Patrick O’Connell, CFO of AMC Networks, emphasised on the transition of media and home entertainment to streaming sustainability on Thursday, saying that “there needs to be financial repair work to the media service.”
In a webcast presentation at TD Cowen’s 51st Annual Technology, Media & & Telecom Conference in New York, he claimed that chairman Jim Dolan’s comments that the current system of making material wealth wasn’t working late in 2015 suggested that “Jim stated aloud what everybody else was sort of whispering to each other.”
The Thursday conference was briefed by the CFO of AMC Networks, which operates such cable television channel brand names as AMC, IFC, and Sundance television, in addition to such banners as AMC+, Acorn Television, and Shudder.
Because of this, O’Connell explained, “we currently have the issue where we had one of the best service models ever with cable television networks, we moved to streaming, and clearly customers were pleased to have a variety of material.” Everyone was investing for future development on the assumption that the margins in streaming would somehow be comparable to the direct media networks because we had too much content produced at a rate that was too expensive and priced on the retail side too cheaply. Unquestionably, that is no longer the case. I think there should be sort of three things happen for this market to be stable from a financial perspective.
The AMC Networks CFO noted that “we have to, as a market collectively, and AMC is doing all of these things too, decrease the quantity of material that we produce.” “That’s the first action. We’ve made steps to do that, and every other media company is acting in a manner that is either more or less similar to ours. On that issue, I’d say AMC Networks was unique because we were more tactical than perhaps some others and less drunk by the idea of streaming as the end all be all. Therefore, we may have been less surprised by that than others.
Along with a focus on reducing content volume, O’Connell demanded a focus on “prices on the material itself,” which can be accomplished in a number of ways. The categories you are configuring can be changed by typing. Additionally, there is merely a market discipline. Since tech giants are now creating their own streaming services, companies like Netflix, Apple, and others “simply had a different type of point of view on what they wanted to pay for a piece of material, so the cost of a programme that you might produce for $5 million five years ago went closer to $10 million, just because there was frustrating demand and limited supply,” according to a report. He predicted a “balance in regards to the supply and need for material,” saying: “There’s a cumulative interest here, too, in regards to we’re not all sort of bidding versus each other for that next sort of glossy thing.”
The head of financing at AMC Networks listed three things to do in order to “fix” the company’s finances, adding that “this is sort of truly essential, it’s still emerging, which is type of rates and product packaging of the material itself.” He said, “At AMC and, I believe, throughout the rest of the firm, we are very much in a back-to-basics mode. From a financial standpoint, the streaming boat can’t bring all the water.
What does that imply? “This shows that we have ownership economics when we make a piece of material. We can decide to put it on our own platforms that we own and manage, and we can certify it internationally inside the window. We’re resuming all of those pretty typical relocations. Businesses have also hiked the prices for their streaming services because “we need to get to a margin that makes financial sense,” as O’Connell put it.
The chief financial officer of AMC Networks concluded, “With those 3 things over the next couple of years, we will get to something approaching a balance.”
We are past peak material investment, and we continue to anticipate money material investment to be around $1.1 billion for 2023, O’Connell had stated on AMC Networks’ first-quarter profits teleconference just last month. At the time, he added: “Looking out even more than that, we prepare for that our money material financial investments will remain in the $1 billion location consistent with our historical pre-pandemic levels.” This information is sufficient to support our services and, truthfully, serves as justification for earlier periods of excessive spending.
The newly appointed CEO of AMC Networks, Kristin Dolan, also foresaw a “upcoming shift to streaming packages,” telling industry insiders: “These packages are starting to acquire traction as the market progresses and customers look for a more streamlined and integrated experience when it comes to handling their numerous services. With our premium content and distinctive brand names, AMC Networks is in an excellent position for this necessary transformation.
O’Connell responded that “streaming does not do particular things truly well” when asked about it on Thursday. It doesn’t sort of curate content the way it might be able to. In all honesty, customers are really uncomfortable with how easy it is to obtain and find services.
“That’s a genuine customer pain point, so there is genuine value in media business interacting to resolve that,” he said. Because of this, streaming services are not only financially advantageous for the media industry but also advantageous for users in terms of accessibility, discoverability, and ease of use. He stated emphatically that “we are not going back to the old package.”
According to O’Connell, Amazon is already involved in this industry of aggregation, and others are also looking into it. Given the situation we’re in now, I would say that there is a determination and an openness to have those dialogues that, honestly, weren’t even present a few months ago when everyone was saying, “This is mine, I’m going to own the client.” AMC Networks has spoken with its traditional suppliers, the innovation industry, and “emerging discussions among our peers that have streaming services,” the executive said.