Q4 2021 AMC Networks Inc Earnings Call
Ladies and gentlemen, thank you for standing by and walked through the AMC Networks' full year and fourth quarter of 2021 earnings call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question during the session need to press star one on your telephone.
You need any further assistance. Please press star Zero as a reminder, today's call is being recorded I would now like to turn the call over to your host Nick <unk> you may begin.
Thank you good morning, and welcome to the AMC Networks' full year and fourth quarter 2021 earnings conference call joining.
Joining us this morning are Matt blank.
From Chief Executive Officer, Chris Spade, Chief operating Officer, and Chief Financial Officer.
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Didn't streaming services, Jamie we will begin with prepared remarks, and then we'll open the call for questions.
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 today todays call may include certain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1095.
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.
<unk> filings for a discussion of risks and uncertainties. The company disclaims any obligation to update any forward looking statements made on this call.
Today, we will discuss certain non-GAAP financial measures the required definitions and reconciliations can be found at the end of today's earnings press release.
I would like to turn the call over to Matt Matt.
Thank you Nick and good morning, everyone.
2021 was a strong and pivotal year for AMC networks, we met or exceeded all of our guidance metrics and delivered a full year of outstanding results.
Let's start with a few headlines.
We had revenue of $3 1 billion representing.
Representing a 9% increase and the highest revenue year in our company's history.
And a significant milestone ending the year with more than 9 million paid subscribers across our portfolio of streaming services delivering on the 2021 full year subscriber goal, we promised and representing nearly 50% year over year growth.
Reinforcing our position as the global leader in targeted streaming.
We expect that by the end of 2022 will be halfway towards our previously disclosed target of reaching 20% to 25 million paid subscribers across our streaming platforms by the end of 2025.
We delivered full year growth in domestic AD sales and subscription revenue, including 100% growth in our streaming revenue demonstrating the power of our model.
And it was a big year for growth for our International Division led by robust advertising revenue across our global portfolio.
We capped the year with a strong fourth quarter and several notable achievements.
We completed a multi year distribution agreement with Comcast, including expanded availability of our streaming services.
And we entered the fast growing fan driven animate space through our acquisition of a company called <unk>.
A global distributor of anime content.
The foundation of our success of our success remains our portfolio of strong distinct brands and consistently great content.
Supported by our broad library of owned and controlled the IP <unk>.
Including franchises with established global fan basis like the walking dead the AD rights catalog and the Agatha Christie Library.
As we've said before.
Our streaming strategy is just different from others.
Growth and success, we've had pursuing our unique playbook is notable not.
Not only in the context of meeting our year end subscriber guidance, but in our structural ability to grow this business economically.
And with marked advantages to continue to set us apart from other major players in the field.
By building a portfolio of targeted services.
Each designed to deliver something very specific super fans of a particular genre.
Growing a business that has less speculative less costly and more sustainable than larger players trying to deliver something to everyone in the household.
Simply put we're not trying to be something for everyone.
We are instead trying to be everything to someone.
A shudder user for example may have several streaming subscriptions.
The charter is likely to be a favorite and a must have because they love the cellular devotion of shutter to mystery to suspense and horror.
They loved the depth of content and they loved the chatter is curated by like minded fans, who are passionate about this content as they are.
This too applies to fans of Acorn TV.
Black of Sundance now and of course AMC plus.
Last quarter, we talked about the beauty of smaller numbers and.
And how our strategy is allowing us to build the streaming business marked but why we believe our higher levels of customer engagement and satisfaction.
Lower costs higher margins and other benefits that are enabling us to achieve our goals at much lower subscriber levels than others.
We're on track to meaningfully reconstitute, our revenue mix and given the structural advantages inherent in our differentiated model. We can do this all while realizing long term consolidated margins in the mid to high 20% range.
Interestingly, John Malone has recently been talking about the wisdom of building, what he calls defendable niches and streaming.
And that's exactly what we're doing and why we believe our recent progress is replicable going forward.
As I mentioned earlier, we recently acquired global anime content supplier center, and we couldnt be more excited to be in the anime space is an entertainment category that is booming with growth driven by increasing demand and online availability.
We will have access to the best talent, most valuable IP and strong global program, enabling us to extend our leadership position and targeted streaming.
I'll touch on a few of the things that make this strategic acquisition, particularly attractive for us.
