Q1 2021 AMC Networks Inc Earnings Call
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Good day and thank you for standing by welcome to AMC networks first quarter 2021 earnings call.
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I'd now like to hand, the conference over to your host today, Mr. Nick Fever head of Investor Relations.
Thank you good morning, and welcome to the AMC networks first quarter 2021 earnings conference call joining.
Joining us this morning are Josh state that President and Chief Executive Officer.
Ed Carroll, Chief Operating Officer, Inc.
Chris Spade Chief Financial Officer.
Today, we will begin with prepared remarks, and then we will open the call for questions.
You do not have a copy of today's release it is available on our website at AMC networks dotcom.
Before we begin I would like to remind everyone that this call may include certain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.
Any such forward looking statements are not guarantees of future performance or results and involve risks and uncertainties that could cause actual results to differ.
Please refer to AMC networks S E T filings discussion of risks and uncertainties.
The company disclaims any obligation to update any forward looking statements made on this call.
On today's call, we will discuss certain non-GAAP financial measures.
Wired definitions and reconciliations can be found at the end of the earnings press release issued today.
With that I would now like to turn the call over to Josh.
Good morning, and thank you for joining us today, you'll hear prepared remarks from me.
From our CLO, Ed Carroll, and our CFO, Chris speed before we open up to call for questions I'll.
I'll spend a few minutes talking about the pivot we continued to make in our fundamental business.
Ed will discuss several of our operational highlights and Chris will review our financial performance.
<unk> discussion of our new operating segments, which we noted in the earnings press release, we issued earlier this morning.
With regard to our new operating segments I'll briefly say that we've made this change in order to best reflect our ongoing business transformation.
This includes taking a multi platform distribution approach to maximizing the value with our compelling content, particularly.
Particularly as we retain more ownership rights to that content.
This multi platform approach today includes monetizing our content across our vibrant and growing streaming platforms.
Our linear and international channels as well as through selective content licensing and.
And we think this new segmentation best represents our operational approach our earnings release noted revenue impacts for the first quarter related to content licensing primarily due to timing of fear the walking dead and one less episodes of the walking dead.
Excluding this impact total revenue grew low to mid single digits for the first quarter largely driven by screening revenue growth Chris will discuss this in greater detail in her remarks.
In the first quarter of all AMC networks had solid performance driven by continued momentum from our streaming services supported by our strong content.
We continue to maintain a strong financial profile with a solid balance sheet with $1 billion in cash and net leverage of two four times.
We have returned to shareholders almost one $4 billion over the past several years.
Our buyback program is retired almost 46% of the shares outstanding since inception.
And even with our streaming investments, we expect continued healthy levels of free cash flow.
As we indicated on our last call we doubled the number of our paid streaming subs in 2020 to end the year with more than 6 million paid subscribers in aggregate across our services.
I'm very pleased to say that we remain on track to meet the targets we outlined in our prior call in which we forecast that we'll end 2021 with more than 9 million subscribers.
The momentum in our screening business continues to surpass our original expectations and streaming is now the most significant growth area of our company.
We had a strong quarter across all of our streaming services from particularly healthy demand for AMC plus premium bundled streaming offering as well as for our Sundance now in all black targeted services.
By having multiple services, we are able to take advantage of content and marketing opportunities quarter to quarter and service by service.
As a result comparatively we are less impacted by the availability of tent pole events in any one month or quarter as we grow subscribers interested in the depth of content, we offer in each area that we offer operators.
As we indicated in our last call. We are on a clear path to more than triple our aggregate subscribers by 2025 at.
At which point, we anticipate having between 20 and 25 million paid subscribers.
A range, which will make screaming the company's largest revenue segment, and which will be very meaningful for AMC networks.
Each of our offerings for People's very specific interests and passions with a clear proposition, whether it's British mysteries, and dramas with Acorn TV or horror and suspense with sugar.
This reflects a quite differentiated approach to screening as compared to the larger something for everyone offerings that aim to appeal to every member of household.
And it is wire services are being purchased in addition to.
And is it absolute complement to the large general entertainment offerings.
Our streaming business model provides us with several critical benefits.
First by targeting specific content areas, we are developing loyal and devoted audiences, who have specific enthusiasm for our material and seek out our services for the depth of content, we offer which they can't get anywhere else.
Our targeted approach also enables passionate fan communities.
One around our content.
These very attractive and unique subscriber dynamics resulted in high engagement, which in turn contribute to generally lower subscriber acquisition costs.
And lower churn and for.
We believe Acorn is among the lowest churn of any U S streaming service.
In addition, because we offer discrete areas of editorial interest that our subscribers seek out with absolute intention we.
We believe our services have sustainable long term stickiness as well as pricing power.
And by enabling our deep library content and expanding our deep libraries of content.
