Q4 2022 AMC Networks Inc Earnings Call
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Yeah.
Good day and thank you for standing by welcome to the AMC Networks' fourth quarter 2022 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session.
A question during the session you will need a press star one on your telephone.
Then here an automated message advising your hand is raised to withdraw your question. Please press star one again.
Please be advised today's conference is being recorded I would now like to hand, the conference over to your speaker today, Nick Seaberg, Vice President of corporate development and Investor Relations. Please go ahead.
Thank you good morning, and welcome to the AMC networks fourth quarter and full year 2022 earnings conference call. Joining us. This morning are James Dolan interim executive Chairman and Patrick O'connell Chief Financial Officer. Today's press release is available on our website at AMC networks Dot com.
We will begin with prepared remarks, and then we'll open the call for questions.
Today's call May include certain forward looking statements within the meaning of the private Securities Litigation Reform Act of 1095.
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 as SEC 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 required definitions and reconciliations can be found in today's press release with that I would like to turn the call over to Jim.
Good morning, and thank you for joining us.
Before we start I want to take a moment to say that after a thorough search by the board of directors. We were very pleased to announce earlier this week that Christian at all it will be taking over as CEO of AMC networks.
Based upon our Christmas considerable executive and operational experience.
30, plus years working in media and entertainment, including her prior history managing subscription based businesses. The board concluded. She is the best candidate for the role.
As founder and CEO of audience measurement and data analytics companies 605, Kristin has been on the front lines of the evolution of advanced advertising and audience targeting. She also has a strong record of driving organizational change. These are areas of critical importance as we transform.
AMC networks and further monetize our high quality content.
Pivotal period in our industry.
Before turning the call over to Patrick I'd like to briefly provide my perspective on the industry and the company and how we see the business evolving.
Across the board the content industry is being disrupted by <unk>.
Cord cutting in the traditional linear sector or Mvpds and also in the streaming sector.
Also being disrupted by changing viewership habits are challenged AD market and rising content costs.
As I've said in the past the current mechanisms for monetizing content are not working.
The content industry needs to reorganize itself. We're seeing this now with most media companies beginning to course, correct to better monetize content and improve the economics of their business, we believe large distributors and programmers will lead the way.
<unk> will follow.
Streaming is a retail business, that's what <unk> means.
For now as the industry continues to evolve AMC networks, we will focus on streamlining our organization.
Operating more like retailers and wholesalers driving cash flow and maintaining our strong balance sheet.
At the same time, we will continue to do what we do best which is making great content. We believe this strategy will position AMC networks, well to navigate current industry dynamics and generate long term shareholder value as an even stronger company with that I will now turn the call over to Patrick.
Thank you Jim.
As Jim highlighted AMC networks unique assets and capabilities position us well to succeed as the landscape shifts in consumer behaviors continue to evolve.
We took steps in the fourth quarter to recalibrate, our business, we streamlined the organization to create a more nimble operating team and reduce costs to drive increased free cash flow.
We are optimizing our content monetization through the array of options available to us to.
This includes our linear and streaming platforms as well as opportunistic content licensing.
We will further leverage our 15th fast channels as we continue to expand our innovative advanced advertising capabilities and utilize data to enhance the value of our inventory.
In addition, we are extending our partnerships with new and existing distributors with six recent renewals, including charter Altice and Bell Canada.
We're now beginning to see movement towards new pricing and packaging models, including streaming bundles.
One example is Verizon which.
Which recently tested an AMC plus and Netflix offer as part of their horizon plus play offering.
And we expect more to come on this front.
We are staying true to our mission of Super serving our passionate audiences by creating highly compelling content the breakthrough in a crowded marketplace.
We had a strong slate in the fourth quarter, including the series finale of the walking dead.
And the first series and our new and Rice and Mortal Universe franchise, and Rice's interview with a vampire.
Last month, we followed up with our debut of the second series in that Universe, and Rice's Mayfair witches, starring the Emmy nominated actress Alexandra to Dario.
Based on the first 30 days of viewership Mayfair, which is now the most viewed season of any series ever on AMC plus ahead of interview and the final season of the walking dead.