First centralized anime focused streaming service called high dive is now part of our portfolio, giving.
Giving us a vibrant new content vertical and a dedicated platform to reach anime Super fans.
As well as a strong complement to our existing portfolio.
The <unk> team has deep relationships with anime studios and creators and with a vast library of top trending in classic titles. They are long time content licensor to many of the anime platforms. This.
This IP strength will enable us to begin to power our own platforms with strong exclusive content.
It's also an opportunity to extend <unk> existing merchandising business by leveraging AMC networks depth of experience and cultivating and rewarding passionate fan basis.
Through events through gaming and through other brand extensions.
So great M&A for us that complements our business and provides us with important strategic advantages and lots of growth opportunity.
As we deepen our targeted leadership position with our <unk> acquisition, we continue to have great confidence in our unique model.
We're methodically and prudently growing our business in a sustainable fashion.
And we're doing this with a highly measured view of the long term metrics of the business, including margin cost per acquisition and subscriber lifetime value.
As others engaged in a race to be the biggest and to spend the most where it is now seeing that many may be much closer to the domestic market saturation with some slowing growth among the larger players it's worth noting that were comparatively in the very early innings of our streaming evolution, particularly.
Particularly for AMC, plus domestically and in key regions around the world, where we have just begun to mobilize and where we will continue to expand over the next year and for years to come.
Lots of market penetration opportunities ahead.
As for content, we had an active fourth quarter and I'll mentioned two highlights. We premiered the first eight episodes in the 11th and final season of the flagship walking dead series.
And we welcome back our acclaimed original drama halt and catch fire, which is now streaming on AMC plus and followed several other acclaimed AMC original <unk> that have recently come back to US following the exploration of third party licensing deals.
Including turn Washington, spies, rectify and Hell on wheels, representing hundreds of hours of content that we're now making exclusively available to AMC plus subscribers.
Our fourth quarter set us up well for 2022, which.
Which will be the biggest year for original content in our company's history.
We will bring our viewers closing seasons of better call Saul, killing Eve and the final episodes of the walking dead three.
Three remarkable series that have all made television history and continue to captivate millions of fans.
And will help us promote the launches of several highly anticipated new series, including the gritty courtroom drama 61st Street, starring Courtney Visa and.
Dark wins.
First of its kind cop trauma set on a native American Indian reservation based on the best selling Tony Hillerman novels, and with Robert Redford and Georgia are Martin producing.
We will end the year with an <unk> interview with the Vampire and Anne Rice's May fair, which is the first two series and our newest franchise based on the yen rates collection. A strong addition to our growing library of owned and controlled IP.
This is just a sampling of our broad slate of premium marquee content that will rollout at rollout over the next year.
And we're already starting to build out our pipeline for 2023.
We recently green lit two character driven dramas for AMC, plus called Damascus, an invitation to our bonfire and have an expanding list of other new shows in development.
On the commercial revenue front as the AD supported TV marketplace continues to evolve we're optimizing our traditional AD business, while taking advantage of new digital opportunities.
So our compelling content and our innovative advanced AD capabilities, we delivered full year 2021 AD revenue growth. This.
This includes a 70% increase in digital growth driven by our <unk> and fast channels inventory where were seeing lots of momentum as we continue to leverage our original program.
The connected TV platforms.
I'll close by reiterating the 2021 was a year of significant achievement for the company.
Setting us up well for 2022, we.
We feel terrific as we look to the year ahead, and we're more confident than ever that we are pursuing the right strategy for our company.
For the audiences, we serve and especially for our shareholders with that I will turn the call over to Chris for more detail on our operational and financial results as well as our outlook for 2022 and beyond.
Thank you, Matt and good morning, everyone.
Our differentiated and targeted streaming strategy is clearly working for 2021, we are pleased to have met or exceeded all the goals. We previously outlined.
And then the year with more than 9 million aggregate peak streaming subscribers representing subscriber growth of 49%.
With this momentum we are well positioned to deliver our 2025 streaming goal.
For the full year 2021, consolidated revenue increased 9% to $3 1 billion.
This revenue year in the history of the company.
So alidade as adjusted operating income was $816 million, representing a six 5% increase year over year.
The company generated record adjusted earnings per share of $9 64.
Representing 24% growth.
