AMC Networks Expects 4 Million SVOD Subs by Year-End

AMC Networks May 5 said it expects to generate 3.5 million to 4 million combined paid subscribers for its four SVOD services — Acorn TV, Shudder, Sundance Now and UMC (Urban Movie Channel) — by the end of the year, two years ahead of the company’s original target.

AMC acquired home entertainment distributor RLJ Entertainment in 2018 for $65 million largely for British-centric programming service Acorn TV and UMC. Notably, Acorn TV launched in the United Kingdom in Q1 — nine years after bowing in the United States as an alternative to Netflix and Amazon Prime Video.

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Separately, AMC, whose signature original programming includes “The Walking Dead,” “Killing Eve,” and “Breaking Bad” spin-off “Better Call Saul,” inked a distribution deal with ViacomCBS ad-supported streaming VOD platform Pluto TV.

“We continue to make significant progress on our digital initiatives … is enabling us to navigate this challenging time and will continue to serve us well when this [coronavirus] environment stabilizes,” CEO Josh Sapan said in a statement.

Indeed, as it is worldwide, the impact of COVID-19 and measures to prevent its spread significantly affected AMC Networks’ ad revenue and pay-TV business in the quarter and going forward.

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Revenue in the quarter dropped 6.4% to $735 million, while operating profit plummeted nearly 30% to $173 million compared to the previous-year period. Beginning in mid-March, the company experienced adverse advertising sales impacts and suspended content production, which has led to delays in the creation and availability of some of its television programming.

Operationally, nearly all AMC Networks employees are working remotely, and the company has restricted business travel. AMC expects current second quarter revenue to fall 30%.

“In what has been a unique operating environment, [we] continue to generate significant levels of free cash flow and remain well capitalized with a strong balance sheet and strong liquidity,” Sapan said.

AMC Networks’ RLJ Entertainment Narrows Q3 Operating Loss

RLJ Entertainment has struggled to be profitable ever since BET founder Robert L. Johnson acquired Acorn Media and Image Entertainment in 2012 to form the home entertainment distributor.

Spurred by over-the-top video successes of Acorn TV and Urban Movie Channel (UMC), AMC acquired majority ownership of RLJ Entertainment in 2018 for $65 million.

AMC Oct. 31 reported RLJE posted third-quarter (ended Sept. 30) net revenue, operating loss and adjusted operating income of $31 million, $1 million and $3 million, respectively.

Robert L. Johnson

For the nine months of the fiscal year, RLJE recorded net revenue, operating loss and AOI of $79 million, $6 million and $5 million, respectively.

RLJE operates under AMC’s “International and Other” segment, which includes AMC Networks International, the company’s international programming businesses; Acorn TV, Shudder, Sundance Now and UMC; Levity Entertainment Group, the company’s production services and comedy venues business; and IFC Films, the company’s independent film distribution business.

“We are optimizing the value and reach of our content in a variety of ways and executing on a plan that will enable us to thrive in a very dynamic and competitive environment,” Josh Sapan, CEO of AMC Networks, said in a statement.

Indeed, Acorn TV recently surpassed 1 million subscribers in North America.

International and Other revenue for the third quarter increased 20.5% to $183 million, operating loss decreased $5 million to a loss of $12 million, and adjusted operating income (AOI) increased $6 million to $13 million, all compared to the prior year period.

International and Other revenue for the nine months increased 30.2% to $533 million, operating loss increased $8 million to a loss of $53 million, and adjusted operating income increased $24 million to $35 million, all compared to the prior year period.

Third quarter revenue primarily reflected $31 million related to the acquisition of RLJE.

Third quarter operating loss and adjusted operating income reflected the increase in revenue as well as an increase in operating expenses. The increase in operating expenses were primarily attributable to the acquisition of RLJE.

As previously disclosed, in connection with the acquisition of RLJE, the AMC acquired RLJE’s 64% interest in Agatha Christie Limited (“ACL”), which manages the intellectual property and publishing rights based on the late author’s works.

As a result of the RLJE acquisition, AMC modified its definition of AOI to include majority owned equity investments. For the third quarter, the company recorded adjusted operating income of $1 million related to ACL. For the nine months of the fiscal year, AMC recorded adjusted operating income of $4 million related to ACL.

 

AMC Networks Upbeat on SVOD as Costs Escalate

When AMC Networks acquired home entertainment distributor RLJ Entertainment for $65 million in 2018, the primary attractions were the company’s over-the-top video services Acorn TV and Urban Movie Channel, in addition to majority ownership of the Agatha Christie IP library.

A year into ownership of RLJE, AMC remains upbeat on SVOD, which include horror-based Shudder and Sundance Now, despite increasing costs associated with supplying original content to the standalone subscription services.