We are building loyal and vibrant content communities, which we can continue to grow in multiple ways.
Another benefit of our model what relates to the efficiency of our content costs.
Because you're only focused on the shows that we know our subscribers want identify with and have affinity for we don't need massive content pipelines that require billions and in some cases tens of billions of dollars in content spend.
Rather by carefully curating and focusing the content offerings in our platforms.
The bigger shows were in constant in concert with our thematic libraries to offer a familiar destination to our subscribers.
A world where the content that makes headlines is often shifting from one service to the next week by week and month by month.
This provides us with a very attractive economic model.
That has inherent deficiencies that continue to hold and build even as we continue to grow these services.
This results in high subscriber lifetime value and very strong margin potential for us.
Regarding our AMC plus AD free premium bundled service had mentioned earlier.
This is the newest service in our portfolio that we launched late last year.
We're seeing higher engagement and strong growth for it.
AMC plus is a rich offering that combines the strength and curation of our targeted the streaming platforms by including Shudder and Sundance now in addition to the high quality content users know from our linear channels AMC BBC America.
<unk> and Sundance TV with.
With a focus on two distinct content areas from them.
Character led prestige dramas, including shows like better call Saul.
<unk> and gangs of London.
And epic World shows with series like a discovery of witches and.
And shows in the walking dead universe.
It's worth noting that we created AMC plus with the active participation of our Mvpds partners and it is an offer that very much aligns our interest with theirs as we work together to provide multiple options for their customers.
We continue to inhabit the Mvpds basic cable video world with our high value low cost linear channels, well now also providing them with high quality streaming offerings to sell to their broadband only subscribers.
And importantly to AMC plus youre.
You are able to expand the reach of the AMC brand from.
Roughly $85 million or so U S cable video subscribers to a universe in the U S. That includes every broadband home available now in the future.
Distributor interest in our streaming offerings is evidenced in the wide distribution. We have to date. It includes Comcast AT&T dish and sling digital platforms, such as Amazon channels, Apple TV channels, and Roku and most recently the addition of Youtube TV, which began offering.
Streaming services just last month.
So this relationship with our Mvpds and which we inhibit two shelves. If you will of their stores represents a significant change and puts us in greater harmony with them.
Turning briefly to advertising if I may.
While we had lower inventory due to content shift and continued macro ratings pressure from the quarter.
We're seeing a strong scatter marketplace with very healthy demand for high quality content.
Additionally, we are seeing accelerating growth from the evolving Avon and SaaS channel space and we are focused on reaching new audiences for their content.
We also continue to focus on making advance advances and new AD related technologies and applications, which Ed will speak to in more detail in his remarks.
So I'll close my portion by noting that the transition of the company.
Should be the worldwide leader in targeted streaming on the strength of our focused strong content continues on track.
The support of our distribution partners for our student efforts and our advanced advertising strides are providing us with both stability and momentum.
We are very confident about our strong programming portfolio.
Led by our seasoned operating team that has a proven ability to identify engage and retain targeted audiences.
We believe the high viewer engagement Fisher.
Economic model and pricing power of our streaming offerings provide us with really important strategic advantages.
Which when coupled with our valuable linear channel offerings will fuel our growth and will position us extremely well over the near mid and long term.
With that I'd like to turn the call over to Ed Carroll to review.
Operational highlights.
Thanks, Josh.
Josh mentioned, we're continuing to see success with our targeted streaming strategy, which is focused on specific areas of interest and programming genres as opposed to the broader something for every one approach that is becoming the norm more than just acquiring subscribers. We are building communities around our unique services and important distinction and one that we are finding potent.
As we acquire and retain customers.
This targeted approach allows us to apply performance marketing tactics targeting specific audiences based on their areas of interest and consumption.
So valuable to us has been the use of our linear networks to reach potential subscribers, which remains one of the most powerful and efficient marketing channels available.
Cash walk through our individual services, let me just saw for a few operational and content highlights AMC plus our newest and broadest offering had a very successful quarter AMC plus just launched on the Apple Amazon and Roku platforms late last year. So we are in early days, but we're finding a strong appetite for the high quality.
For the dramas from AMC, BBC America, and our other entertainment networks, our ability to find and develop original content has differentiated our linear networks for years. We are applying these same skills to streaming with an audience targeted focus that gives us a dedicated line to succeed in a competitive environment.
In the first quarter AMC plus featured six new episodes of the walking dead, which were constructed in a way that allowed them to be produced during the COVID-19 lockdown to lessen the time gap between the seasons 10 and 11. We also premiered the widely anticipated second season of a discovery of witches other theories that saw strong.
Long viewing on AMC plus in the quarter included gangs of London, the walking dead World beyond and Riviera as well as earlier AMC original series like Mad men and Hell on wheels.
