Sapan Lays Out AMC’s Subscription Video Strategy

Streaming investments will yield a ‘very good return,’ CEO says

Like other programmers, AMC Networks is taking baby steps into the over-the-top direct-to-consumer subscription streaming video business.

CEO Josh Sapan outlined the company’s strategy during its earnings call with analysts Thursday.

“In addition to owning more of our content, we are focused on the future and are embracing changing viewing habits by making strategic investments in OTT services that fit well within our programming mandate and appeal to the audiences who now have affection for our brands,” Sapan said.

AMC has already created two premium streaming services, Sundance Now—dedicated to independent film, TV series and documentaries—and Shudder, appealing to horror film—and Walking Dead—fans.

Last year, AMC invested $65 million in RLJ Entertainment, the company behind the British drama streaming service Acorn TV, as well as Urban Movie Channel, which delivers content for African-American audiences.

It also recently invested in the yet-to-be-launched BritBox, an ad-free subscription video-on-demand service developed by BBC Worldwide and ITV, an investment that builds on its relationship with the BBC.

“Those are all subscription, right? None of them have ads. People buy them all. And BritBox is not yet launched, but the pricing is generally between on the lowest end, a little below $5 and on the highest end, a little above $6. So they all have somewhat similar pricing,” Sapan said.

“I think it's early days for these very defined niche SVOD services,” Sapan said in response to a question from analyst Todd Juenger of Sanford C. Bernstein. “What's curious about them is that they're very defined. They have an immediate constituency, and they're available with ubiquity on day one. We don't enter any of them randomly or casually. We believe that each has a serious and fundamental premise and core audience and relationship to our own content.”

Sapan said the services are in areas AMC understands very well.

“We understand who the people are. We understand the material that they like,” he said, adding, “No, I don't think we're over-extended and I don't think we're wide or long. I actually think we're appropriately, and at the right level of risk and investment each being different, involved. And we actually feel that it's a progressive, interesting, highly appropriate, strategic and that will yield a very good return over time.”

Juenger also observed that AMC appeared to be stressing the studio side of its activities.

“We do think that the company is becoming, and has become, more of a studio as opposed to only a channel operator," Sapan said. "And that already has put us in a position of making TV shows that play in our own channels; that go into a subsequent window in the U.S., generally on Hulu or Netflix; that are on our own AMC Global Channel, often in a worldwide simultaneous premiere, which allows us efficiencies in marketing; and that we sell in subsequent windows overseas where we have channels, and if we don't have channels, that we sell to SVOD services where we're not present. So that is essentially sort of standard studio functionality.”

As for whether AMC aimed to create shows for other networks, Sapan said “we have not yet to-date. And we would certainly, if it was a good business, we would entertain it.”

In answering another question from John Janedis of Jefferies LLC, Sapan said that AMC Networks was not in the same position as some other programmers who are looking to prune the number of channels they provide to distributors.

“Some of our peers have 20-plus channels. Some have 15-plus channels. Some have 10-plus channels. We have five channels. So, we have been of the mind for some time that quality matters, brands matter, content matters, engagement matters, investment matters. And you have to matter or you don't get a free lunch for showing up with 22 channels; that a day of reckoning would come when your content would be called to account. And that creating that precedent would be an unwise one,” Sapan said.

“We did expand our portfolio. And we purchased Sundance because we thought it was a brand that was very well defined and that we could contribute to through our editorial resources. And then we purchased a controlling interest in BBC America, because we thought it was a brand that was very well defined that was supported by a substantial content initiative coming from the BBC that we could work with and complement. And so actually, I will say that we think that we have already skinnied our offering down, by which I mean to say, each channel is vibrant. It's well defined. It's potent. And, frankly, collectively, they're under-priced," he said.

“So I think we are uniquely well-positioned, by what we've done, for the changing nature of the landscape and manner of consumption,” Sapan said.