AMC reported that its “International and Other” business unit, which consists of AMC Networks International; IFC Films, independent film distribution business; Levity Entertainment Group, production services and comedy venues business; and RLJ Entertainment, including SVOD, generated second-quarter (ended June 30) operating loss of $27 million, up $16 million from an operating loss of $11 million during the previous-year period. Revenue increased 22.4% to $180 million.

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The increase in operating expenses were primarily attributable to the acquisition of RLJE. Operating loss also reflected restructuring and other related charges of $17 million recorded in connection with the reorganization of the direct-to-consumer businesses.

Regardless, CEO Josh Sapan said AMC is seeing “very healthy rates of growth” among the SVOD services.

“As these services gain sufficient scale, we have been increasingly populating them with original content, which has been resonating with subscribers and is driving our momentum,” Sapan said in a statement. “As we continue to remain focused on creating sought-after premium content — which propels our entire enterprise — we believe direct-to-consumer, along with owning more of our intellectual property and expanding our studio, represent significant growth areas for us.”

Meanwhile, RLJE, which also distributes packaged and digital media, recorded Q2 net revenue, operating loss and adjusted operating income of $26 million, $2 million and $2 million, respectively. For the six months of the fiscal year, net revenue, operating loss and AOI reached $48 million, $5 million and $2 million, respectively.

Finally, AMC recorded adjusted operating income of $2 million related to Agatha Christie Limited, and AOI of $3 million through the first six months.

A reboot of ACL-licensed “Murder on the Orient Express” generated $9.6 million in combined DVD/Blu-ray Disc sales for 20th Century Fox Home Entertainment in 2018. The movie, featuring an ensemble cast led by Kenneth Branagh (who also directed), generated Fox worldwide box office revenue of $346 million in 2017.

RLJ Entertainment Narrows Q1 Loss, Ups Revenue

AMC Networks subsidiary RLJ Entertainment May 1 recorded first-quarter (ended March 31) operating loss of $3 million, which was 51% less than the $6.1 million net loss from the previous-year period when the home entertainment distributor was a separate company. Revenue increased 19% to $22 million from $18.5 million last year.

Last Halloween, AMC acquired majority ownership of RLJE, making Robert L. Johnson’s namesake company a privately-owned subsidiary of AMC, with a 17% minority stake held by Johnson.

In addition to packaged media and digital distribution, AMC sought RLJE’s over-the-top video services — Acorn TV and Urban Movie Channel, which collectively have almost 1 million subscribers, and majority interest in Agatha Christie Limited.

Agatha Christie Limited generated operating income of $2 million.

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AMC’s other branded OTT ventures include Sundance Now and Shudder, which together with RLJE, AMC Networks International, IFC Films and production services company Levity Entertainment Group, generated an operating loss of $14 million on revenue of $171 million.

That compared to an operating loss of $17 million on revenue of $111.7 million during the previous-year period.

Overall, the network behind “The Walking Dead” and “Killing Eve,” reported net income of $143 million on revenue of $784 million. That compared to income of $157 million and revenue of $741 million last year.

“With our focused, well-priced and desirable collection of [business] assets, we occupy a differentiated space in the media landscape,” CEO Josh Sapan said in a statement.

AMC recently greenlit a third “Walking Dead” original series. “Fear the Walking Dead,” just began its fifth season. Launch date for 10th season of ‘The Walking Dead” hasn’t been announced.

AMC Networks Completes Acquisition of RLJ Entertainment

AMC Networks Nov. 1 announced it completed the acquisition of home entertainment distributor RLJ Entertainment, after the latter’s stockholders approved the transaction at a special meeting on Oct. 31.

AMC Networks acquired all of the shares of common stock of RLJE not owned by founder and namesake Robert L. Johnson, for about $59 million in cash.  RLJ Entertainment is now a privately-owned subsidiary of AMC Networks, with Johnson and his affiliates owning a stake of 17%.

RLJE operates two subscription streaming services with about 1 million combined subscribers: Acorn TV, known for its British and international mysteries and dramas; and UMC, which offers films, documentaries, original series and comedy for African-American and urban audiences.

The growth of Acorn TV has been driven by the current release of “A Place to Call Home.” Other pending original programs include, “Agatha Raisin,” “Queens of Mystery” and “London Kills.” UMC original series include “Monogamy” and “5th Ward.”  Recent releases from RLJE Films include MandyArizona and Galveston.

“Our businesses each serve unique audiences and have a strong connection to their viewers,” Miguel Penella, CEO of RLJ Entertainment, said in a statement. “”AMC Networks has been an ideal partner as we developed Acorn TV and UMC for their respective audiences.”

In addition, RLJE owns a majority stake in Agatha Christie Ltd., a popular IP franchise. Last year’s 20st Century Fox Kenneth Branagh-directed adaptation of Murder on the Orient Expressgrossed more than $350 million in worldwide box office. It sold more than $9 million in combined DVD/Blu-ray Disc units from 20thCentury Fox Home Entertainment.