All black completed a successful rebrand consistent with our aspiration to create the number one streaming service in the world focused on black content and Black storytellers all black for success in the first quarter requests a number of genres, including comedy with a new original series millennials about for Twentysomething man.
<unk>, who are roommates became the top title of March a pair of dramas double cross in our house divided continued to have strong utilization as well and all black launched a new weekly talk show called Social Society hosted by Kendall Kindle, which features music comedy and a round table with pointed.
<unk> about black culture and politics.
On Acorn TV, our original series blood land starring James Nesbitt was popular in March blood lands is a four part BBC thriller co executive produced by the creator of body Guard. The story follows a veteran detective.
On a cold case in northern Ireland involving a serial killer during the troubles.
Broken wood mysteries in Midsummer murders for a pair of other dramatic series that experienced high utilization on eight corn during the first quarter.
On shudder at the original film host became an extremely popular title generating a lot of attention among horror thriller fans.
This film started as a short on social media about zoom seance. It was noticed by shudder and quickly produced as a full length feature.
Also in moving news Shudder will bring its members a coveted lost George Romero film the amusement park this summer.
April shutter celebrated halfway to Halloween month, which is typically its second busiest month of the year. This year's installment featured the return of a creep show the number one original series and shut our history for a second season more than half of all shutter members watched at least one episode of season. One so we're happy to have <unk>.
Show back on the platform.
I think it's worth pausing to note the high utilization of our most popular series among subscribers toward targeted streaming services are most popular titles like the ones. I've. Just mentioned are typically watch by 30% to 50% of our viewers within just a few weeks of being made available this level of interest underscores the knarr.
<unk> affinity among our members for the targeted content that we offer.
And when we look at our top five most streamed series on each of our for targeted services in the first quarter.
So that would be 20 series and all 19 of them were produced or co produced at a cost to the platform and the six figures per episode one was produced in the low seven figures per episode.
I think this underscores the model, we have developed at finding and making content with a reasonable level of investment that services a specific audience.
Some of our targeted streaming services, most notably Acorn and shutter have begun to launch in international markets and we're seeing the same affinity is as we are here in the U S. Our plan is to continue to expand into territories, where we can model our return on investment.
Turning to production and development I am pleased to say that the production of new content for our linear networks and streaming services is back in full swing. We have three series in the walking dead universe and production simultaneously for the first time ever the walking dead fear, the walking dead and the walking dead World beyond.
In Boston, we just wrapped production of a highly anticipated new series called Kevin can F himself starring Andy Murphy in her next TV role. Following Shits Creek. This will premiere on AMC, plus and AMC in June.
Better call Saul is in production and Albuquerque, and will premiere on AMC plus an AMC early next year and in Chicago, We are in production on a gritty courtroom and police drama from Peter Moffett, who created the night of it's called 61st Street and start the remarkable courtney be events.
Josh mentioned AD sales and the very strong scatter market just a few words about our 2021 upfront.
You may recall last year, we held back inventory in the upfront anticipating a strong scatter market, which did materialize and continued into the first quarter, we are well into upfront conversations and anticipate strong demand and pricing in the coming upfront.
We also continue to innovate around advanced advertising, having successfully completed two first to market national addressable AD campaigns working in partnership with the on addressable <unk> N V. P. D consortium as well as Vizio, we are developing national addressable products, which enable our clients to effectively <unk>.
Target consumers with greater precision and allow us to achieve higher CPM as a result for our business.
So just to sum up we are pleased with the progress we've made across to our streaming services. We are now back in production across a range of original programming and we feel the momentum is good heading into the advertising upfront.
Now I'd like to turn the call over to our Chief Financial Officer, Christina Spade for some financial highlights.
Thank you, Ed and Josh and good morning, everyone.
Before I review and discuss our financial performance for Q1, 2021.
I won't give you new changes to the presentation of our operating segments.
Beginning with the first quarter of 2021, and we are reporting under our new operating segment structure.
New structure best reflects AMC networks focused multi platform distribution approach to content monetization and our business operations.
It also provides the best alignment of revenue and expenses in relation to how we will monetize content investments across linear streaming and selective licensing platforms.
Today's discussion of our financial results, we will refer to our new operating segment structure, which includes our two operating segments domestic operations and international and other.
I stick operations includes what was formerly known as the National networks segment, AMC networks streaming services and our film distribution businesses.
International and other includes AMC networks international businesses and the production services business, formerly known as Liberty and now named twenty-five seven media.
Prior to this new segmenting, the streaming services, including AMC plus range.
In the international and other segment.
Additionally, we are now separately reporting corporate expenses as a distinct reporting component, including corporate management accounting tax treasury HR facilities legal and technology.
This will improve operating segments margin disclosures line, excluding corporate expense allocations from the operating segments.