For the fourth quarter 2021, consolidated revenue increased 3% to $804 million adjusted operating income was $103 million and adjusted earnings per share was <unk> 54.
Full year and fourth quarter domestic operations revenues grew 8% to $2 6 billion.
And 4% to $685 million respectively.
This growth was underpinned by strong growth in streaming subscriptions and robust full year advertising performance.
Subscription revenue, which includes streaming and affiliate revenue.
15% for the full year and 11% for the fourth quarter.
For the full year 2021 streaming revenue was $371 million, representing 100% growth as compared to the full year 2020.
We exited 2021 with streaming run rate revenue of $424 million based on the company's share of the month of December gross paid subscription fees annualized.
Affiliate revenue declines were in the low single digits for the full year of 2021.
For the fourth quarter, excluding the impact of a one time payment associated with the distributor in the prior year quarter.
<unk> revenue decreased in the low single digits.
Robust subscription revenue growth was partly offset by a decrease in content licensing revenue of 4% for both the full year and fourth quarter of 2021.
The decrease is driven by our decision not to license our new owned original content to third parties.
Keep it exclusively for our streaming services.
Full year 2021 domestic operations advertising revenue grew 5% to $845 million.
Driven by healthy pricing and continued digital growth, which was partly offset by lower delivery.
In the fourth quarter advertising revenue declined 1% to $234 million, reflecting the comparison against the timing of a stronger content lineup and the prior in the prior year quarter.
Domestic operations adjusted operating income grew 2% to $845 million for the full year 2021.
For the fourth quarter domestic operations adjusted operating income was $122 million.
Full year and fourth quarter NOI results reflect strong revenue performance, partly offset by continued investments for future growth, including programming as well as subscriber acquisition and retention marketing.
International and other revenue was $511 million for the full year 2021, representing growth of 13%.
Excluding FX translation impacts growth was 9% on a constant currency basis.
Full year revenue performance demonstrated the robust advertising performance across our international channel footprint as well as the return to production from Covid related delays at $25 seven media.
Fourth quarter revenue was $122 million, a decrease of 3%, reflecting the timing of production as the majority of productions were delivered in the first three quarters of 2021 at $25 seven media.
International and other Oi was $83 million for the full year 2021, representing growth of 71%.
Excluding FX translation impacts growth was 56% on a constant currency basis.
For the fourth quarter.
Hi.
With $13 million representing growth of 96%.
Performance was driven by the strong revenue performance I, just highlighted as well as ongoing expense management.
Consolidated free cash flow for the full year of 2021 was $71 million and reflected increased content investments, including previously delayed production and the onetime impact of the previously disclosed litigation settlement payments.
Excluding the impact of the litigation settlement payment free cash flow would have been $230 million for the full year 2021.
We ended 2021 with net debt and finance leases of approximately $2 billion. Our consolidated net leverage ratio was two five times and we remain very comfortable with our balance sheet and our current leverage ratio.
There were no repurchases of AMC networks common stock in 2021.
We will continue to evaluate share repurchases on an opportunistic basis.
Our capital allocation policy remains unchanged first we will look to invest organically on projects that provide attractive returns to our shareholders. This concludes return based investments and the profitable growth of our streaming services.
Second we will maintain leverage that is appropriate for our business outlook.
Third disciplined and opportunistic strategic M&A, such as the <unk> acquisition, we completed in the fourth quarter of 2021.
And fourth opportunistic return of capital to our shareholders.
Looking ahead to 2022 and beyond we see numerous advantages in the streaming opportunities in front of us and our long term view remains unchanged.
We're tracking well toward our goal of 20 to 25 million streaming subscribers by the end of 2025 and as Matt mentioned, we expect to be about halfway there by the end of this year.
As we continue to reconstitute our overall revenue mix, we expect streaming to be our third largest revenue business by 2023 and well on its way to be our largest revenue business by 2025.
As streaming revenue becomes a larger percentage of our consolidated revenue, we will enhance our disclosures by providing streaming subscribers on a quarterly basis beginning in the first quarter of 2022.
While we encourage investors to always take a long term view of our opportunities today, we are matching the cadence of our disclosures by providing our streaming subscriber outlook for the first quarter of 2022.
In the first quarter, we expect 400 to 500000 net streaming subscriber additions driven by our strong first quarter slate, which includes the return of a discovery of witches, the walking dead and killing Eve.
