AMC Network Still Offers ‘Something More’

by Adam Benjamin | April 12, 2013 8:51 am

Shares of AMC Network (NASDAQ:AMCX[1]) have charged forward in 2012, up 31% YTD.

On the strength of hit TV shows like Mad Men and The Walking Dead, AMCX has continued the surge it started back in September, more than tripling the market this year. And from the way things look, there’s still more left in the tank.

Let’s get the negatives out of the way. Yes, AMC had a bad Q4 in 2012; it was still digging out of the Dish Network (NASDAQ:DISH[2]) lawsuit. (The satellite company dropped the network for a few months in the second half of 2012, causing significant collateral damage for AMC.) And yes, AMC is only getting $175 million from that lawsuit — half of what it originally accounted for. But the litigation is over, and the network knew it might end up with much less than $350 million (the Q4 report[3] warned of that).

Meanwhile, AMC continues to set and break records for viewership, especially for The Walking Dead, which averaged more viewers this past season than, well … everything.

An average of 7 million people[4] tuned in each Sunday night to see what was happening in the zombie apocalypse — beating Modern Family, on Disney’s (NYSE:DIS[5]) ABC; The Big Bang Theory, on CBS (NYSE:CBS[6]); and even American Idol, on News Corp’s (NASDAQ:NWSA[7]) FOX.

Incremental increases in viewership for shows like The Walking Dead and Mad Men have driven ad revenues up, and AMC knows that its future depends on original programming. The network has consistently been adding scripted and unscripted original shows since Mad Men debuted in 2007. And a recent redesign of the company logo — accompanied by the new slogan, “Something More” — suggests that AMC is looking intently toward the future.

The company also inked a multiyear deal[8] with Rogers Communications (PINK:RCIAF[9]) to continue offering HD programming in Canada, plus a partnership[10] with Anchor Bay for home entertainment distribution. Anchor Bay handled DVD distribution for The Walking Dead’s first two seasons, and now AMC is working with that company to release shows from some of its peripheral channels like IFC and Sundance Channel.

AMC is starting to invest more in those channels, hoping to improve their lagging viewership. On Wednesday, IFC announced a slate of 11 new projects[11], including original films as well as pilot scripts. And Sundance Channel is gearing up for the premiere of its first fully owned series, Rectify, on April 22, and will also begin airing repeats of AMC’s critically adored series Breaking Bad.

AMC understands the importance of online distribution, too. (Mad Men’s season six premiere debuted as the No. 1 episode and TV series on Apple’s (NASDAQ:AAPL[12]) iTunes this week.) The network is researching opportunities[13] to supplement its current online offering, Sundance Now, which offers digital distribution of independent films.

Recent price target upgrades for AMCX — like Thursday’s bump from Stifel Nicolaus, up to $70 — aren’t drastic, but they have been fairly consistent. And I think there’s a little bit further to go. Mad Men still has one more season after this year, and The Walking Dead will likely have a few more seasons than that. Of course, long-term success will depend on the quality of programming post-Mad Men, but the investments in IFC and Sundance should help diversify AMC’s revenues.

If you believe AMC President Charlie Collier’s comments[14] about the “deep bench” of new programming, AMCX is a buy. If you think its success started with Don Draper and ends with Rick Grimes, I’d recommend holding until The Walking Dead concludes.

But personally? I think there’s plenty more where Don came from.

Adam Benjamin is an Assistant Editor at At the time of publication, he had no positions in the securities mentioned.

  1. AMCX:
  2. DISH:
  3. Q4 report:
  4. 7 million people:
  5. DIS:
  6. CBS:
  7. NWSA:
  8. multiyear deal:
  9. RCIAF:
  10. plus a partnership:
  11. 11 new projects:
  12. AAPL:
  13. researching opportunities:
  14. Charlie Collier’s comments:

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