Investors Emerge From Their Panic Rooms as AMC Earnings Soar

'The Walking Dead' Freakout Appears to Be Over

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Relax, everyone, it's still the No. 1 scripted show on TV.
Relax, everyone, it's still the No. 1 scripted show on TV. Credit: Gene Page/AMC

That Wall Street is largely ill-informed when it comes to parsing a series' Nielsen ratings is never more apparent than when the show in question is the biggest on TV. But a recent spate of share price fluctuations suggests that investors in AMC Networks need to pop an Ativan before they react to the demo deliveries of "The Walking Dead."

Now in its sixth season, the zombie-apocalypse serial remains the top-rated scripted show on TV in the all-important adults 18-to-49 demo … and it's not even a close race. According to Nielsen live-plus-same-day data, "The Walking Dead" is averaging a 6.8 rating in the guaranteed 18-to-49-year-old audience, which works out to a little more than 8.60 million targeted viewers, off a base of 13.3 million total viewers. (That 65% hit rate is extraordinary; by way of comparison, 51% of the overall audience for TV's No. 2 show, "Empire," are members of the 18-49 crowd.)

Through the first four episodes of season 6, "The Walking Dead" is down 13% versus the year-ago 7.8 in the demo, and while that's an almost insignificant decline given the absolute ratings numbers, investors appear to be fixated on the weekly deliveries. Case in point: When the live-same-day ratings for the Oct. 11 season premiere came in down 15% versus the season 5 opener, AMCX's share price dropped 5%. A week later, when the ratings dropped another 16%, the stock fell 6% on the day the Nielsen numbers were released.

If nothing else, the knee-jerk reaction would seem to suggest that many investors aren't exactly burdened with a surfeit of braaaiiins. For one thing, the sell-off was precipitated by back-to-back deliveries of a 7.4 and a 6.2, for a two-week average of a 6.8 in the demo. During that same interval, the "Empire" averaged a 4.9.

More importantly, AMC was never in danger of missing its ratings guarantees. And given the simple supply-and-demand dynamics of the TV ad market, a little GRP deflation here or there only served to help boost the network's bottom line. Given the relative scarcity of available inventory in the first pace (there are just eight episodes in each half-season, which translates to around 288 30-second units) and steady demand, AMC's ad sales team actually was in a position to raise the average cost of a spot. The going rate for a :30 in this summer's upfront? A princely $500,000 a pop.

In the two subsequent weeks following the last AMCX stock drop, "TWD" ratings have improved, notching a 6.7 on Oct. 25 and a 6.8 last Sunday, when it went up against "Sunday Night Football" and Game 5 of the World Series. And while the share price has stabilized, analysts on the company's third quarter earnings call still expressed concern over the show's outsized influence on AMC's financial outlook.

For his part, AMC Networks CEO Josh Sapan said the company "perhaps not surprisingly" is "pleased" with the show's performance, reiterating that "The Walking Dead" is "the biggest show on television."

Not every analyst has gone all Chicken Little over the year-over-year ratings slide. In a note to investors posted after the second share drop, Nomura analyst Anthony DiClemente said the flagship series "represents a powerful asset that continues to drive advertising and affiliate monetization." (Speaking of distribution fees, AMC Nets' affiliate revenue grew 20% in the quarter $311 million.) Mr. DiClemente also expressed doubt that "The Walking Dead" would suffer significant ratings fatigue, given its "rabid core fan base."

Speaking to investors Thursday morning, Mr. Sapan contextualized the show's recent declines, noting that "the competition for live viewing has been particularly intense this season," especially among the key sports franchises that are the NFL and Major League Baseball. The CEO went on to add that the ratings are "mildly down" versus the year-ago period, and while he didn't contextualize it as such, it's worth noting that "The Walking Dead" is facing almost no serious competition on the scripted series front. Per Nielsen, the average demo delivery for the 19 new broadcast shows is a meager 1.4 in live-same-day.

Mr. Sapan also noted that AMC owns "The Walking Dead" outright, which gives the company the latitude to syndicate it to Fox's MyNetworkTV and streaming platforms such as Netflix.

The AMC chief went on to talk up the success of the "Walking Dead" companion series "Fear the Walking Dead," which averaged a hearty 7.6 million viewers and a 3.8 demo rating in its inaugural six-week run. The zombie origin story returns next year with a 15-episode order.

AMC Networks' ad revenue soared 52% to $210 million in the third quarter, thanks in large part to strong pricing for the half-dozen installments of "Fear the Walking Dead." Spots sold in the scatter market fetched upwards of $370,000 a pop, according to media buyers.

Shares of AMCX on Thursday closed up 2.94% to $73.87.

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