EXCLUSIVE: This is an important month for AMC Networks and its CEO, Josh Sapan. The company known for critical hits including Mad Men and Breaking Bad hopes to build on the astonishing ratings success of The Walking Dead with a new companion show, Fear the Walking Dead. The title coincidentally also captures Wall Street’s new wariness about TV network companies at a time of cable and satellite consolidation, cord cutting, skinny bundles, ratings declines, and advertising weakness.
AMC Networks’ stock price appreciated 34.5% in 2015 up to August 4, when Disney stunned investors by trimming a financial forecast for ESPN. In the nearly three weeks since then, AMC’s down more than 20%, in line with other major network owners.
Sapan, 65, says he has been preparing for such a moment at the company he has led since 1995, including through its 2011 spinoff from Cablevision Systems. He has invested in original programming for AMC’s networks, which also include IFC, Sundance, and WEtv. The CEO expanded overseas with a surprising $1 billion acquisition last year of European network owner Chellomedia. He represents BBC America after paying $200 million last year to turn it into a joint venture. AMC also raised a lot of eyebrows this year when it announced that, after years of licensing streaming rights to Netflix, it will move new shows to Hulu.
Will these gambles pay off? Sapan’s optimistic — for example, he disagrees with FX chief John Landgraf’s recent observation that there’s “too much television.” Here’s what Sapan told me last week, edited for length and clarity.
DEADLINE: Cable programmers and distributors have long told everyone not to worry about cord cutting. With all that’s come out recently, can we now stipulate that it’s an issue and something you have to be concerned about?
SAPAN: It is certainly an issue, and it is certainly something to think about, reflect on and deal with. I don’t think it’s the only thing to think about, reflect on and deal with. But it is a thing.
DEADLINE: That’s it?
SAPAN: There is a degree of maturity in the industry, and industry maturity brings with it different sets of challenges, different sets of opportunities.
DEADLINE: Does it mean that cable networks — which have been insanely profitable for a long period of time — go from being a 35% margin business to, say, a 25% margin business?
SAPAN: No, I don’t think so. “Maturity” is not a dirty word and it is not inherently negative. It really does mean one has to operate differently. That’s not ignoring it. But it just has its own challenges.
DEADLINE: How would AMC be affected by skinny bundles? If someone comes to you and says “We want AMC and we’ll take IFC, but we don’t want some of the other channels” — that’s a mixed bag for you.
SAPAN: We’ll see how so-called skinny bundles evolve. I would like to think that our company has had in its genetics and in its orientation and in its mindset a belief that there is no free ride in television. Each of the channels we operate are ones that are known, respected, if not adored, by the people who watch them. I think that sets us up fairly well.
DEADLINE: You think all of your channels will make it into the skinny bundles?
SAPAN: I don’t want to say that we’ll be in every skinny bundle. But each of [our] channels does represent something that people really strongly identify with. They stand up and they stand out clearly, as well as mean something.
DEADLINE: Have you learned any concrete lessons, for example about cannibalization, from having AMC and IFC on Dish Network’s Sling TV?
SAPAN: No, we haven’t been proximate enough to the data that comes from Sling to have any significant learnings.
DEADLINE: Would you welcome Apple TV if it offers a skinny bundle? Would that be more of a help or a threat?
SAPAN: We really do welcome alternative means of distribution. We really do believe that what we’ve been doing for a decade-plus and even before that has been actually to prepare for an era that is more like today than yesterday. We’ve declared in a fairly straightforward manner that fairly expensive content is important. And there’ve been certain constituents who’ve raised eyebrows at whether or not the path that we’ve taken is one that is absolutely appropriate. I would say that the manner in which the world has shifted has probably by degree supported that we’ve gone down the right path.
DEADLINE: A lot of investors wonder how long AMC Networks can remain independent. One recent report said that CBS would make a good partner for you. Would it be a good idea for you to team up with a bigger company?
SAPAN: We’ve operated in an environment on the multichannel video retail side that’s been consolidating apace for a decade. During that period of time, and during the last four years since we’ve spun, our channels have increased in importance at the size that we are. Our wholesale rates have escalated above market most of the time. Social media has also created a more level playing field. What seems to matter by degree more is potency and passion, not size.