On linear Mayfair is off to a strong start with ratings continuing to build as the season progresses and is already a top 10 cable drama for the 2022 2023 television season in key demos.
Based on our strong Debbie performances, we've Greenlit, both interview and May fare for second seasons.
As for the walking dead that world continues to resonate with advertisers and captivate viewers.
The final season of the walking dead committed at the highest pricing that Sirius has ever seen over the course of its 11 seasons strong evidence of the continued power and relevance of this franchise.
Also on that point.
Knowing its successful run on AMC and AMC plus the 11th season of the walking dead launched on Netflix earlier this month.
And the FERC in the first full week. It was available Netflix can some consumer streamed 143 billion minutes of the series. It was the number one most watched acquired series in the platform and then number two series overall.
We are thrilled to have two highly anticipated walking dead spinoff series planned for 2023.
The walking dead that city.
And the walking dead Daryl Dixon.
And a third production.
And a third in production right now and slated for 2024, starring Andy Lincoln and the Niobrara.
Viewers know as Rick and Michelle.
Next month, we will premiere Lucky Henk, starring Bob Houghton Kirk and his follow up series to better call Saul on AMC and AMC plus.
And later this year, we will have the second season of the popular and critically acclaimed dark wins.
This is just a sampling of the new content, we will be we will be bringing viewers on AMC AMC plus and across our other linear networks and streaming services.
BBC America is currently featuring its latest natural history Tentpole series from the BBC and their remarkable Sir David Attenborough frozen planet to next.
Next year, we will have planet Earth III as we extend our leadership position and bringing viewers the very best franchise titles and Thats very popular programming category.
This spring BBC America, Acorn, TV, and AMC, plus or being viewers. The third season of the British crime drama Happy Valley.
Isn't that just concluded in the UK and became must watch appointment television in that country.
Acorn TV will also premier a new season of the hit series Harry Wild starring Jane Seymour later this year. In addition to a full slate of its popular international dramas and mysteries.
We also continue.
To see remarkable strength and interest in the franchise hits on our we TV reality network.
All three series and the love after lockup universe attract large and dedicated audiences.
As does our growing up hip hop franchise, which is slated to expand to include a new series later this year.
Before I review, our 2022 financial performance in 2023 outlook I'd like to summarize a few of the onetime items that are reflected in the 22 results.
First in the fourth quarter, we realized restructuring and other charges of $449 million comprised of $404 million strategic programming write offs and $45 million of organizational restructuring costs.
While the majority of the restructuring and other charges are noncash we accrued for the cash portion of the fourth quarter, including $73 million of strategic programming write offs and $41 million of severance and employee related costs, which could which will contribute to a cash outflow of approximately $115 million in 2020.
Three.
Second we took a separate goodwill impairment charge related to AMC networks International.
Moving onto our full year 2022 financial performance.
Consolidated revenue increased 1% to $3 1 billion.
Consolidated adjusted operating income was $738 million.
Representing a margin of 24%.
Adjusted earnings per share was $9 21.
And we generated free cash flow of $103 million in 2022.
For the fourth quarter of 2022 consolidated revenue increased 20% to $965 million adjust.
Adjusted operating income grew 34% to $137 million and adjusted earnings per share was $2 52.
In our domestic operations segment full year and fourth quarter revenue grew 4% to $2 7 billion.
And 26% to $861 million respectively.
We ended the year with $11 8 million paid streaming subscribers representing year over year growth of 31%.
Subscription revenue grew 6% for the full year and 7% in the fourth quarter.
Full year streaming revenue was $502 million representing.
Representing 35% growth year over year.
Fourth quarter streaming revenue grew 41%.
Affiliate revenue declined five 8% for the full year and seven 5% for the fourth quarter.
Affiliate revenue performance was driven by declines in the basic subscriber universe, partially offset by contractual rate increases.
Content licensing revenue grew 18% for the full year and 152% for the fourth quarter.
The increase in content licensing revenue was driven by the timing and availability of deliveries, including what we.
Which is a series produced by AMC Studios for Apple TV.
Deliveries are all represented approximately $126 million of content licensing revenue for us in the fourth quarter of 2022.
