AMC’s Triumphs Are Adding Value
Emmys for 'Trail,’ 'Mad Men’ Cachet Are Bolstering Net
By Linda Moss -- Multichannel News, 9/23/2007 8:00:00 PM
AMC is basking in the kind of accolades that usually are lavished on networks like HBO, FX and, most recently, Showtime.
And that could make the ad-supported movie channel more alluring to a buyer if parent Cablevision Systems decides to put it on the block.
At the Primetime Emmy Awards in Los Angeles a week ago, AMC walked off with three prizes, all stemming from its record-breaking miniseries Broken Trail. The Western won the Emmy as the best miniseries or movie, while its stars — Robert Duvall and Thomas Haden Church — got gold statues for best actor and best supporting actor, respectively. The miniseries also won a Creative Arts Emmy for casting one week earlier.
Those weren’t AMC’s only recent accomplishments. The network’s original dramatic series, Mad Men, has been showered with acclaim. Last week, the network renewed the breakout scripted show, whose finale is Oct. 18.
“Mad Men has put AMC on the map, critically speaking, and even is giving the channel a 'hip’ and cutting-edge vibe,” TV Guide senior TV critic Matt Roush said. “Who saw that coming? I surely didn’t. This very much reminds me of when FX launched The Shield, and a brand was instantly and boldly redefined.”
AMC’s success could help make the network more attractive to suitors at a time when Cablevision is weighing whether to shed some properties.
In a proxy filing this month, the Dolan family said it might sell off assets to help finance its $10.6 billion proposal to take the cable company private. Several Wall Street analysts are predicting that Cablevision will aggressively shop around its national Rainbow Media Holdings’ networks — namely AMC, IFC, WE TV and Fuse.
| Cable’s Emmy Haul | ||
|---|---|---|
| In total, cable networks took home 12 statuettes from the 2007 Primetime Emmy Awards. Here is what the medium won in specific categories: | ||
| Category | Winner | Network |
| SOURCE: Academy of Television Arts & Sciences |
||
| Outstanding Performing Actor, Comedy Series | Jeremy Piven, Entourage | HBO |
| Outstanding Supporting Actor, Miniseries or Movie | Thomas Haden Church, Broken Trail | AMC |
| Outstanding Actor, Miniseries or Movie | Robert Duvall, Broken Trail | AMC |
| Outstanding Miniseries | Broken Trail | AMC |
| Outstanding Directing For a Drama Series | Alan Taylor, The Sopranos, “Kennedy and Heidi” | HBO |
| Outstanding Writing For a Drama Series | David Chase, The Sopranos, “Made In America” | HBO |
| Outstanding Variety, Music or Comedy Series | The Daily Show With Jon Stewart | Comedy Central |
| Outstanding Supporting Actress In a Miniseries or Movie | Judy Davis, The Starter Wife | USA |
| Outstanding Made for Television Movie | Bury My Heart At Wounded Knee | HBO |
| Outstanding Creative Achievement In Interactive Television | Current TV | currenttv.com |
| Outstanding Lead Actor In a Comedy Series | Ricky Gervais, Extras | HBO |
| Outstanding Drama Series | The Sopranos | HBO |
NET WORTH
Accolades such as Emmy Awards may not directly make AMC more attractive as an acquisition, but the network’s current strategy of creating quality original programming does, according to Sanford C. Bernstein analyst Craig Moffett.
“AMC is in the process of trying to morph itself from being an old-movie channel to having a mix of original programming that makes it less dispensable,” Moffett said. “The problem is that movies are quickly becoming a commodity and that’s pretty well-trod ground.
“HBO wrote the playbook for how to do that transition years ago. Not everybody can be HBO,” he said. “But efforts like Mad Men and that sort of thing show that they’re [AMC] not asleep at the switch. There’s tremendous risk associated with being just another outlet for old movies.”
On stage during the Sept. 16 Emmy Awards ceremony, Duvall gave a shout-out to Ed Carroll, president of Rainbow Entertainment Services. Last week, Carroll said AMC’s Broken Trail Emmy Awards, will have a halo effect on the network.
“The Emmy does reinforce the message that AMC is producing top-quality originals, and that’s a very positive message for our distributors and for advertisers,” Carroll said. “Originals of this quality are used increasingly by [cable operators]. It gives them something to shout about on their VOD platform.”
For example, the country’s major cable companies are offering Mad Men on demand, and the show “has crossed 1 million-user hits on VOD across our MSO base,” according to Carroll. In addition, Mad Men has consistently been among the Top 10 TV-series downloads on Apple’s iTunes Music Store, he said.
“So it’s prospering on the channel and it’s prospering in terms of our distributor base in a VOD incarnation,” Carroll said.
IN THE SCRIPT
AMC will “continue to be 90% films,” according to Carroll, but the network is launching original scripted series like Mad Men to build viewing.
“What we need to do, over time, is get our viewers in the habit of weekly destination viewing on AMC, which is historically not how people watch a movie network,” Carroll said. “We think Mad Men is a pretty good start there as appointment television, and we’ll build off that.”
Both Mad Men and Broken Trail fit the model AMC has established for its scripted fare.
“We set out very consciously to make originals that are cinematic, that have high production values, that are presented in a filmic style and are often in a distinctive time and place,” Carroll said.