Forthcoming adaptations include Fox’s Death on the Nilesequel as well as the BBC’s recent multi-show deal with Agatha Christie Productions for seven dramas based on the author’s works.

“This acquisition furthers AMC Networks’ direct-to-consumer strategy and accelerates our interests in subscription video-on-demand services that we own and control,” said Josh Sapan, CEO of AMC Networks.

AMC Networks Pulls Trigger on RLJ Entertainment Merger

AMC Networks has agreed to buy majority (50.1%) interest in RLJ Entertainment, including over-the-top video properties Acorn TV and Urban Movie Channel (UMC), for $65 million in cash.

AMC’s $6.25 per share offer represented a 47% increase from its $4.25 per share offer in February. In 2016, AMC entered into a merger-agreement with RLJE, giving $65 million in loans (now valued at $78 million) with the option to acquire the Bethesda, Md.-based home entertainment distributor.

AMC’s move puts a value of $274 million on RLJ Entertainment, which was created in 2012 by Robert L. Johnson through the merger of Image Entertainment and Acorn Media Group. Johnson, who founded and sold Black Entertainment Television (BET) to Viacom, retains a 17% stake in RLJ Entertainment, which becomes a private subsidiary of AMC.

“[Bob Johnson’s] management team is extraordinary, having successfully transitioned Acorn TV from a home video and DVD business to a leading direct-to-consumer subscription service,” Josh Sapan, CEO of AMC Networks, said in a statement.

Acorn TV was launched in 2011 by Acorn Media Group as a competitor to Netflix streaming British TV shows and movies over the Internet. Together with UMC, the two OTT video services have a combined 800,000 monthly subscribers – up 100,000 subs since the end of 2017.

While Sapan appears confused about Acorn TV’s history as a distributor of packaged media (it wasn’t), the CEO is spot on recognizing the value of RLJE’s majority stake in the Agatha Christie library — a brand filled with IP opportunities.

In 2013, RLJE licensed the film rights to Christie’s Murder on the Orient Express to 20th Century Fox, which released a new feature film co-starring and directed by Kenneth Branagh in 2017.

Murder on the Orient Express, which starred Johnny Depp, Michelle Pfeiffer, Judi Dench, Penelope Cruz, Willem Dafoe and Michael Pena, among others, generated $352 million at the global box office. The title generated more than $9 million in combined DVD/Blu-ray Disc sales.

“This acquisition furthers AMC Networks’ digital strategy by meaningfully accelerating our interests in direct-to-consumer ad-free subscription services that we own and control, in addition to providing us with access to strong IP as we continue to diversify our revenue opportunities, placing AMC Networks in a stronger position over the long term,” Sapan said.

RLJ Entertainment in May reported a first-quarter net loss of $6.5 million, compared with a net loss of $6.1 million during the previous-year period. Revenue increased 34% to $18.5 million, from $13.8 million a year ago.

 

 

AMC Networks OTT Business Reduces Q1 Operating Loss

AMC Network May 10 reported a first-quarter (ended March 31) operating loss of $17 million in its over-the-top video and international business unit, which was down 12.5% from an operating loss of $19.2 million during the previous-year period.

Revenue increased 4.3% to $111.3 million from $106.7 million.

The “international and other” segment includes AMC Networks International, the company’s international programming business; IFC Films, the independent film distribution business; and proprietary subscription streaming services, Sundance Now and Shudder.

“Our streaming services, Sundance Now and Shudder, continue to gain traction with consumers,” CEO Josh Sapan said in a statement.

The pay-TV network synonymous for the “Walking Dead” franchise has attempted to diversify through BBC America’s “Killing Eve,” IFC’s “Brockmire,” and “Fear the Walking Dead” and most recently, “The Terror”.

“Our content continues to break through in a cluttered environment,” Sapan said.

Indeed, AMC’s “national networks” unit, which includes AMC, WE tv, BBC America, IFC and SundanceTV; and television production business, AMC Studios, saw revenue increase 2.9% to $633 million from $615 million last year. Operating income increased 0.1% to $250 million.

Revenue was driven by a 10.8% increase in distribution revenue to $407 million, which was primarily due to an increase in content licensing revenue as well as an increase in subscription revenue.

Advertising revenue decreased 8.8% to $226 million. The decrease was related to lower delivery as well as the timing of the airing of original programming, partially offset by higher pricing.

Separately, AMC reiterated plans to acquire outstanding shares of RLJ Entertainment it does not currently own for a purchase price of $4.25 per share in cash. Through this offer, AMC would make RLJE a privately owned subsidiary, with a minority stake held by RLJE founder and namesake, Robert L. Johnson.

RLJE, which includes Image Entertainment, Agatha Christie Ltd., and Acorn Productions (including Acorn TV), is currently trading at $4.51 per share.