While we typically produce content for ourselves because we have partial to ownership economics was an example of how we utilize our assets across the company, including our studio Opportunistically.
It's worth noting that generally production for third parties have lower margins as compared to the rest of our business typically third party production margins are in the 10% area.
Also in the fourth quarter, we delivered certain titles in the walking dead universe that we had previously planned to deliver in 2023.
The early delivery of these titles contributed to our fourth quarter licensing revenue growth.
Full year domestic operations advertising revenue decreased 7% to $788 million.
Fourth quarter advertising revenue declined 12% to $206 million.
The decline in advertising revenue is primarily due to lower veneer ratings and softness in the AD market as well as fewer episodes of original programming.
Partly offset by digital and advanced advertising revenue growth.
Broadly speaking our AD supported networks and digital platforms are experiencing the same environment as others in our space.
The scatter markets have been soft as the climate of economic uncertainty has resulted in our advertising partners being more conservative with their spending.
Domestic operations adjusted operating income was $789 million for the full year 2022.
Our performance for the full year, it was largely attributable to lower advertising and affiliate revenues increased programming investments and increased SG&A expense.
For the fourth quarter, AOI increased 27% to $154 million.
The increase in fourth quarter AOI was largely attributable to an increase in content licensing revenue and a decrease in subscriber acquisition marketing, which was partly offset by an increase in programming investments.
Moving to international and other.
Revenue decreased 14% to $443 million for the full year 2022, or 7% on a constant currency basis.
Fourth quarter revenue was $108 million.
A decrease of 12% or a decrease of 4% on a constant currency basis.
Full year international and other revenues reflect lower distribution revenues due to the timing of production at $25 seven media.
Lower advertising revenues due to the impact of the planned wind down of two channels in the U K and softer ratings in the UK.
Fourth quarter revenues reflected similar trends with the exception of content licensing revenues, which increased in the fourth quarter due to the timing of productions at $25 seven media.
International and other OE decreased 17% to $69 million for the full year 2022, alright decrease of 15% on a constant currency basis.
For the fourth quarter, AOI was $13 million, representing growth of 8% or 4%, excluding the beneficial impact of FX translation.
Full year and fourth quarter outperformance was driven by our revenue performance.
Technical and operating expenses and lower SG&A expenses.
Consolidated free cash flow for 2022 was $103 million and reflected the beneficial timing of certain production related payments a reduction in marketing spend the timing of tax credit payments and lower cash taxes.
We ended 2022 with net debt and finance leases of approximately $1 9 billion.
And our consolidated net leverage ratio of two six times.
We have substantial financial flexibility and total liquidity of 143 billion.
Including $930 million of cash on the balance sheet, and our undrawn $500 million revolving credit facility.
We continue to monitor the markets and we'll be opportunistic in addressing our upcoming maturities.
There were no repurchases of AMC networks common stock in 2022.
Our capital allocation philosophy is both disciplined and opportunistic.
First we will look to support the business with a particular focus towards creating compelling content that resonates with our audiences.
While balancing overall profitability and cash flow generation.
Second we remain focused on the balance sheet and addressing our upcoming maturities.
Further down our priority list at the moment is the pursuit of strategic M&A and returning capital to shareholders.
Moving to our outlook for 2023.
Starting with the topline we expect 2023 consolidated net revenue to be approximately $2 9 billion.
Largely due to the industry wide dynamics Jim mentioned.
Regarding streaming revenue, we expect growth for the full year at a moderated pace as compared to 2022, driven by lower gross additions.
Reduction in subscriber acquisition marketing.
Streaming is important part of our future and represents a meaningful opportunity for us we will continue to focus on delivering highly curated content to our passionate engaged audiences, but as we are focused on optimizing monetization across our entire business. We are no longer providing streaming subscriber targets at this time.
Regarding affiliate revenue, we anticipate that existing cord cutting trends will continue.
And our year over year comparison will be incrementally impacted by our strategic non renewal with a virtual mvpds that occurred at the end of 2022.
On content licensing, we anticipate a decrease in licensing revenues as our year over year comparison is affected by the 2022 deliveries of wall and certain walking dead universe titles, which were partly offset by new international licensing revenues.
