Home Entertainment AMC Networks CFO Outlines Three Steps to “Economic Repair” in the Streaming Age

AMC Networks CFO Outlines Three Steps to “Economic Repair” in the Streaming Age

by News7

AMC Networks CFO Patrick O’Connell elaborated on how media and entertainment is pivoting to streaming sustainability, telling an investor conference on Thursday that “there needs to be economic repair to the media business.”

Speaking at TD Cowen’s 51st Annual Technology, Media & Telecom Conference in New York in a session that was webcast, he said that chairman Jim Dolan’s comments late last year that current content monetization mechanisms weren’t working meant that, “Jim said out loud what everyone else was sort of whispering to each other.”

The CFO of AMC Networks, which operates such cable channel brands as AMC, IFC and Sundance TV, as well as such streamers as AMC+, Acorn TV, and Shudder, told the Thursday conference in a session that was webcast change was needed.

“Because right now, we’ve got the problem where we had one of the best business models of all time with cable networks, we shifted to streaming, obviously consumers were overjoyed to have a plethora of content,” O’Connell explained. “We had too much content produced at too high a price, priced on the retail side too cheaply, because it was greenfield [areas to be explored], so everyone was investing for future growth on the assumption that the margins in streaming would somehow be something similar to the linear media networks. That’s obviously no longer the case. So for there to be equilibrium in this market, from an economic perspective, I think sort of three things have to happen.”

Number one, “we’ve got to, as an industry collectively, and AMC is doing all of these things as well, from a volume perspective reduce the amount of content that we produce,” the AMC Networks CFO said. “That’s step one. We’ve taken steps to do that. … Every other media company is doing the exact same thing to a greater or lesser degree. I would say on that point AMC Networks was unique in that we were less drunk on the thesis of streaming über alles than maybe some others and more strategic. … So we were maybe less blindsided by that than others.”

In addition to a focus on less content volume, O’Connell called for a focus on “pricing on the content itself,” which can be done in different ways. “You can kind of tweak the genres you are programming. There is also just a market discipline.” With tech giants building new streaming businesses, the likes of Netflix, Apple and others “just had a different kind of perspective on what they were willing to pay for a piece of content, and so the price of a show that you could produce for $5 million five years ago went closer to $10 million, only because there was overwhelming demand and limited supply.” He predicted improving “equilibrium in terms of the supply and demand for content,” saying: “There’s a collective interest here, too, in terms of we’re not all kind of bidding against each other for that next kind of shiny thing.”

The AMC Networks finance chief wrapped up his list of things to do to “repair” the business with number three, saying “this is kind of really important, it’s still emerging, which is kind of pricing and packaging of the content itself.” He explained: “We are very much a back-to-basics mode at AMC and I think across the rest of the business as well. The streaming boat can’t carry all the water from a monetization standpoint.”

What does this mean? “This means that when we produce a piece of content, we have ownership economics of that. We can decide to put it on our own owned and operated platforms, we can license internationally within the window. So all those very traditional moves … we are going back to doing.” Companies have also raised the prices for their streaming products, “because we got to get to a margin that makes economic sense,” O’Connell highlighted.

Concluded the AMC Networks CFO: “With those three things over the next few years, we will get to something approaching an equilibrium.”

Last month, O’Connell had said on AMC Networks’ first-quarter earnings conference call said that, “we are past peak content investment, and we continue to expect cash content investment to be approximately $1.1 billion for 2023,” also emphasizing at the time: “Looking out further than that, we anticipate that our cash content investments will be in the $1 billion area consistent with our historic pre-pandemic level. This is more than enough content to drive a strong slate of content to support our businesses, and frankly, represents a rationalization for a prior period of over-investment.”

New AMC Networks CEO Kristin Dolan had on the earnings call in early May also predicted a “forthcoming shift to streaming bundles,” telling analysts: “These bundles are beginning to gain traction as the marketplace evolves and consumers seek a more simplified and integrated experience when it comes to managing their various services. With our high-quality content and distinct brands, AMC Networks occupies a prime position for this inevitable shift.”

Asked about this on Thursday, O’Connell said that “streaming doesn’t do certain things really well. It doesn’t sort of curate content as well as maybe it could. And frankly, the access and the discoverability across services is a real pain point for consumers.”

He highlighted: “That’s a real pain point for consumers, so there is real value in media companies working together to solve that. And so streaming bundles make a ton of economic sense for the media companies, they make sense for consumers as well from just a user interface, access, discoverability and ease of use perspective.” But he highlighted that, “we are not going back to the old bundle.”

O’Connell said that Amazon is already in this business of aggregation, and others are also looking at it. “I would say, given the crucible that we’re in right now, there’s a willingness and an openness to have those dialogues that, frankly, didn’t exist even months ago when everyone was, ‘this is mine, I’m going to own the customer’.” AMC Networks has had talks with its traditional distributors, technology companies and “emerging conversations amongst our peers that have streaming services,” the executive concluded.

Source : HollywoodReporter

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