Moving to our full year 2022 financial outlook, we anticipate total company revenue growth will be in the low single digits subscription.
<unk> revenue growth will be driven by continued streaming revenue growth, partly offset by continued affiliate revenue trends.
As legacy content licensing agreements roll off licensing revenues will decline over time as we utilize our exclusive content to drive subscriber growth and retention across our streaming services.
Notwithstanding the expected long term decline of content licensing revenue for the full year of 2022, we do anticipate some year over year growth and the content licensing revenue.
This is largely driven by the timing of deliveries related to prior existing licensing agreement.
Our advertising business demonstrated remarkable strength in 2021.
For 2022, we are expecting stable advertising revenue driven by increased pricing as well as the robust growth of our digital and addressable offerings, which will be partly offset by continued macro viewership trends.
We have a robust content slate this year with the return of pandemic delayed programming, including the highly anticipated seasons of killing Eve better call Saul and the walking dead.
In addition to the strength of our 2022 content, we will continue to invest in the growth of our streaming platforms by expanding our investments in owned content return based subscriber acquisition and retention marketing as well as international streaming launches in new geographies.
We plan to launch AMC, plus in India, followed by Spain, New Zealand, Latin America, and other European countries.
The timing of new launches is largely weighted towards the end of 2022 and into 2023 with much of the initial investment required in 2022.
With our targeted streaming strategy and the beneficial unit economics inherent in our differentiated model. We are operating our portfolio of targeted services efficiently today with an eye towards future growth.
This means that we will prioritize investments to support our long term streaming and digital revenue growth, while also optimizing our current performance.
This was evidenced in 2021, when we initially expected 2021 would be an investment year with a small decline.
As 2021 progressed, we were able to execute strongly to deliver AOI growth of six 5% without impacting our necessary streaming growth investments.
In 2022, we similarly see that we are in an investment year and estimate lower OE in the neighborhood of 10% lower than 2021.
We will continue to invest in content and marketing to support streaming growth, which will require a few points of margin investment in 2022.
As we continue to maintain our disciplined and curated approach towards content investments along with our intense focus on the economics that maximize subscriber lifetime value to meaningfully grow our streaming revenue, we anticipate that longer term total company margin will be consistent with our 2021 margin.
While in the mid to high 20% area.
Moving to free cash flow for the full year 2022, we expect free cash flow of approximately $100 million.
Our free cash flow outlook reflects continued investments in content as well as increased technology investments.
Our full year 2021 effective tax rate was 25% and we expect to be in the mid 20% area for 2022.
In summary, with the strength of our 2022 content slate ongoing efficiencies from awareness and performance marketing and global streaming expansion, we are well positioned in 2022 and beyond to drive profitable subscriber growth.
This will fuel our continued long term revenue and earnings growth and we will drive substantial value creation over time.
With that I am pleased to turn the call over to Miguel to discuss our strong streaming performance in more detail.
Thank you, Chris and as Matt said at the start of the call. We are building a successful streaming business with a unique playbook, which is structurally different than the one being followed by other major players in the space.
This gives us some clear advantages today and as we continue to make progress towards.
Reasonable and attainable subscriber goals.
All of our streaming services, so significant and steady growth in the last year.
Our unique strategy allow us allows us to grow these businesses quickly and responsibly.
Building, a more stable base of subscribers at a much lower comparative content spend.
In that regard I want to give a little more context and data around the advantages of our targeted approach to streaming.
Every streaming business revolves around a few key elements the coast the cost to acquire subscribers the lifetime value of those subscribers the fixed cost associated with retaining them mainly in the form of paying for content and how many of those subscribers for customers churn out of your service.
Across our portfolio of targeted streaming services, excluding AMC, plus which is still a relatively new service, our CPA or cost per customer acquisition is significantly less than the projected lifetime revenue associated with that customer.
That is a good business and once we are in a relationship with them the annual revenue from each customer far exceeds what we spend on content to serve them.
These are very favorable economics that we believe we sold stable can ultimately very profitable business with customers, who are very happy with their experience and the value of the services they subscribe to.
If you look at the top 20, most popular shows in December across our foremost published and targeted screening services Acorn TV shatter Sundance now and old block 19 of those 20 titles cost less than $1 million per episode and some substantially less than that.