Moving to advertising, we expect 2022 trends to continue through 2023, including lower linear ratings in a soft overall ad market.
Partially offset by digital and advanced <unk>.
Advertising revenue growth.
We have a strong content slate for 2023, and we are optimistic about our upfront strategy.
In terms of adjusted operating income we are beginning to realize the benefits of our strategic cost measures, including material year over year reductions in programming marketing staff and other costs.
As such for the full year of 2023, we anticipate that consolidated AOI will be in the range of $650 million to $675 million.
Beginning with the first quarter of 2023, we'll be adjusting our free cash flow definition to exclude distributions to noncontrolling interests, which are discretionary in nature.
Will better reflect the earnings power of the business in our reporting and will more closely align our definition with those of our peers. Additionally, we will provide supplemental cash flow schedules that will include details regarding onetime items that may affect comparability.
For 2023, we expect to generate reported free cash flow using our updated definition in the range of $70 million to $90 million, which no longer reflects the inclusion of approximately $35 million of expected distributions to noncontrolling interests in 2023.
The $70 million to $90 million range represents free cash flow on a reported basis and includes the negative impact of approximately $115 million of one time cash costs associated with our restructuring plan.
Our 2023 reported free cash flow guidance implies a $185 million to $205 million.
Free cash flow, excluding these one time items, which.
Which represents the level of cash flow that we so we can maintain and grow over time.
However, due to the timing and cadence of productions, we anticipate net cash outflows during the first half of 2023 and expect to generate the majority of our full year free cash flow closer to year end similar to the pattern in 2022.
In terms of our content investment strategy, we continue to focus on making efficient and highly curated content decisions as we super serve our distinct audiences.
2022 represented our peak content investment year.
We continue to refine and improve our approach towards content investments something over which we have a high degree of control.
For 2023, we expect cash content investment to be approximately $1 1 billion as.
As compared to 135 billion in 2022.
Looking out past 2023, we anticipate that our cash content investment will be in the $1 billion area consistent with our historic pre pandemic levels.
2023 will be a key year for AMC networks, as we execute our differentiated strategy of being everything to someone rather than offering something for everyone.
We are thrilled to be nurturing and growing our newest franchise, the <unk> memorial universe, while extending and expanding our most storied franchise the walking dead universe.
We are streamlining our organization and optimizing our monetization while meaningfully growing our free cash flow year over year.
With that operator, please open the line for questions.
Thank you and if you have a question at this time. Please press star one one on your telephone.
Well the compiler Q&A roster.
And our first question comes from the line of Thomas <unk> with Morgan Stanley . Your line is open. Please go ahead.
Thank you so much Jim I wanted to dig into your comment about operating more like the retailers versus wholesalers going forward, what do you see as the major incremental steps.
AMC needs to take to move towards that direction that you guys have kind of an industry market for some time.
A different marketing approach or partnerships or something else and then Patrick on the $1 $1 billion of programming spend on cash can you talk a little bit about as kind of the write downs for US grew and you refocus the spending how we look to the general mix of focus around high.
And scripted original programming relative to targeted.
Programming and you've got the balance of that looks like over time. Thank you so much.
Yes.
It's rather long set of questions.
Okay well.
Look.
AMC has been a wholesaler.
Most most of the programming companies have.
I have been.
And wholesaling.
Somebody else takes care of the customer somebody else watching the customer.
And somebody else actually ends up pricing to the customer.
When you go to D to C. All of those things become your responsibility.
And for an organization.
To move from wholesalers to retailers to really significantly change its focus.
We are paying attention to things like customer journey and churn.
Are all part of becoming.
A good retailer the pricing is becomes very important.
And where.
You apply your manpower.
You do.
It is not affiliated relations not that Youre stopping affiliate relations but.
But affiliate relations is a much smaller task now compared to understanding the customer and serving them well.
And that is a.
Cultural change for AMC.
So it will be for a lot of other companies.
Alright, Thanks, Tim.
So the question Thomas on on programming spend listen I think it's important to contextualize our reduction in programming spend BCP our historical levels.
Between 2017 in 2019, AMC spent an average of about $1 billion in cash and I'm talking here.
And during this period, we obviously had amazingly powerful programming that you all sort of know and love.
