AMC May Have To Lower Ticket Price


AMC could lose some big bucks if Time Warner Cable either drops the channel from its lineup or, more likely, begins paying less to carry it following the cable operator’s victory in a New York State Supreme Court suit.

According to Stanford C. Bernstein & Co. LLC, the loss of those 10.9 million Time Warner subs could mean a drop in the value of Rainbow-owned AMC by a whopping $267 million in affiliate fees and ad revenues.

Although Time Warner can drop AMC, it will most likely use the ruling to renegotiate its contract to lower its monthly fee to carry the channel. Time Warner currently pays about 23 cents per subscriber in affiliate fees.

If Time Warner cuts a better deal, other cable operators will likely follow suit.
That could reduce the value of Rainbow and parent company Cablevision by between $67 million and $111 million – about 3% of Rainbow’s value, according to Oppenheimer analyst Thomas W. Eagan.
The ruling is not expected to dramatically affect Cablevision’s stock or derail its plan to spin off the Rainbow unit, however.

"We are presently evaluating our relationship with the network going forward," said Time Warner in a statement.

The court ruled AMC had breached its carriage contract with Time Warner by reducing the number of classic movies it airs. AMC has aired younger-skewing movies in recent years to attract a younger audience.

Cable operators contend that to keep their lineups diverse, they should have the right to drop an individual cable network should the network’s content deviate significantly from what it promised to air.

Under Rainbow’s initial contract with Time Warner in 1993, more than 90% of AMC’s movies dated from the 1930s through the 1950s. Soon after Time Warner renewed that contract in 2000, the network rebranded, changing its name from American Movie Classics to AMC, switching to an ad-supported model and slating contemporary movies and original series like Hollywood Shootout, which play to a younger audience.

In doing so, AMC breached the content clause in its carriage agreement and Time Warner threatened to drop the network from its systems. AMC sued to prevent that, and Time Warner counterclaimed.

In Friday’s ruling, the judge pointed out that between 1993 and 2002, AMC’s pre-1960 movies dropped to 18.9% of the network’s slate, while post-1960 movies jumped to 81.1%. Black-and-white flicks dropped from 73.8% to 14.8%.

AMC will immediately appeal the court’s ruling, according to a network spokesman.

"This dispute, one of many over the years between AMC and Time Warner, will not affect the quality of programming that subscribers have come to expect from AMC," said the network in a statement. "We are optimistic that this ruling will be overturned."

One of those "one of many" disputes has been the recent fight over Cablevision's regional sports networks MSG and Fox Sports New York.

Rainbow pulled the networks from Time Warner systems in New York last August and again this spring amid contract negotiations; state officials intervened to help negotiate a new contract.

Other networks have recently re-positioned without opposition from cable systems. The National Network reinvented itself as men’s channel Spike TV and video game-themed G4 acquired technology-news channel TechTV.

AMC has seen steady ratings growth since its re-brand. The movie network grew 16% in prime second quarter 2005, averaging 989,000 total viewers. It also recently inked an $80 million deal with another division of Time Warner for the rights to air 22 Warner Bros. films.

Cablevision subsidiary Rainbow Media also owns IFC, WE: Women’s Entertainment and VOD network MagRack. Time Warner is the second-largest cable company, with 11 million subscribers. AMC reaches 87 million subscribers.

Judge Bernard Fried of State Supreme Court in Manhattan handed down the ruling.