DEADLINE: Is there anything structural that would prevent you from making a deal?
DEADLINE: Cable programmers are spending more than ever for original shows, yet the ratings keep declining. Are we seeing a game now where networks are trying to win the battle but may lose the war?
SAPAN: There has been increased recognition that programming of importance matters. There’s been a bias that’s shifted to scripted programming. So there are more entities in pursuit of that.
DEADLINE: FX’s John Landgraf was very direct a few weeks ago. He said that there’s too much TV. Do you agree?
SAPAN: No. I would say that the television model is less forgiving than it was in the past and that the hurdle for degrees of success is higher than it was in the past. But I would rhetorically say: are there too many movies being made?
DEADLINE: You could make that argument.
SAPAN: Sure. Are there too many books being written? Maybe. Is there too much music being recorded?
DEADLINE: But as a business.
SAPAN: But the question is, what is one’s expectation about success? What is the bar you have to clear? And that’s a question not about too much, but about expectation of success. How competitive is it supposed to be?
DEADLINE: You have to make money.
SAPAN: You have to make money. So I would say the bar might’ve gone up a bit, yes.
DEADLINE: We’d all love to have 1 million TV shows. But does he have a point that we’re reaching a point where programmers are making so many shows that the investment isn’t worth it?
SAPAN: I think there’s always an evolution in the matter of TV shows that are made and in what is successful and it’s ongoing.
DEADLINE: So does this new Golden Age of television last as far as the eye can see?
SAPAN: I do not see an end to the so-called second Golden Age of television in sight whatsoever. It has great consumer appeal, and what will happen is that the business systems that support it will alter a bit.
DEADLINE: Speaking of business systems, Landgraf also says that he wishes that FX had not sold shows to Netflix. That fed the enemy. Do you feel the same way?
SAPAN: No I don’t. There are trade-offs in the evolution of the business and we calibrate what we do at any point in time. You balance those trade-offs. But it’s neither black nor white.
DEADLINE: Would you classify Netflix now as friend or foe?
SAPAN: We benefited from our relationship with Netflix. We’re going to benefit from our relationship with Hulu. We’ve windowed with great care and wisdom. We’ve been at least as much the beneficiary of the relationships we created with Netflix and Hulu as they have.
DEADLINE: Why did you move your future shows to Hulu?
SAPAN: Hulu is a strong partner. Their growth is a benefit, not a liability. They had an appetite to step up to the type of material that we were doing. We also had considerations outside of the U.S. where we had expanded our channel presence due to acquisitions that we’ve done. We wanted to operate with latitude internationally.
DEADLINE: Netflix also was becoming a competitor to you. They were ready to pick up Better Call Saul if you hadn’t, right?
SAPAN: So it’s rumored, yeah.
DEADLINE: So it’s not merely a carrier of shows. It produces shows that are very much like AMC shows.
SAPAN: People who are in the television business — HBO, Showtime, Starz, Hulu, Amazon, Netflix, FX — are all in one sense competitors. They are all interested in some of the material that we’re interested in. Are they all direct competitors? They’re all competitive by degree inasmuch as each might have a show on that we would want on. Are they drafting off the same economic opportunities? No, they’re all a little different.
DEADLINE: Would you like to see Hulu become an authenticated cable service?
SAPAN: They are doing some of that. It’s their intention to do some authentication….We like authentication. And we like extension of TV into other platforms — anyone who is facilitating that.
DEADLINE: John Malone says that if the cable industry had launched TV Everywhere faster then Netflix would not have had the opening to become the brand name for on-demand viewing.
SAPAN: I have a different perspective. Cable is not one company. Cable is multiple companies with many different channels that it carries so the implementation is not as monolithic.
DEADLINE: Is Fear The Walking Dead a big deal financially for AMC, or is it just another show?
SAPAN: The ability to have a companion to [The Walking Dead] it is a really good opportunity. Better Call Saul [a companion to Breaking Bad] worked out wonderfully.
DEADLINE: What targets does it have to hit for you to consider it a success?