It was really only during 2021 and 2022, we're programming bumped up to the $1 335 billion dollar level and so we're just taking cash spending down to $1 $1 billion. This year, that's obviously a meaningful reduction of about $250 million.
Roughly 20%.
This still leaves us with <unk>.
Plenty of firepower to continue our historical programing cadence.
And I would say on that front cover to cover this fall we've got an amazing.
Set of shows I mentioned in my comments at the top of the call here.
I think it's also worth noting that the numbers I've given you, obviously sort of cash numbers right.
This is distinct from programming amortization that runs through our P&L, which obviously has a little bit of a lag to it.
Versus cash given that its attempting to me to match earned revenue with expenses and equally valid metric. It just has to do with differences in timing.
We are very much focused on cash here as you've heard from me before.
I think the punch line here is that we're trying to strike the right balance between continued investments in the business and generating sufficient profits and cash flow in the near term.
In terms of where the cuts are coming from specifically.
We took a hard look at all of our platforms.
And they are trying to maintain as much programming efficiency as possible across all of them.
But we took a look at shows that's where.
When we took a look at our covered we have to kind of pull out things that werent, maybe add on brand are on strategy.
Some others and this happened both across linear and streaming and across channels as well. So it was really we looked across the entire portfolio. We also reduced some of our spend on the international side as well.
It was a skew linear versus <unk>.
Streaming I would say.
Given the fact that we've got some of these smaller streaming platforms that we can still invest capital into and grow nicely, we protected those to a degree.
And we liked our programming levels at AMC and AMC plus.
It's fair to say that maybe the slight skew.
Towards ensuring that the monetization of the programming is front and center and so maybe.
Tinged less exclusive programming on AMC, plus as we as you recalibrate the business for profitability.
But that being said all we're trying to do here is be as thoughtful as possible about the window, the winning with the content and really kind of sweating the assets that we have.
And that's kind of really the game plan.
That's very helpful. Thank you both.
Thank you and as a reminder, if you would like to ask a question. Please press star one on your telephone to raise your hand.
And one moment for our next question.
And our next question comes from the line of Robert Fishman with Moffett Nathan Your line is open. Please go ahead.
Hey, Good morning, Jim can you help us think about how you see the future of this company.
Obviously been a lot of press reports about possible M&A scenarios over the past couple of years.
We prefer to see AMC networks, as a standalone entity and a few years or rather combined with another strategic partner.
I'll follow up thank you.
Paul.
Well look.
Okay.
I think that our first concern is always going to be creating value for our shareholders.
So.
What forum that comes in.
Yes.
As.
It could be stay the course it could be.
M&A a strategic transaction.
Very honestly.
We're very much open.
Two.
We have the company that we have in Europe , and we're trying.
Trying to guide through <unk>.
It's going to remain a standalone.
But that doesn't mean that we won't consider.
M&A.
Let's see if we can improve the shareholder value that way.
So.
I think that kind of answers it.
Yes. Thank you.
For Patrick you guys talked about these recent MVP D renewal I'm just wondering in the context of shifting to this retailer mentality.
Should we think about the impact of these renewals on future affiliate fee revenue growth and given the accelerated level of cord cutting.
Can we expect pricing to offset any of the.
Cord cutting or are there other revenues as part of the negotiations.
With these renewals that can offset traditional affiliate fee decline.
Thanks Robert.
Listen we have very long standing relationship with our affiliate partners.
Profitable partnerships for both parties for decades now.
As I mentioned earlier, we continue to invest heavily in premium content.
We think we we punch way above our weight and just in terms of the residence of the content itself, but frankly the value for money that our content delivers to our to our distributors. So obviously you've taken note of the fact that we've had half a dozen renewals here.
We feel really good about these relationships these relationships continue to to expand and grow as many of the larger distributors are now distributing our AMC plus apps other apps on their on their platforms. We can just as a win win for us for them for consumers. So.
Theres obviously.
Additional.
Advertising.
Relationships with with some of the larger ones as well and so we're leaning heavily into that so we see these relationships as critically important we continue to invest in content to support our viewers and in the technology to support that.