Broken Trail, which AMC will replay on Oct. 1, broke ratings records last year for the network and basic cable, attracting 9.7 million viewers in its premiere.
“It was the most-watched mini-series on basic cable in about five years,” Carroll said.
To date Mad Men — set in the politically incorrect world of a Madison Avenue ad agency in 1960 — has averaged a 0.8 household ratings, or 901,000 households and 1.1 million overall viewers, according to a Disney ABC Cable Networks analysis of Nielsen Media Research.
AMC just ordered 13 more installments of Mad Men.
“It’s really put them on the map,” said Carat USA senior vice president and director of programming services Shari Anne Brill. “You really had to take notice and look at the network because of Mad Men.
“Maybe Mad Men made us [ad agencies] take notice because it’s about our history. It’s about us. Even though it’s seemingly kind of insidery, it’s done a very good job of retaining viewers from week to week.”
Even with Mad Men, AMC’s household rating was down 18% this summer versus last, to a 0.9 from a 1.1, suffering in part because of the comparison to last year’s high Broken Trail numbers, according to network officials.
BREAKING OUT
AMC will premiere its next scripted series, Breaking Bad, in January and is targeting early 2009 for a new miniseries.
Set in New Mexico, Breaking Bad is about a desperate teacher who turns to crime to help his family.
AMC also has a big development slate, which includes Western projects with Church. And within the past month, Duvall came in to pitch a Western on the Pony Express.
“We were sufficiently interested to commission a script,” Carroll said. “That’s in a very early stage of development, but obviously we liked the pitch. We have a good track record with Duvall and we would be interested in working with him again if the material is right.”
There has been speculation for years about AMC, IFC and WE being on the block, but Cablevision reportedly was seeking too high a price. Indie-movie chief Harvey Weinstein was once reported to be interested in IFC and Fuse, and Liberty Media earlier this year was cited as a potential buyer for several Rainbow networks.
Cablevision sold off part of its programming portfolio in 2002, when it sold Bravo to NBC Universal for $1.25 billion.
This time, Wall Street analysts said, chances are more likely that the Dolans — eager to finally succeed in taking Cablevision private — will make a much more serious effort to divest AMC and its sister services.
“The high degree of debt that they’re going to be taking on [to take Cablevision private], and their decreased core operational outlook because of Verizon competition, might make them a little more incentive-ized to sell it at this point,” said Miller Tabak & Co. analyst David Joyce. “So that’s why I think there’s probably some more teeth to this possibility now.”
Oppenheimer & Co. analyst Tom Eagan also laid odds that Cablevision will unload its national networks.
“The Dolans have displayed that they’re interested in separating out the assets, they’ve tried a separate stock [for Rainbow Media], twice,” Eagan said. “Now they feel as though there’s less reason to keep them together, and they can use it to help finance the acquisition.”
AD VALUE
With its 92.2 million subscribers, AMC is Rainbow’s crown jewel, the biggest cash-flow generator among its national networks.
This year, SNL Kagan is projecting that AMC will garner $400 million in revenue, with $149.8 million in net ad sales and $247.9 million from license fees. The channel’s monthly license fee is averaging 23 cents.
AMC has transformed itself from a commercial-free service to one that runs ads, successfully creating a second revenue stream in addition to collecting affiliate fees, according to SNL Kagan senior analyst Derek Baine.
“They’ve been doing pretty well in ad sales,” he said. “They had $155 million in [gross] ad revenue last year, and they had nothing in 1999.”
Analyst Joyce has put a $2.1 billion valuation on AMC, IFC and WE, with AMC at $915 million, or about $19.25 per subscriber. Eagan said his valuation on the three networks is about $3 billion, or $15 to $18 a subscriber, which he considers a conservative estimate.
Citigroup last year offered a valuation of $3.74 billion, based on a multiple of 13 times 2007 cash flow (earnings before interest, taxes, depreciation and amortization) of $288 million for AMC, IFC and WE.
As a whole, the relatively small Rainbow group — lacking brands as strong as an MTV or an ESPN, or a huge number of channels — does not wield same clout in contract negotiations with distributors as networks owned by major media conglomerates.
That means that Rainbow networks such as AMC can’t command big license-fee increases from affiliates, and that it’s vulnerable in terms retaining its much-valued analog slots on cable systems, according to Moffett. He values AMC, IFC and WE at roughly $2.5 billion.
“AMC generates the lion’s share of the EBITDA at Rainbow, but also faces some of the more difficult strategic challenges,” Moffett said
SOLD SEPARATELY?
“It is nearly fully distributed on analog cable systems at a time when all of the operators, especially Comcast, are looking for ways to pare down their analog lineup,” he said. “AMC just doesn’t have the same kind of negotiating leverage that the Viacom and Disney and News Corp. channels have. So it faces a tough challenge of maintaining its full-distribution status.”
In recent weeks, Comcast moved AMC from analog to digital on its system in Richmond, Va., he noted. As part of a media conglomerate’s cable portfolio, though, AMC could “be more secure,” according to Moffett.
NBC Universal, which is reportedly in talks to buy Oxygen, might also be a potential buyer for AMC, Eagan said. Joyce pegged Viacom, Time Warner Inc. and News Corp. as others who might want to purchase the Rainbow services.
“They don’t have to be sold as a group,” he said. “They can be sold individually, and AMC would obviously be the most desirable out of this group.”
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