Going forward in 2021, as we did for year end and full year 2020, we plan to provide supplemental revenue and operational performance information at the end of the year, which will include streaming subscribers in streaming revenue for year end and the full year of 2021.
Now, let's turn to the first quarter performance for 2021.
I would like to first summarize a few singular items reflected in our quarterly results.
These include first in March 2021, we divested the life business of Levity comprises the comedy club in talent management operations.
And the associated lease commitments.
Retaining the production services business, which is now named twenty-five seven media.
This transaction generated a noncash loss of $16 $1 million.
Reported in the consolidated statement of income within impairment and other charges.
Having divested the non core components twenty-five seven media now more aligned with our core business strategy.
Second we had approximately $9 million of restructuring expenses, including $4 $1 million related to severance costs associated with our 2020 restructuring plan and for $5 million associated with our international business.
Lastly, we had a $22 million loss on extinguishment of debt as related to the refinancing that we had previously disclosed.
Moving to our first quarter 2021 financial performance.
Total company revenues were $692 million, representing a 6% decrease from the prior year.
<unk> operating income was $238 million, representing 7% growth from the prior year.
Adjusted earnings per share was $2 98.
In Q1, the timing of content licensing revenue contributed to an overall consolidated revenue decreased from 6%.
Excluding the timing impact for content licensing revenue in Q1.
Total consolidated revenue grew low to mid single digits.
This growth is largely driven by streaming revenue growth.
We remain firmly on track with previously disclosed target for the full year of 2021.
We saw strong growth in the first quarter from both AMC plus and the targeted streaming services.
First quarter streaming subscribers and revenue increased 156% and 131% respectively versus the prior year first quarter.
In April we continued to expand distribution of AMC, plus as evidenced by the launch of AMC plus on Youtube TV.
Distribution revenue declines primarily reflected the delayed content licensing from the delay of fear the walking dead for Q3 for 2021, and we also had one fewer episodes of the walking dead in the quarter.
The decrease from content licensing was partly offset by strong streaming revenue growth and better performance at our L J and IFC films.
Lower advertising revenues reflected lower ratings and COVID-19 related timing impacts, including the absence of better call Saul uncertainty be see American nature programming and one last episode of the walking dead in Q1, 2021 person Q1 2020.
This was partly offset by strong scatter pricing and growing AD supported streaming revenue.
As Josh and Ed have already noted the <unk>.
AD market is very strong to date for 2021.
Consolidated NOI improved as a result of lower program amortization from the absence of some original programming delayed to later in 2021.
Partly offset by increased investment in marketing to drive the growth of AMC, plus and the targeted streaming services.
Regarding the performance of our operating segments domestic.
Operations revenues of $574 million decreased 6% from the prior year.
Adjusted operating income was $243 million for the quarter, representing 1% growth as compared to the prior year.
Domestic operations advertising revenue of $199 million decreased 7% from last year. This is due to a few key drivers.
We experienced a decrease from COVID-19 related delays in the timing of some original programming as previously noted.
The decrease was partly offset by strong pricing performance for scatter and direct response advertising and robust digital growth.
We continue to strategically manage our advertising inventory across linear and digital we are still seeing a lot of strength in the advertising marketplace in April and now into May.
Pandemic influenced spending is very strong we are seeing substantial continued demand for multiple stay at home categories.
Including home Entertainment Pet household fitness apparel renovation and home furnishing.
Domestic operations distribution revenue, which includes affiliate subscription streaming and content licensing revenues.
Decreased 6% to $375 million.
The decrease was primarily the result of delayed content licensing revenue, which decreased 54% compared to the prior year due to the timing and availability of our scripted programming.
The impact of delayed content licensing revenues was offset by 14% subscription revenue growth driven by strong streaming revenue growth.
Domestic operations adjusted operating income performance for the quarter reflects the discipline of continued expense management in particular, the strategic reallocation of marketing investments to emphasize streaming growth.
Moving to the international and other segment.
Revenue decreased by $4 million to $121 million.
International and other first quarter revenue trends demonstrate the continued recovery at AMC networks International and at 25 seven media.
Adjusted operating income increased 32% to $24 million, reflecting the impact of favorable exchange rates and the recovery of some bad debt.
Turning to free cash flow and the balance sheet.
Free cash flow for the first quarter of 2021 was $97 million.
Primarily reflecting the increased programming investment in Q1, 2021 due to the welcome return to production from the COVID-19 related delays, we had in 2020.
Our net debt and finance leases is at the end of the first quarter were approximately $1 $9 billion as compared to $2 $3 billion from the prior year period.
Our consolidated net leverage ratio with coupons for times at the end of the quarter as compared to two six times a year ago. We.
We remain comfortable with our current leverage ratio.
In the first quarter as previously disclosed we completed a series of leveraged neutral financing transaction.
