AMC Networks Takes Massive Programming Write-Down As Streaming Doesn’t Grow Fast Enough

Following the news on September 29 that the CEO & COO of AMC Networks Christina Spade would step down after just three months on the job and that massive layoffs were coming, investors got more bad news Dec. 1 when the company disclosed in an SEC filing it would take a restructuring charge of $350-$475 million.

Although the company didn’t put a number on it, the Wall Street Journal reported that as much as 20% of the staff could be let go with the company also taking a massive write down on its content library of $300-$400 million. The reorg of staff is only expected to be in the $50-$75 million range, which will include the cost of severance packages and other administrative changes.

Also included in the charge will be Spade’s pay-out. According to an SEC filing, she is set to receive more than $10 million in severance pay if she was not fired for cause or if she left for good reason.

Like most cable network owners, the company had a terrible third quarter due in large part to “cord-cutting” as consumers fled traditional cable and satellite bundles in favor of streaming video services.

Earnings were announced on November 4, with revenue down 15.9% to $681.8 mil. (versus a 6.2% decline YTD) and adjusted operating income fell 13.5% to $194.3 million (versus -15.7% YTD). Adjusted earnings per share fell 22.0% to $2.09.

Although streaming revenues increased 41% in Q3, with just 11.1 million subscribers this relatively new revenue stream is not able to keep up with the deterioration at its core networks, AMC, BBC America, IFC, Sundance TV and WEtv.

On the company’s Q3 conference call, Spade gave kudos to the prior management team’s foray into streaming, stating “AMC Networks is in the midst of an important transformation with streaming growth momentum and new opportunities that are enabling us to transition to a consumer-focused multi-platform premium content company with a strategic mix of proven and new digital distribution streams.”

Although the company boasted paid streaming subs were up 44% year-over-year in the latest quarter and are expected to rise to 12 million by the end of 2022, the company only added 300K streaming subs in its latest quarter, peanuts compared to other large competitors.

Its streaming operations include AMC+, Acorn TV, Shudder, Sundance Now, ALLBLK and the anime focused HIDIVE online content offering.

The comments from Patrick O’Connell, EVP & CFO, on the earnings call now seem ironic given the huge programming write-down. “Adjusted operating income will be approximately 10% lower than 2021, consistent with our prior guidance due to strategic investments in programming and marketing,” he said. Investors have driven shares down from their 52-week high of $44.66 in February to under $20/share—it closed December 2 at $19.49, down 56.4% from the February high.

Although shares in many of the major cable networks have fallen significantly as cord-cutting has not slowed down as many had predicted, this is a huge decline and both money-losing streaming services and linear cable networks both seem out of favor with Wall Street.