SAPAN: The first target is a creative one. We’re big believers that good material will rise to the top. Does it have the respect of people who are viewing it? Do they think the stories are good, that the characters are good? Do they think it’s been done with real care? So we’re in good shape on that front.
DEADLINE: If you were a movie studio then this would be considered a tentpole: It’s not enough for it to just be successful. It has to be really big. Would you agree?
SAPAN: I wouldn’t say that. We’re not a movie studio. We’re television network and a small studio. We have a different set of economics. We have reasonable expectations about how it will perform and be embraced and accepted. We’ve also had a pattern in the past having shows happily build over time.
DEADLINE: How much time?
SAPAN: Some of our more successful shows built over, in some cases, four or five years. We’re patient not just by sentiment. We’re patient because our business model invites and allows patience.
DEADLINE: Have you decided yet whether to renew Halt And Catch Fire?
SAPAN: No, we’re evaluating it. We really are.
DEADLINE:When do you expect to have a decision?
SAPAN: We just finished [the season] so we’ll look at all the data and will make determinations as we always do about its longevity and its possibilities. We think it was creatively strong.
DEADLINE: You’re producing more of your own shows and you’re becoming more global. Does it change your idea of what makes a good TV program when you have to appeal to audiences that have little in common?
SAPAN: It really does start with story and character. People like great material. It’s a little evident in [AMC Network’s series] Humans. They speak with British accents except for William Hurt, and the show did extremely well in the U.S. Borders are mattering less and language by degree is mattering less. After that there are some really pragmatic considerations. Certain material that’s less individually American or singular or hard to understand may play a little bit better, or is likely to play a little bit better in foreign lands. But I think it’s not smart to give too much weight to that if the compromises how good the material is.
DEADLINE: You have IFC Films, but don’t break out its financials. How’s it doing?
SAPAN: It’s doing reasonably well for us. We manage it quite carefully. We release upwards of 50 films a year and we’ve been working at it for quite some time. We’ve been honing what we do and how we do it.
SAPAN: Yes, profitable.
DEADLINE: Is the role of theaters diminishing in that business?
SAPAN: The role of theaters is smaller than it was, yes.
DEADLINE: And it will continue to diminish?
SAPAN: I’m not so sure exactly how I would project it, but it is certainly smaller than it was.
DEADLINE: You once said that its main value is that it draws creative people into your ecosystem.
SAPAN: There are multiple reasons to have it. First of all it’s profitable. That’s a good thing. Second of all, we’re building a library that is of increasing value. There are now several hundred films in our library. And the third reason is it does give us another point of access to the creative community that we enjoy.
DEADLINE: You have two subscription video on demand streaming services: Sundance Now Doc Club for documentaries, and Shudder.tv for fans of horror. Are these just experiments or is this a business you hope to build?
SAPAN: They are very small today. We think it’s wise to be active in every form of consumption that we can be active in that is economically sensible. The fact that we are running them from here and that they moving along we think is a good and smart thing to do. We’re building up the muscle of what it means to operate services that deal with subscription video-on-demand and all that goes with that. So we’re very pleased to be in it. But it’s very early stages.
DEADLINE: Could they presage a similar direct-to-consumer offering for AMC or other channels?
SAPAN: I don’t know where it all goes. I do know that we’re very pleased to be gaining facility with that capability.
DEADLINE: Five years from now, how does your business divide up between the basic bundle, skinny bundles, direct to consumer, syndicated stuff to Hulu? Are you going to have to have a foot in every one of those areas?
SAPAN: We have to fundamentally be in the content business. We’re marching on the path to own or control more content that’s important. It means that our services should be available on all the machinery that allows them to come alive — I hope with our distribution partners. And that means that we should become very adept at the manner in which people shop, consume, and socialize. We take those principles really seriously. We’ve gone overseas with much more aggression than we ever have. We spent $1 billion buying what’s now called AMC Networks International [formerly Chellomedia]. And we’ve become a digital company in several ways. The shows we make are selectively syndicated and sold to digital outlets. And we’re starting our own services there: We’re gaining facility with how they’re technologically managed, how they’re marketed and how consumers actually remit their bills and either stay with it or disconnect. So we’re doing all those things. And what we’ll do over the next five years is course correct.
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