The chair of AMC Networks, James Dolan, helped by a couple of family generations involved in the pay-TV business, has bluntly said that the streaming business model is broken. He added that while some M&A could help, such deals are not the answer.

Analysts at MoffettNathanson (MN) agree with Dolan and say that change in the streaming business is needed, “that much is clear to all”.

“With its pivot to Direct-To-Consumer, AMC has never had so much direct control over its user experience, yet at the same time, the company’s limited size means it can do little more than ride the tides of bigger wave makers,” said MN.

The analysts recognise that AMC is itself in a transition phase, but is stuck between a declining secular linear world that pays its bills and a streaming world with questionable economics.

“Dolan discussed how AMC Networks should be shifting away from the wholesaler business of supplying content to MVPDs and vMVPDs, but instead think about the company as a retailer selling direct-to-consumer. Unfortunately, acting as a retailer comes with many more challenges led by a far fickler cohort of buyers that can cancel at a click of a button. AMC needs a return of some of the dynamics of the previous era, such as bundling, that kept churn low and penetration high. In the meantime, AMC will double down on its efforts to generate cash flows including selling content to third parties, as it did selling Wool to Apple TV+ in 4Q 2022,” continued MN.

The analyst added: “We think AMC Networks essentially waved the white flag on [during its results announcement] in terms of streaming subscriber growth, withdrawing its guidance and announcing it would pull back on marketing spend. While we applaud their restraint in opting not to throw good money after bad, this leaves AMC in the position of trying to extract greater value out of its current 11.8 million subscribers. Given its platforms’ limited content library, we question the pricing power of AMC+ going forward. AMCX is not fully giving up hopes of future growth but is instead opting to double down on strategic partnerships, such as a recently announced deal to bundle AMC+ subscriptions with certain Verizon plans.”

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Categories: Blogs, Broadcast, Business, Inside Satellite

Tags: AMC, AMC Networks, MoffettNathanson