,” Sapan said, adding that AMC has seen “very healthy rates of growth” across all four services. That growth is due in part to AMC’s ability to keep churn low by offering a narrow band of content to a narrow band of users.
Viewers, Sapan said, come to the four services to watch very specific content, unlike subscribers to Amazon’s or Netflix’s services that are more general.
“They know what to expect,” Sapan said, something that has led Acorn TV, for example, to have one of the lowest churn rates in the industry.
Increasingly, he said, original content has played a bigger role. “It resonates” with AMC’s subscribers, Sapan said.
Data, analytics and happy customers
While AMC is open to partnering with platforms like Amazon and Apple, it reaches the majority of its D2C customers through its own platform. That allows it immediate and total access to the viewing data being generated by its subscribers, something it doesn’t have access to through partners. Nevertheless, both have been good partners that widen its funnel, he said.
But the data is crucial.
Running content off its own platform is “immediate feedback,” he said. That feedback allows AMC to better see what titles are being watched all the way through, on what devices and during which part of the day, for instance.
The analytics currently help it determine which of its titles to stream. Eventually, said Sapan, it will also help it determine what original content to create.
The bulk of AMC’s D2C viewership currently is US based. But AMC sees international distribution as something that can significantly raises the bar on potential subscriber growth.
By the numbers
For the quarter, AMC Networks:
- Posted profits of $129 million, or $2.25 per share, topping Wall Street forecasts of $1.96 EPS. That’s up from $106 million y/y and EPS of $1.82;
- Adjusted earnings were $149 million ($2.60 per share), compared to $113 million ($1.93 per share).
- Revenue increased 1.4% to $772 million
The bottom line
AMC has been in the streaming game for several years; it represents one of the earlier OTT plays in the industry.
What sets it apart – really what makes it very special – is its understanding that subscriber data is the foundation upon which its business rests. It helps determine content line ups, pricing, even, eventually, what content gets developed.
AMC also has been around long enough to understand that it takes time to develop a streaming business and that, often, multiple small revenue streams that are additive to the overall business may be better than throwing all of your eggs into a single basket.
AMC has no hard and fast playbook for its content, Sapan said. AMC looks at the economics of every show it develops and how it factors into developing each of its services to scale.
“We live and play in a different arena (than other SVOD services),” Sapan said. “And we will follow a pattern that has sensible economics in each instance that balances strategic opportunity against economics.”