James Dolan, interim executive chairman of AMC Networks, made a rare appearance on the company’s quarterly earnings call with Wall Street analysts, addressing a major exec change and the strategy for facing a complicated operating environment.
Asked about reports of M&A overtures and whether he sees AMC Networks continuing to go it alone or merging with another company, Dolan said the priority for now is to make adjustments to enable AMC to make it as a stand-alone business. Down the road, he said, “It could be ‘stay the course,’ it could be M&A or a strategic transaction. We’re very much open to all of those ideas.”
At the top of the call, Dolan said his wife, Kristin, was picked as CEO because the company’s board of directors “concluded that she is the best candidate” after an “extensive search.” The new chief exec (who is separated from James Dolan, though they remain close), had previously been head of advertising analytics firm 605 and a longtime senior exec at Cablevision. She will take the helm on February 27 in the latest major management change at the parent of cable networks like AMC and IFC and a handful of niche streaming services. The company has laid off 20% of its staff and reported weaker results from affiliate sales and advertising. Despite those headwinds, the company topped analysts’ expectations in the fourth quarter, with its earnings prompting a 26% surge in its share price midway through the trading day.
“Based on Kristin’s considerable operational and executive experience for 30-plus years working in media and entertainment, including her prior history managing subscription-based businesses, the board concluded she is the best candidate for the role.” He added that she has “a strong track record of driving institutional change.”
Speaking of change, James Dolan also highlighted the shift under way from wholesaling to retailing.
“The current mechanisms for monetizing content are not working,” he said. “The content industry needs to reorg itself. We’re seeing this now with most media companies beginning to course-correct to better monetize content and improve the economics of their business. We believe large distributors and programmers will lead the way. AMC will follow. Streaming is a retail business. That’s what [direct-to-consumer] means. For now, as the industry continues to evolve, AMC will focus on streamlining our organization, operating more like retailers than wholesalers, driving cash flow and maintain our strong balance sheet. At the same time, we’ll continue to do what we do best, which is make great content.”
In 2020, as Covid pushed streaming to the fore, “there was a lot of optimism about streaming,” Dolan recalled. “The thought process was, at that time, that a streaming customer was worth four or five hundred dollars … based on the idea that they were a lot like cable customers, that they were going to be with you a long time.” Today, the reality has dawned on all streaming players that customers can hop on and off subscription services “with one click of your mouse,” a radically simpler process than the old trucks-and-boxes days when “you really had to work at it.” Prices for streaming “don’t reflect that reality, that a customer can sign up, binge your product for a month and then leave you.”
Shares in AMC Networks, which skidded to multi-year lows a few weeks ago, exploded on the company’s strong fourth-quarter earnings report earlier today. As of mid-day, they were up 25% to around $26 a share, on nearly three times their normal trading volume.
Asked about overall industry consolidation, whether or not mergers include AMC Networks, Dolan said he doesn’t expect another M&A wave akin to the one that reshaped the industry in 2018 and 2019. Key deals during that span included AT&T buying Time Warner, Disney acquiring most of 21st Century Fox and Discovery buying Scripps Networks.
“I don’t think you’ll see the industry pursue a strong consolidation movement because they industry doesn’t know yet how to monetize the content,” Dolan said. “Once they reorganize themselves and start to get a better handle on that and a better strategy for that, then you could see consolidation because it would be consolidation around building stronger products and stronger offerings for the customer and building a better business. Right now, and it’s just my opinion, I don’t see anyone who has the answer to this yet. Without that answer, I don’t get the rationale for pursuing a consolidation strategy.”
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