And because it's sort of this is focused on a specific genre or content category.
Performance marketing is much more tactical inefficient than the marketing for a service that is aimed at every member of our households.
We also build a community around each one of our services.
This is not a marketing slogan.
Structural factor in our business because of our targeted approach.
We call Shadow subscribers members and we treat them like that.
They come in for the content deals, which we continue to provide but we engage them in a variety of ways over the course of the year that fortify their loyalty to the brand.
Including winning a film curator of the phone in the month of October to make custom recommendations on what to watch based on our customers' individual case.
For Acorn TV, we arrange tours to bring super fans across the Atlantic to the U K.
To visit the talents and sets where their favorite shows are made.
These bespoke tactics may feel out of place in the context of the streaming wars that generate headlines.
But they are totally organic towards services and the way they relate to viewers.
AMC plus is the newest of our services.
It is a source of our acclaimed and popular new originals for many broadband only customers it lifts closest to our linear business.
But as we continue to grow and refine AMC plus.
This has been developed very much in the model where targeted services with all of the structural advantages and benefits we're seeing in those businesses.
So AMC plus we're very pleased with the strong subscription growth to date.
Its first 16 months since launching in October 2020, we're seeing strong subscriber acquisition and retention trends include.
Including strength in annual subscription sign ups, which helped to lower churn rates.
The strong content slate for AMC plus in 2022, along with targeted and efficient marketing, we will continue to drive meaningful revenue growth for the service.
Internationally, we launched AMC, plus in Canada, and Australia late last year.
We're seeing a strong positive reaction by consumers there and expect both markets to continue to grow rapidly this year.
As Chris mentioned, we have significant international launches planned for AMC, plus and our other targeted services this year.
Assuming a huge untapped opportunity.
In terms of content, we have a very big year ahead in 2022.
Across our full portfolio of services, including the big titles coming to AMC plus that have already been mentioned.
Sure we will see an expansion in original horror films. In addition to the return of its number one series creep show.
Fourth season, and the W series cleared for fear executive produced by Bryan Fuller.
Simmons the history, a quarter through the lens of the LGBTQ community.
All black is a huge year of original programming planned with a return of top series like double cross.
And the second season of the week of the weekly talk comedy and music series Social Society.
With four hosts will have a combined social reach of more than 11 million followers.
Which we think is a great springboard for weekly engagement and conversation.
We're also seeing strong synergies between all black television linear network.
Those platforms work more closely together to grow their respective larche largely complementary audiences.
Later this year, our new <unk> series, a pup homesites.
Used by safety and Manav, Scott Young will delve into the unsolved murders in the hip hop community.
Explosive series will premiere on we TV and also appear on our block.
Acorn will offer subscribers have fantastic lineup of shows including a new series called Harry while starring James steamer.
The return of favorites like bloodlines with James Nesbitt.
License murder, starring Lucy Lawless with stable Pearl the Chelsea detective and the final season of Doug Martin starting longtime thin fan favorite Mark concludes.
Okay attendance now we will have the second season of the Emmy Award winning short form series is state of the Union and a new series called 10%, which is the English version of the French Netflix had called my agent.
As we have said.
Entities in affinity retention fixed content and customer acquisition costs lifetime value and other key metrics are real and compelling today and.
And we believe they will only intensify over time as we continue to build communities around the content areas, where we see these distinct opportunities.
The <unk> acquisition.
Got it any made to our portfolio of direct to consumer offerings.
We love to hand that we're playing in the way we are building a vital viable and sustainable stream business for today.
Laura.
And now operator, please open the line for questions.
Ladies and gentlemen, if you have a question or comment at this time. Please press the star.
So on telephone if your question has been answered or you are seeing with yourself from the queue. Please press the pound key.
Our first question comes from Michael Morris with Guggenheim.
Thanks, guys good morning.
Wanted to ask you first of all.
A little more detail on.
Acquisition.
Love to hear what kind of contribution that it makes in the near term, but maybe more importantly can you talk about.
The timing or path to taking some of your IP.
And combining it with the opportunities.
This studio in this format present view.
How quickly can you kind of get that.
Fine.
Performance and then also.
Maybe just a pretty unique one but when you talked about the international rollout I was kind of surprised to hear India at the top of the list given what a challenging market that's been for some others. So I'm curious what you're seeing there that makes it.