We secured lower fixed rate and lengthened our maturity profile with no significant maturities now view until 2024.
There were no repurchases of AMC networks common stock in the quarter.
We will continue to evaluate share buybacks on an opportunistic basis.
Our capital allocation policy remains unchanged.
First we will look to invest organically in projects that provide attractive returns to our shareholders. This.
This includes return based investments in the growth of our streaming services.
Second we will maintain leverage that is appropriate for our business outlook.
Third disciplined and opportunistic strategic M&A.
And fourth opportunistic return of capital to our shareholders.
As we look ahead for the remainder of 2021 and based on our current 2021 monthly streaming subscriber growth trends to date.
We see ongoing momentum in the growth of our streaming services.
We remain confident in our plan for growth to at least 9 million aggregate screening subscribers by the end of 2021.
It is important to note that subscriber growth will be driven by a strong programming slate in 2021 supported by strategic marketing investments.
We are reiterating our outlook of total company revenue growth in the low single digits for full year 2021.
Driven by streaming revenue growth and offset by linear market dynamics.
To drive the growth from the streaming platform, we will continue to invest in programming marketing and platform enhancements for AMC, plus and our targeted streaming services.
We continue to expect adjusted operating income to degree decreased by mid single digits in 2021.
Our free cash flow expectation remains the same we expect to generate approximately $200 million of free cash flow in 2021.
As Ed noted delayed production from 2020 are now in full swing in 2021, and we will continue to strategically invest in the growth of our streaming services.
As a final note on the first quarter of 2021, it is encouraging to be in the strong and resilient financial position a year after the pandemic began.
As we continue to turn the corner from the pandemic related impacts to our business, we are extremely well positioned for long term growth.
Gross debt will be driven by our differentiated targeted streaming strategy and our ongoing ability to monetize content investments across traditional and growing global distribution platforms.
Operator, please open the line for questions.
As a reminder, if you'd like to ask a question at this time. Please press. The Star then the number one key on your Touchtone telephone.
To withdraw your question press the pound key.
Again that is star then one if you'd like to ask a question at that time.
Our first question comes from cooking for all with RBC capital markets.
Good morning, and thanks for taking the questions two topics if I could first on <unk> I apologize if I missed it but can you provide any more color on our spot subscribers exiting the first quarter or maybe trends into Q2 and now that it's been about six months or so since you've rolled out AMC plus are you seeing it.
Growth outpace the growth from your other streaming services I'm, just trying to understand how much of the 9 million subscribers you expect for yearend might represent AMC plus since I assume that continued mix shift would be accretive to our true given it's a higher retail price point and then I have a follow up please.
So this is Ed on S fraud, I would say most directly to your question, we're seeing a strong and steady growth throughout both on AMC plus and on the targeted S. Five.
The other color I would give you is that in terms of engagement, we're seeing number of streams at an all time high very healthy completion rate for our original series.
And I would say, particularly at the targeted <unk> are exceeding our initial expectations. The model is proving to be even more efficient as we scale. The services are representing not only a destination, but they're forming a community around the content and thats, helping us with both churn and Sac and so as those communities build.
We believe the pricing power in front of us only increases so I would sum up by saying we're proceeding along the model. We're feeling good about the results and we feel we're we're gaining momentum both on AMC plus and the targeted the targeted S. Five.
Got it.
Thanks for that and then maybe just on advertising digital is becoming a more meaningful contributor, especially across Avon and the fast channel space. Some of your peers include digital AD sales and their DTC, our streaming revenue disclosure. So I'm just trying to make sure we compare your growth appropriately with them and in that vein is there any.
<unk> you could help us think about the magnitude of the digital advertising, you're generating or maybe it's from growth outlook yet.
The digital advertising is the fastest growing segment of our advertising. It's it's included in the advertising numbers are our strategy just just to back up.
Is to be on really all of the major.
<unk> platforms. So we feel in doing that we have visibility over a large part of the market by virtue, one odd being all the platforms and we program our own fast channels with our library content. So we're able to adjust relatively quickly based upon the number of impression so that continues to grow for us.
It's growing at the fastest rate the impressions continue to grow at a steady pace and it is included in the total AD sales number.
Got it thank you.
Our next question comes from Tim Nolan with Macquarie.
Great. Thanks couple of questions on streaming please.
Obviously topic.
Great interest firstly is it possible to breakout the subscriber numbers between.
Direct to consumer subscribe for some of that signs up just for shutter a corner or whatever versus the broadband apps like AMC plus if you care to provide that kind of detail and then secondly, I'm. Just curious you mentioned about the growth.
Of your streaming services internationally.
Familiar with how well known popular your content is internationally. If you could just help us understand what is the growth profile for your international streaming services is it even better than the U S growth potentially because there is demand and it's not very well penetrated or is it maybe a tougher hill to climb internationally right.