Three of our products vis vis these distributors in whichever form or fashion consumer for luck.
Let me just add into that.
The mvpds, particularly the cable companies right.
Also in <unk>.
Obviously in a state of turmoil there.
And as cord cutting and may be even more important in cord cutting is the change in viewership habits.
These companies.
The likes of Comcast charter and Cox et cetera.
They've been in this business a long time.
And.
They are a depth.
At.
At creating products for their customers et cetera.
Our goal with them should be and is.
To to work with them as they create.
New platforms and new environments for their consumers, we anticipate that.
Due to our long relationship and our support to them.
We will do those things together.
And that should accrue well to AMC as a company.
Great. Thank you very much.
Thank you.
And as a reminder to ask a question. Please press star one one and our next question one moment. Please.
Our next question is from Brett Feldman with Goldman Sachs. Your line is open. Please go ahead.
Yes, thanks for taking the question and it was interesting to hear you talk about thinking more about being a retailer. If we think about retail business models. They tend to have higher cost structure than wholesale business models, but they also typically get higher pricing in our retail channel than they get in their wholesale channel a question, we get a lot from investors.
It seemed like in your traditional linear wholesale model you had a lot of pricing power and so as you think about being more retail focused with your content distribution. The future. How are you thinking about the pricing power that youre going to have in that kind of model to make sure that to the extent your costs are higher your pricing is higher as well. Thank you.
Well I think thats part that is part of the overall strategy of the company.
What we're saying right now is that those pricing models and those monetization models don't work when you look essentially.
You go back to two and a half years.
There was a lot of optimism about streaming.
And the thought process was at that time that our streaming customer was worth four or $500.
Per customer.
And that was that based on the idea that there are a lot like cable customers because theyre going to be with you a long time.
The fact is that.
The model for the consumer is very different.
When the cable business right. If you wanted to if you wanted to cancel your subscription.
You really had to work at it.
And.
And the same thing honestly was true was signing up a lot of times.
But now in the streaming model is one click of your mouse.
So.
That's that's the new environment and the pricing structures that.
Industry has had right don't really reflect that reality. They don't reflect the reality that a customer can sign up claims your product for a month and then.
And then leave you.
And so what does that make that customer, we're certainly not $500.
So there needs to be an adjustment.
What AMC is doing is essentially.
Maintaining its ramp.
Its revenue streams.
<unk> itself not doing that kind of investment that yes that values extremely customers at five $500, but rather.
Laying back.
Watching the marketplace working with retailers like like <unk>.
<unk>.
And waiting for our opportunity to take our great content and put it into a vehicle that truly monetize that may take a little while.
Thank you.
Thank you and one moment for our next question.
And our next question comes from the line of Douglas <unk> with Cowen. Your line is open. Please go ahead.
Thanks.
A follow up to your last answer.
Okay.
Everybody decided to invest in streaming very heavily others more so than you and it hasnt worked as you sort of identified.
You're cutting costs.
And.
To reflect that.
But obviously if you can't grow revenue then its still going to be pressure on your business. So do you think your ability to grow revenue as something Thats <unk>.
Completely in your hands or is it going to take some changes to the market structure.
To make it a more healthy environment and if so what are they.
Well.
It's an interesting question I mean.
In some ways I do think it's in our hands right because we have great content, we have a product that the customer wants right.
So from that from that point of view you do get.
Sort of guide your destiny.
<unk>.
But.
On the other side I mean, I really think that what we're going to we have to look for is a sea change across the industry.
It is something that AMC is not going to be at the forefront up.
Yes.
Because we're just playing we're not big enough, we cant, we cant drive that kind of change.
But the marketplace will evolve.
And what we need to do as a company is we need to be really in tune with it.
We have to watch what the customers are doing.
Out of their behavior with their subscriptions.
What kind of content, they like et cetera.
Sure.
As I said, we're not going to lead the way.
I think the rest of the industry right. The larger players in the industry will have a much greater impact than we do.
We'll continue to watch them, we will continue to watch the customers will get much more adept at things like that.
The research and understanding viewership patterns.
And all of that so we can keep customizing and making our products into a product.
That consumers will want and.
We'll watch the pricing, but I do think that pricing right.
