AMC Networks Chief Takes Aim at Broadcasters

Affluent Viewers, Big Reach Will Drive Upfront Strategy

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'The Walking Dead'
'The Walking Dead' Credit: Gene Page/AMC
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AMC Networks CEO Josh Sapan on Thursday gave advertisers a sneak peek at the company's 2016-17 upfront strategy, characterizing the flagship network as a viable replacement for broadcast TV, while making a case for its apple-cheeked, spendthrift audience.

Speaking to investors during AMCX's fourth-quarter earnings call, Mr. Sapan invoked a phrase coined nearly a decade ago by Turner's then-ad sales capo, David Levy. "Increasingly, the ratings of AMC's original programming are making it a legitimate broadcast replacement for ad buyers, especially amongst younger and more desirable viewers," Mr. Sapan said.

That "broadcast replacement" line was no fluke; Mr. Sapan repeated the phrase during the question-and-answer portion of the call.

Turner introduced the broadcast replacement concept back in 2008, when it began bundling its original series on TNT and TBS as an alternative to the older-skewing, over-priced fare on offer at the Big Four networks. At the time, the idea was to draw more attention to Turner's original scripted series while pumping up its pricing. (At the time, broadcast CPMs were at a 3x premium to top-tier cable.)

Scale and a favorable audience composition should work in AMC's favor as it heads to the negotiations table. Per Nielsen, the home base of "The Walking Dead" and "Better Call Saul" reached 93.6 million subscribers at the end of 2015, down just 1.5% versus 95 million subs in the year-ago period. Last year, AMC finished third among adults age 18-to-49, trailing only ESPN and AMC, and in boosting its target demo 10%, it was the only top 25 cable net to deliver double-digit growth.

Reach aside, the AMC audience also would appear to have a fair amount of discretionary income at its disposal. "Last year, AMC had seven of the top 10 most upscale dramas on TV, a competitive advantage that we will look to capitalize on in the coming upfront," Mr. Sapan said.

Take, for example, the Silicon Prairie drama "Halt and Catch Fire," which returns for its third season on AMC this summer. While the show's live audience is tiny by any measure -- season two averaged a 0.2 rating -- the people who are loyal viewers are particulalry desirable to manufacturers of pricy goods like automobiles and tablets. The audience composition of "Halt" is one of the richest on TV, as nearly half of the show's targeted viewers boast a household income of $100,000 or more.

While Turner's original broadcast replacement scheme was designed to establish pricing parity with the ratings-challenged broadcast nets, AMC isn't exactly in the poor house. The upfront ad rates its secured for "The Walking Dead" and "Fear the Walking Dead" made the two zombie apocalypse dramas the second- and third-priciest scripted shows on TV, trailing only Fox's "Empire." (For what it's worth, season six of "The Walking Dead" is currently out-drawing "Empire" by nearly two whole ratings points, averaging a 6.7 in the 18-49 demo versus the Fox phenom's 4.8, per Nielsen live-plus-same-day data.)

Which is not to say that AMC won't be looking to nail down higher unit costs for its zombie-free series. For example, there's a compelling argument to be made for the martial arts drama "Into the Badlands," which averaged a 1.8 in the dollar demo during its initial six-episode run. While that's a relatively small sample size, the short season out-delivered 59 scripted shows on ABC, CBS, NBC and Fox.

AMC Network in Q4 booked $289 million in domestic ad sales revenues, up 13% when compared with the year-ago period. Full-year ad sales were up 24% to $945 million. Those totals include results at AMC as well as BBC America, IFC, WE tv and Sundance.

"Advertising continues to be a growth area for us," Mr .Sapan said. "Demand for our network remains high with strong relative ad growth as compared to our peers, led by our strongly performing original content."

On the affiliate side of the ledger, distribution revenue grew 12% in Q4 to $273 million, with the total-year 2015 take up 22% to $1.19 billion.