Alright, so Tim.
Starting with the for.
First question on the DTC I'll remind you that that AMC plus is only offered through partners right now true through dish through Comcast tubes for Roku, Amazon Apple et cetera. So at this point, we don't have a DTC in the market for AMC price that does not mean that will always be the case for the targeted.
<unk>, we do have a DTC in the marketplace and they they make up a very significant part of the.
The total subscriber distribution on international.
We're just starting to expand internationally.
Acorn and Sundance now have been available outside the U S for about a year shatter a bit longer are mainly in the U K, Canada and Australia. So that represents roughly 10% of the subscribers and we do see a lot of upside as you would imagine the content that we're making.
For the targeted S fights and certainly AMC is track record has broad appeal across the world and another advantage. We think we have is our strong relationships with the platform due to our linear networks across the world.
We think that gives us a leg up strategically and we'll be able to enjoy synergies with our.
With our MVP day platforms similar to what we've done in the U S.
Okay.
Our next question comes from Michael Nathanson with Moffett Nathan.
Thanks, Good morning, I have a couple.
This has been my my.
Recent.
A set of questions, which is just the volatility in U S affiliate revenues they bounce around so because somebody help me it's like level set how do we think of.
The right way to think long term about just the affiliate fee number that you guys posted its been bouncing as you know pretty severely so so josh.
Chris help me think about the next couple of years on the right way of thinking about the inputs to the Philippine number that I have another one.
Hey, Michael It's Josh I think.
We have.
We renewed I think we mentioned that we renewed.
Affiliate agreements over the past two years now there is actually a night.
That occurred since the last quarter.
The rates that we.
You're getting rate increases on those.
On those linear affiliate agreements.
And of course, we're working against a universe decline by call it 6% to 7% for you.
A year in the U S. So the position we're in is strong.
Long stable and our services are attractive.
Thank you for 90 day period, you get some different contractual things moving around.
I guess I'd remind you I think it's important to note that we really do have a high value.
A lecturer of a limited number of channels, that's very different than <unk>.
10, 15 channels broadcast networks that are carrying sports fees.
And I think that Mvpds as we go forward are seeing that the price value relationships of the AMC networks put us pretty close to the first place and value for what they're putting on veneer.
It's occurring now is that we're seeing.
Selling them screaming services, there are they're retailing net.
And so theyre getting margin on that so we find ourselves actually.
<unk> new position of harmony with our Mvpds. So I would say from a horizon point of view, Michael I think the situation for us gets better and better as Mvpds are price sensitive number one value sensitive.
And we have the.
Harmony opportunity of margin for them on the premium services with an attractive price for linear.
Okay, and then Josh cash you want maybe Eddie wants to jump in.
When you guys bought there was international channels and there was a lot of hope at that time that you'd be able to.
Make a really big business out of international I Wonder stepping back.
AMC plus it into the international rollout.
And do you see that as potentially the next opportunity and maybe the channel business, taking a back seat going forward. So I know <unk> talked about the other other asphalt products, but where's the AMC fit into your over the top strategy and what markets would you think.
Our next for you guys to move into.
Sure sure.
A few things if I might.
If I can expand the answer we didnt, we did several acquisitions over the past four years international channels for.
49, 9% controlling interest in BBC America, we did the deal for our LNG, which brought us Acorn.
And what's now called or Black.
The the pot, if you will and I'll get to the specifics of your question about AMC plus internationally was to be a global company was to be a global content company.
<unk> produced material that was an appeal around the world and that was delivered in the most opportune at the time that was linear and its now becoming screening so just to emphasize what Ed said.
We are just beginning to deploy our streaming services overseas. The happy news there is that true partners and distribution partners Michael that we have in <unk>.
Spain, and Latin America, and Eastern Europe.
Are going to become if they're not already the retailers for the streaming services and we've begun with the targeted services as Ed mentioned and we definitely see AMC plus as next in terms of market opportunity I don't want to get ahead of myself, but I would say that the shows.
On AMC AMC.
The linear channel have proven worldwide appeal.
Just for instance, the walking dead fear the walking dead that whole franchise are among the biggest shows frankly on the plant when we begin to deploy.
Our streaming services around the planet, we're going to have what we've already seen in streaming which is market appetite.
And then we're going to have an accelerator.
Interest in the content, that's historically been on our linear channels that will come to our streaming channels and we'll do it in harmony and in part on the infrastructure of what we've done with our linear channel partners. So I think I don't know how to say the most exciting time for this company is going to be coming.
In the next 612, 18 24 months and beyond.
Okay. Thanks, Josh.
Our next question comes from Thomas Inc family.
Hi, Thanks for taking my questions given the new segment reporting, which I think also reduces elimination accounting I was hoping you could give us an update on the path of content licensing monetization and in particular with the world beyond landing on AMC, plus Ed mentioned from strong engagement. There can you comment on how you assess that Rick.
