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AMC Networks CFO outlines three steps to “economic recovery” in the streaming era


Patrick O’Connell, CFO of AMC Networks, touched on how media and entertainment revolve around streaming sustainability, telling an investor conference Thursday that “there is an economic recovery needed for the media business.”

Speaking at TD Cowen’s 51st Annual Technology, Media and Telecom Conference in New York during a webcast session, he said that comments made by Chairman Jim Dolan late last year that current content monetization mechanisms weren’t working, meant: “Jim said out loud what everyone kind of whispered to each other.

The CFO of AMC Networks, which runs cable channels like AMC, IFC and Sundance TV, as well as streamers like AMC+, Acorn TV and Shudder, told a session at Thursday’s conference that a webcast change was needed.

“Because right now we have the problem that we had one of the best business models of all time with cable networks, we moved to streaming, obviously consumers were thrilled with an abundance of content,” explains O’Connell. “We had produced too much content at too high a price, priced too cheap on the retail side, because it was greenfield (areas to be explored), so everyone was investing in future growth assuming margins in streaming somehow would be something similar to the linear media networks. That’s clearly not the case anymore. So to balance this market, from an economic perspective, I think three things need to happen.”

First, “We as an industry collectively, and AMC is doing all of these things, from a volume perspective, we need to reduce the amount of content we produce,” said AMC Networks’ CFO. “That’s step one. We’ve taken steps to do that. … Every other media company does exactly the same to a greater or lesser extent. I’d say on that note that AMC Networks was unique in that we were less drunk on the streaming über alles proposition than maybe some others and more strategic. … So maybe we were less dazzled by that than others.

In addition to a focus on less content volume, O’Connell advocated a focus on “pricing based on the content itself”, which can be done in several ways. “You can adjust the genres you program a little bit. There is also just market discipline.” With tech giants setting up new streaming companies like Netflix, Apple and others “just had a different kind of perspective on what they were willing to pay for a piece of content, and thus the price of a show you could produce for $5 million in five years moved closer to $10 million just because there was overwhelming demand and limited supply, he predicted an improvement in “equilibrium in terms of content supply and demand,” saying, “There’s also a collective interest here, in the sense that we’re not all outbidding each other for that next kind of shiny thing.”

AMC Networks’ CFO rounded off his list of things to do to “fix” the company with number three, saying “this is actually really important, it’s still emerging, what kind of pricing and packaging of the content itself.” He explained, “We are really in a back-to-basics mode at AMC and I think about the rest of the company as well. The streaming boat cannot carry all the water from a monetization point of view.”

What does this mean? “This means that when we produce a piece of content, we have ownership of it. We can decide to put it on our own and managed platforms, we can license internationally within the window. So all those very traditional moves… we’re going to do it again Companies have also increased prices for their streaming products, “because we need to get a margin that makes economic sense,” O’Connell stressed.

The CFO of AMC Networks concluded, “With those three things, we’ll get to something approaching equilibrium over the next few years.”

Last month, O’Connell said on AMC Networks’ first quarter results conference call that “we have passed peak content investment and continue to expect cash content investment to be approximately $1.1 billion by 2023” , he also emphasized at the time: “Looking beyond that, we expect our investments in cash content to be in the $1 billion region, consistent with our historic pre-pandemic level. This is more than enough content to generate a strong content offering to support our businesses, and frankly represents a rationalization for an earlier period of overinvestment.”

New AMC Networks CEO Kristin Dolan also predicted an “imminent shift to streaming bundles” during the earnings call in early May, telling analysts, “These bundles are starting to gain popularity as the market evolves and consumers look for a more simplified and integrated experience when it comes to managing their various services, with our high-quality content and distinctive brands, AMC Networks is well positioned for this inevitable shift.”

When asked about this on Thursday, O’Connell said that “streaming doesn’t really do things right. It doesn’t manage content as well as maybe it could. And frankly, access to and findability of all services is a real pain point for consumers.”

He stressed: “That’s a real pain point for consumers, so it’s really valuable when media companies work together to solve that. And so streaming bundles make a lot of economic sense to the media companies, they make a lot of sense to consumers as well, just from a user interface, access, discoverability and ease of use perspective. But he stressed that “we’re not going back to the old bundle.”

O’Connell said Amazon is already working on aggregation and others are looking into it as well. “I would say, given the melting pot we’re in right now, there’s a willingness and an openness to have those dialogues that, frankly, didn’t exist even months ago when everyone was like, ‘This is mine, I’m going to own belong to the customer’.” AMC Networks has had conversations with its traditional distributors, technology companies, and “emerging conversations between our peers who own streaming services,” the executive concluded.

Merry C. Vega is a highly respected and accomplished news author. She began her career as a journalist, covering local news for a small-town newspaper. She quickly gained a reputation for her thorough reporting and ability to uncover the truth.

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