<unk> is going to change.
How it's going to change exactly.
I T.
Take a pass on being that precedent.
But what.
But I do think we're going to see change.
Great. Thank you.
Thank you and one moment for our next question.
And our next question comes from the line of David <unk> with Jpmorgan. Your line is open. Please go ahead alright.
Alright. Thank you just on the kind of overall shift towards driving more cash flow wondering if there has been consideration towards changing the mix of content toward.
Lower price programming like non scripted that still drives a large audience. So we are doing less originals and then Patrick wanted to see if you could just follow on your AG commentary, we've heard from some of your peers about stabilizing or improving market wanted to see if there is an update or maybe you could say whats assumed in your guide for the year with advertising.
Well.
On the content piece basically what we did.
In the last few months.
As we took on a hung on to some of the our best programming.
Yes.
The content that performs really well.
I mean, that's what we're good at so no I don't think that we're going to change that that strategy, we're just going to try and keep it more efficient and work on the monetization models.
Yes on the AD market.
I don't have much incremental to add other than what you've already heard from others, which is obviously Scott. It was very very weak in the fourth quarter you saw that in our numbers.
Over the last couple of weeks, we have seen.
The market start to sort of.
Kind of firm up a little bit.
We're not prognosticating sort of into the future in terms of what the.
The back half of this year, it looks like et cetera. So implicit in our guidance is just continued.
Continued status quo.
So not much not much to add there, but thats whats embedded in our guidance.
Thank you and again to ask a question at this time. Please press star one on your telephone.
Our next question comes from the line of John Hodulik with UBS. Your line is open. Please go ahead.
Great. Thank you.
Maybe just keeping with the D to C team, Jim you talked about needing a sea change for things to really improve on the forum.
Streaming economic standpoint.
Well.
I guess you guys have already addressed it but just what's your view on that just consolidation of the industry from here, maybe involving AMC, maybe not but just how do you see do you think we're at the cost go up in sort of another wave of consolidation sort of driven by the whats happening in streaming given the sort of changes in strategy. We've seen from that from a number of the carriers and then.
Is there any chance you often hear about sort of bundling streaming services has there been any real initiatives.
That you've seen that could sort of bring some of these services together outside of consolidation or or anything else you could tell us about what you mean in terms of at sea change.
The economics of this business.
On consolidation.
I think.
You have to watch the customer the consumer.
The.
<unk>.
<unk>.
It would be difficult right at this moment.
I don't think youll see the industry pursue.
A strong consolidation movement.
Because the industry doesn't yet know how to monetize the content.
Once.
Great.
Once they reorganize themselves.
<unk> et cetera, and start to get.
A better handle on that in a better strategy was at then.
Dan you could see consolidation.
Because there will be consolidation around building stronger products and stronger offerings to the customers and building business.
Now.
In my view, it's just my opinion I don't see anybody who has the answer to this.
And.
Without that answer I don't get the rationale for pursuing a consolidation strategy.
And on the streaming bundles question listen there's been.
Obviously, a lot of chatter recently in the market on this topic and I think I think for good reason, obviously done properly.
It's a win win win for programmers for distributors.
Most importantly for consumers.
We like the idea of bundled services.
Sure.
We see some movement towards that obviously you saw in our release we've had some interesting.
Beta tests with Verizon around a bundle of.
PMT plus with Netflix, we think that holds promise, we're holding multiple conversations with other potential aggregators in the market along these same lines.
We think.
To be successful there, obviously you need to have a high degree.
Complementarity, if that's where we really want to make sure that as a program or you are adding something to the bundle and we think in our case.
Given how well define our brands are given our reputation for the premium programming that we have.
Given our attractive price point.
With that were very attractive partner in this regard so the early tests have been positive and we're leaning in.
And we're hopefully more in the coming quarters.
Got it thanks guys.
Thank you and this does conclude today's question and answer session for today's conference Ladies and gentlemen. This also does conclude today's conference. Thank you for participating you may all disconnect everyone have a great day.
The conference will begin shortly to raise and lower Johan during Q&A, you can dial star one one.
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Dan.
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The conference will begin shortly to raise and lower Johan during Q&A you can dial one one.
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