Turns relative to the trade often do these early findings Inc. Increase your appetite to push content more exclusively into your services and then I have a follow up.
Sure.
In general.
Our world as we've described is changing as our streaming platforms growth.
The nice news is that.
We have our hands on the dial so as we produce new material that we own.
US whether to keep it for our streaming platforms domestically and internationally or will or whether to sell it or license. It is.
Perhaps worth mentioning that one can license for a short period of time when can license for a long period of time, if you choose to do it one can license domestically or internationally or in subsets of the international market.
I think it's the case that we will have a bias to keep material for ourselves.
In order to accelerate the growth of our streaming services, but it's not to say that we won't make a decision depending upon the development of our international streaming deployment.
To create a license for a limited period of time and certain geographies. If we think that there is a smart return on that so we'll make an economic assessment.
It involves strategic and momentum benefit of putting it on our own services.
Against.
Selective licensing on third parties taking into account.
And judging how long we want to do it for and what geographies, we might want to do it.
Makes sense and then Josh you talked about a lot of event driven path of growth acquisitions for the OTT services and I think Ed talked about performance marketing tactics as well does that mean, we should expect top of funnel growth is less tied to the timing of some of the high profile original content releases or should we be thinking about <unk>.
<unk> versus performance marketing differently than General Entertainment services.
I think the answer is yes, so I think the what we're seeing and we've seen it.
In Sundance now, which we've operated for years and we've seen it in Acorn, which we've operated now for years and preceded before us from came toward through acquisition.
Is that.
As against her.
Whole house services.
People identify with and like to have a steady stream of British content for suspense and horror or all black or immersive dramas and documentaries on Sundance now they are somewhat less sensitive to what's on this week, what's on this month, whereas the show of the.
A moment.
So what we find is net.
For instance, on Shudder, which has experienced some very nice growth.
It shows the hits on Shudder or creep show a movie that we did called nest moving Thats up for a Peabody Award and entertainment called La Rubia and it's up against you for you and all this other stuff that's somewhat better known and so we have the nature of our subscribers as they come for.
For a depth of content a steady stream of content.
They are less absolutely sensitive to does this week or this month, where is the show that is in the headlines.
Great. Thank you so much.
Our next question comes from Michael Morris with Guggenheim.
Thank you good morning, guys I have two questions one on advertising and one on streaming profitability. My first question is on the national linear addressable campaigns that.
You referenced.
And the question there was around what the ultimate opportunity is and sort of the incremental contribution of that approach. So.
So as you look at the success that you had there on those two.
How big can that be if this continues to work and how much sort of incremental value is there in that linear inventory.
My second question on streaming profitability, Josh you mentioned strong margin potential for the streaming businesses over time.
Most of your peers site margin contraction as a result of their streaming services, whether it's content spend or marketing so.
Can you put a little more context around what.
Constitutes strong is it as strong as what you've been able to.
Enjoy on the linear side, historically or whats the frame of reference for the strength there. Thank you.
So Michael this is Ed on your advertising question.
I think that there's great potential for increase ramp up and this has certainly been the addressable witty conversations have certainly been a centerpiece of the upfront.
The upfront conversations that we're having now just to put it in plain speak what what it allows us to do with the help of the.
The consortium that includes Comcast charter Cox and Vizio. For example is when we're serving one spot we're able to target that at a specific demographic.
And we can do that down to the household or device level.
So another household might see another spot and another household might see another spot again so.
So it is a way for us to increase our inventory in effect and enjoy higher pricing from each of these advertisers in the process now now it does take more work for reasons that are obvious it does take active cooperation with our Mvpds partners, which which we see as a strength of ours.
But.
The biggest part B.
The answer to your question is really the speed at which advertisers want to prioritize this and work with us to deploy this and I think you will see this scale up in a significant manner in this upfront based on the conversations we're now having.
Michael.
On the subject.
I think you were talking about margin and investment if I'm not mistaken on stream, here's what I think what's true of our services and it's just a fundamental.
Structural almost genetic difference.
We.
Are not looking for moon shots on the streaming services.
As we mentioned, we reaffirmed our $9 million year end.
We're looking to be between 20, and 25 million and for.
Few years.
And we have the targeted services and AMC plus we.
We've seen growth as Ed mentioned during the last period on both AMC plus and the targeted services for the <unk>.
They book, we're running is pretty different than whole house services, who frankly.
God bless them has ambition for a quarter for 1 billion subscribers and more in global share and they all operating different systems. As you know some are owned by yourself companies some have shopping infrastructure somehow.
Many other different characteristics.
We have our characteristics and what we need to do to achieve our objectives is to provide content that.
The sands constituents subscribers members of our services like that frankly cost less.