Kind of top of your list.
Additional markets from here. Thanks.
Thanks, Mike.
Since I was interesting.
Literally in my first week on the job back in September I was presented with this opportunity and the folks here were well into their discussions and putting that transaction together.
About two weeks later couple of weeks later, there was a wall Street Journal story, I think about Barnes and Noble's earnings and surprises in there.
Store traffic.
The article pointed out that it was driven by two things graphic novels, and anti books and I said Wow. This is a category I don't know much about.
Full disclosure I have never been a fan, but there is a tremendous following forward and I view it.
I view that acquisition as sort of a microcosm of our targeted strategy.
There are audiences out there that we can reach we can reach efficiently.
They have a streaming service in place called Hi, David I think we can enhance tremendously in terms of the marketing.
Hi.
That service and.
We own a lot of that content and we think it will be valuable content to more valuable content in the future.
In terms of what we can add to it in terms of our IP.
I think that's probably down the road a little bit but.
We are ramping up there very quickly.
And we intend to make that an important part of our offerings and again, it's exactly.
On message for us in terms of how we're trying to reach.
The superfan audiences reached them efficiently.
Low churn rates.
Great Great subscriber long term value and our programming costs that we can control.
We will enhance all of our offerings going forward. So that's a good one for us.
In terms of India, I'll, let Chris elaborate on that a little bit, but youre right thats coming up soon.
Good morning, Mike Thanks for the questions relative.
Relative to our international rollout, we are excited to expand our international footprint and as you May know a lot of our distribution expansion is mainly with our partners with Amazon and Apple and others and from the standpoint of our direct to consumer offering we will have a direct to consumer offering also but from the standpoint of our role.
Our plan, it's largely in partnership with bigger distributors.
And of course, our products will differ in terms of our offerings country by country. So within <unk>, we will take a close look at what's there.
On a broader scale for our international expansion as you also know we have international business is largely driven by the linear side of the businesses, but because we have boots on the ground so to speak.
We have a lot of.
Organic.
Ability there.
Locally in a lot of the regions.
Not just rollout from corporate we are going to rollout our international expansion, but we can.
Perfectly triangulate, what we're trying to do on a global level and then use these local region to our benefit with Dell being local content partnership relationships. So we feel very good about our international expansion opportunities.
Great. Thank you.
Our next question comes from Robert Fishman with Moffett Nathanson.
Hi, good morning, Thank you.
Following up on your prepared remarks can you expand upon the balance of marketing and promotional investment that's needed to drive AMC plus subscriber.
You pay for the most expensive AD during the Super Bowl. So just curious if this is <unk>.
First of all one off compared to the more tailored subscriber acquisition approach that you discussed.
Let me start on that.
I'm sorry.
Let me just start on that and say that.
I think one of the things Youre going to see in addition to the.
Aggressive pursuit of subscribers.
<unk>.
For our streaming services.
Ill begin a year with our best content in history.
Youre going to see us doing a lot of marketing to support that content and support the brands that we offer.
As a backdrop to all of all of the direct.
Specialized marketing we do in the.
In the streaming world so.
Super Bowl thought which was one part of it I think that.
With the type of content, we have this year.
That was an important opportunity to kind of take advantage of that content and get our message out more broadly to consumers I'll, let Miguel talk a little bit more on the on your other point, yes. Thank you, Matt and specifically for the Super Bowl AD, we felt it was important.
For AMC, plus an extension of our linear business.
To let consumers know led audiences know that.
The final episodes the final season, so franchises like the walking dead better call Saul, killing Eve now going to be premier on AMC, plus but that is not typically what we do to acquire customers. What we do to acquire customers follows a very disciplined approach that includes creating audience profiles.
And really targeting our marketing campaigns based on our understanding of the consumers lifetime value.
And with a very specific target for the cost per acquired customer and Thats something that we do see this systematically in a disciplined manner and we manage them on a daily basis.
Thank you.
It's great that you saw the commercial it's all good manner right.
Thank you yes.
It was a fun one.
Bigger picture I'm, just wondering how is your expected ROI change for new programming that you've discussed coming.
With your streaming and more limited third party licensing compared to what green lighting of new theories used to look like before the streaming pivot.
Sure. It's a great question I mean relative to our return on investment of Mcgill highlighted we're focused on the streaming side.
Of our lifetime value and <unk> and what that can generate but also when you think about it in our content investment we still have the full flywheel flywheel of the ecosystem with linear.
And streaming so we're able to invest in our content in a way that we can fully monetize it across various different distribution.
Areas and licensing revenue for us because of our size.
It's not billions and billions of dollars that we pull away from so with the way our licensing revenue will decline over time strategically.
We feel that we have a balance that we will have some come in to fuel it but over the long term streaming revenue will meaningfully grow to offset it and we just feel that the exclusivity of the original content series is paramount.
More important than licensing it to third parties.
I also think that this is this is a moment in time when.
We have really a pretty exceptional lineup probably the best lineup in our history in 2022, and we just delivered terrific performance in 2021, when we didn't have that so if you look at kind of every piece of our business.
Commercial revenue to the things, we do with our traditional platform affiliates.
Two our ability to drive streaming subscribers.
Is an important time for us at an important time to take it take advantage of those content investments and we plan to do that this year right.
And I think the key word in your question or set of words as return on investment in the sense that we're playing for the long term, we want to have quality subscribers, we want to make sure that we're looking in measuring our content marketing and tech investments in a way that really drive future value, which is the lifetime value of this is screaming.
Of the streaming subscribers, while also optimizing linear business.
Revenue from the standpoint of the strong performance we saw in 'twenty. One we'll continue to have strength in 2022 and again our content slate is key to driving future growth for 2022 and beyond and monetizing across all the platforms.
Thank you Evan.
Thank you.
Again, ladies and gentlemen, if you have a question or comment at this time. Please press. The Star then the one key on your Touchtone telephone. Our next question comes from Stephen Carll with Wells Fargo.
Thanks, Matt.
Maybe first I was just wondering if you could talk about the trend of content spend you've got the three big series. This year and then I'm sure you're working hard to fill some of that content and the free cash flow step down on an organic basis year on year.
Somewhat sizable so just wondering how we should think about cash content spend trending as you go through this big growth cycle, and what that kind of means for free cash flow in the next couple of years and then on advertising. It seems like maybe on a year on year basis, you've just you've got a huge year for the content slate. This year. So it was a little surprised that you are.
Adding to stable and not up I. Just think you have a lot more shows hitting maybe just help me unpack that a little bit.
And any thoughts as you head into the upfront season. This spring. Thank you.
Sure. Thanks, Steven relative to the trend of the content spend we've been waiting for 2020 to patiently. So we do have a strong volume of content offerings across all of our brands and services. So we like the level of volume we have in 2022, we can offer new original content.
Call. It three to five weeks and we feel that thats important cadence to keep the streaming subscriber engaged.
And constantly being given new things to enjoy.
So relative to the trend there I don't really see.
Full cash flow basis that will continue to rapidly increased content investment spend.
Relative to.
Free cash flow and the trends there I think.
That goes hand in hand, with what I, just said because we do have three series finales in 2022 more mature programming higher cost per episode that also affects our free cash flow in 2022 on a timing basis. So from the standpoint going forward I would expect that we would turn the corner and we would start to ramp.
Backup net free cash flow over the long term and that also goes hand in hand with the margin outlook that we gave were the next year. We feel is going to be an investment year from what we see now but as that as that continues and streaming continues to meaningfully grow we should be able to get to a mid to high 20%.
Margin for the long term.
On the advertising front the stable outlook is what we see today, we do have strong performance in terms of our series finales, even just with the Super Bowl commercial for example, that's streaming focused obviously not advertising at this point, but we're seeing more traffic more.
Does there so as we continue to focus on more awareness for all of our shows across all the platforms I think that will have a halo effect on our viewership of linear but it's still early days, it's still early days for the upcoming upfront.
But we feel very strongly that we have innovation and leadership in our advertising talented team and we expect that to continue but we're just putting forth what we see on the horizon for us today with the macro viewership trends that are out there I think we should also just re.
Remember that pricing was extremely strong coming out of the upfront last year for the past year.
That was through a year again that is not nearly as strong as 22 is in terms of the content that we are.
Going to be offering across the board. So theres a lot of reason to be excited and hopeful on that front.
Great. Thank you.
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And I'm not showing any further questions at this time I would like to turn the call back over to our host for any closing remarks.
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Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.
Okay.
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