Ed will tell you that of 'twenty shows that.
We've had on the year recently, the vast number it's something like 18, or so we're under a million under seven figures. So that means we're in a different stratosphere then.
And what other people are doing as we service those very different.
Scriber basis.
And there was an earlier question about performance marketing of course engaged in.
Deeply metric based performance marketing its the nature of the Beast. So when you combine that which Acorn frankly has been doing very well for a period of seven years.
With the currently.
Lower necessity for sort.
Monster hit.
On our services you end up with a different set of economics, and there's a very healthy margin opportunity in that.
Yeah.
And so Josh if I could if we think about that business and the streaming part of your business, becoming the largest source of revenue over time as you've referenced is it your view that you are.
We'll we'll kind of go through that.
Change in this evolution.
Consistent margin performance or I don't mean quarter to quarter like I understand that but I'm, just saying from a big picture perspective, the profitability on the next generation business compared to the sort of legacy business.
Yes.
I Wouldnt want to promise a number as we go forward I think it's.
We're <unk>.
Due to it as you know and it's evolving with some speed.
<unk>.
We are very mindful of costs and I mentioned the nature of.
The services.
I think I'm going to ask Chris Spade to just comment for a moment she may be able to elaborate a little bit.
Thanks, Jeff Thanks, Mike. Thanks for the question, it's actually a great question given the landscape. We're in in all of the evolution of streaming.
From where I sit I would put it.
Back to the guidance, where we we're very laser focused on not just quarter by quarter, but what we're seeing for the full year given the strength of our pivot low relative to what we're projecting for the P&L.
We are going to have growth on the top line, which is going to be driven by strength.
Gross.
So from that standpoint.
We said, we're going to be up low single digits on the AOR growth, we're going to be down mid single digits on a percentage basis and it's not really because if we just look at this year. That's the best we can do we're making conscious deliberate choice to reinvest in marketing and increase our programming content spend on the cash flow.
We're seeing that.
So what I can tell you is that our goal is not to just send away. Our goal is to really look at all the expenses. We have in total and then optimize the performance of whats going to derive from our marketing tactic standpoint from what type of content. Our research tells us we need to continue to put up for streaming.
Services, and we're very happy with what we're seeing so far.
So we are confident to reiterate our guidance.
And I think that honestly is going to be the ongoing question not just for us but for the industry. So thank you for the question.
Thank you I appreciate it.
As a reminder, if you'd like to ask a question at this time.
And one.
Our next question comes from Steven Cahall with Wells Fargo.
Thanks, So I think now all of your peers are giving quarterly streaming subscriber numbers, just wondering with the new reporting segmentation. If that's something that we might expect going forward and just kind of thinking about the net adds with the streaming sub sorry commentary I think you were adjusted over 6 million.
And at year end it.
It sounds like Youre pretty confident being about $9 million by the end of this year, but the slate is pretty kind of weighted to the second half of the year. So is that how we should kind of think about the pace of streaming subscriber growth and then just the last one it sounds like you're leaning into subscriber acquisition. This year. So any just update on profitability of the streaming business for the medium.
Thank you.
Yes, So I think what we've done is we we thought that the most important thing for us to do was to provide a.
For full year book.
I don't know exactly what our peers do but we.
Several months ago identified where we'd be at the end of the year.
I don't know if they've done that so we thought that we would give you as much transparency and Chris just reiterated the key financial metrics associated with that 9 million subscribers and we talked that was frankly, the best way to keep you appraised of where our minds are on the performance.
For the business and what the key critical.
Critical points of achievement are.
So we think that that's frankly, most sensible as opposed to frankly, opportunistically popping up for the number here and there.
That would be less helpful to you and absolutely understanding where we were headed.
So I'll turn it over to Chris because I think she has a little bit of application on that subject.
Yes. Thanks for the question I do think when we look at our performance for the year you hit on a few key thing which is how the content plays out over the year and as we know we're turning the corner from COVID-19. So our production strength is only going to improve it's not been a weekend, but relative to as we look at the timing of our slate Q1 Q2.
Q3, Q4, we do all in have a strong slate for this year and we're going to invest in marketing to really drive the growth, but we are laser focused on full year and to get to at least the 9 million subs.
We're definitely on track for that we feel good about where we are and I think.
As we looked at what we did in 2020 streaming with growing fairly significantly. So it had been in international and other we moved it over to <unk>.
<unk> to be inclusive in the flywheel of AMC and AMC plus in terms of monetizing all different ways in terms of linear streaming and selective licensing and then as we look to the future as Josh said, our streaming revenue is going to become even more significant.
So our reporting will evolve, but in terms of where we are in 2021.
At the table.
Very nicely, which is why we made the segment changes.
I'm showing no further questions in queue at this time.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating.
May now disconnect.
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