AMC Networks Inc. Q1 2023 Earnings Call
[music].
Okay.
Yeah.
Good day, and thank you for standing by.
Come to the AMC networks first quarter 2023 earnings 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.
Ask a question during the session you will need to press star one one on your telephone you will hear an automated message advising you your hands, it's right to withdraw your question. Please press star one again, please be advised that today's conference is being recorded I would now like to hand, the conference over to the speaker.
Speaker today, Nick Schubert. Thank you good morning, and welcome to the AMC networks first quarter 2023 earnings conference call. Joining us. This morning are Chris can Dolan, Chief Executive Officer, Patrick O'connell, Chief Financial Officer, and Kim Callahan, Chief Commercial 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 995.
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 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 the required definitions and reconciliations can be found in today's press release.
That I would like to turn the call over to Kristin.
Good morning, everyone. Thank you for joining us well I'm new to my role as CEO of AMC networks. This is a company I know very well I started my career here and spent the last decade, serving on the board of directors, but more than that my background in programming cable operations and more recently data and analytics around viewership and advertising.
Sizing gives me a clear and actionable perspective on the opportunity we have here.
AMC networks has always been known for great content and the ability to make shows that breakthrough in popular culture received critical acclaim and engage fans that is the consistent theme that has defined our presence in the content landscape for years.
Question today is how do we take that core competency and evolve the business for a new world of multiplatform consumption that is increasingly being driven by the consumers. We serve when I look at AMC networks today and I think this is key for our future I don't just see a content company ICA technology focused company that delivers this content across <unk>.
And a number of platforms here and around the world.
I see a nimble and fast moving organization that relies heavily on data to grow audiences serve fans and build value for our advertising and distribution partners.
On our last call, we talked about the idea of transitioning from a wholesale to a retail mindset for us that means reorienting, our company and making sure everything we do is in service of viewers and subscribers our customers in this new world of content consumption.
We also shared a strong focus on reevaluating the pathways to content monetization as we reduce costs streamline the organization maintain a strong balance sheet and drive free cash flow.
Our efforts in these areas contributed to our first quarter with healthy margins and increased streaming revenue and consolidated ally.
We ended the quarter with $11 5 million streaming subscribers in aggregate and while this represents a slight decline from last quarter, the bigger context, as our focus on attracting and retaining higher value subscribers.
Building, a more valuable customer base is something I'm very familiar with from my Cablevision days, where we drove higher revenue per subscriber results quarter over quarter and year after year.
This growth came from a deep understanding of what it takes to acquire serve and retain customers and a competitive environment.
Although the specifics of that distribution focused sales strategy are distinct from what we are doing here. The objectives are the same.
Patrick will expand on all of this in his discussion of our financial results, which I'm pleased to say we will include reaffirming our guidance for the full year.
Now I'd like to spend a few minutes talking about four interconnected areas of focus that framework current activities and represent what I see as AMC networks opportunity moving forward.
The first is content, which has been a core competency and strengths that has driven this company's success going back to the days of Mad men and breaking bad.
Our record of producing high quality breakout content for adults continues with our current slate of original programming that is among the most robust and diversified in our history.
In January we premiered the second series of our expanding universe around the iconic works of Anne Rice, Mayfair witches became the most successful premier in the history of the AMC plus and the most watched season of any show on the platform. We've greenlit second seasons of both Mayfair witches and Anne Rice's interview with the Vampire and we're in a.
Active development of a potential third series set in the world of the <unk> a secretive organisation featured in a number of Rices novels.
We also continue to serve the regions of walking dead fans with three new shows focused on the series most popular characters set an iconic new locations.
They are walking dead dead City set here in New York premieres in June we recently.
<unk> completed production in Paris for the walking dead Zero Dickson coming this fall and we are in production on a third series that reunites stars Andrew Lincoln and the Niobrara, you know them as Rick and Michelle three new extensions that will engage in and through all the millions of fans of this continuing universe.
Returning this summer is our acclaimed Western Noire crime series Dark wins, starring Zhan Mcclarnon, and we have new AMC series on the way with parish starring Gian Carlo Esposito Monster speed with Clive Owen and a new chapter in our orphan Black franchise, starring Kristen Ritter, we promoted all of these exciting <unk>.
Last month at our upfront event in New York, and we're already seeing strong interest in our early discussions with advertisers.
Our streaming strategy of Super serving fans of a particular genre represents our differentiated approach that sets us apart from the general Entertainment services with very reasonable levels of content spending our Acorn TV, all black Shudder and high Def services are achieving strong viewership and remarkable engaged.
Matt.
One example is from our high debt service, which is making gains as an increasingly sought after destination for passionate anime fans are very potent category.
<unk> New series called <unk> has become a breakout hit quickly becoming the number one series launch in the history of the platform and growing audience week over week.
I do believe we've only begun to scratch the surface with all of our services, particularly in terms of our opportunity to expand the depth and breadth of our content offerings and attract larger audiences.
The second area of focus relates to AMC networks, being a nimble innovative and opportunistic company with an expanded distribution footprint and partner relationships that allow us to maximize the value and potential of our content in several ways R.
Our overarching goal is to distribute this shows you make as broadly as possible to ensure that they are visible and available to viewers wherever and whenever they might want to watch while ensuring we preserve and drive our strong brand identities across all platforms.
AMC networks is a track record as a sought after an innovative strategic partner for distributors and this was evidenced most recently with an agreement we reached with dish network and sling for continued carriage of our U S channel portfolio streaming services and fast channels as well as an expansion of our advanced advertising partnership with them.
Yes.
It is our long standing distribution relationships that we believe will form the foundation of what is the forthcoming shift to streaming bundles.
These bundles are beginning to gain traction as the marketplace evolves and consumers seek a more simplified and integrated experience when it comes to managing their various services with our high quality content and distinct brands AMC networks occupies a prime position for this inevitable shift.
As the models of content monetization continue to evolve. Another advantage. We have is a broad distribution footprint that spans linear television networks, our own digital and streaming platforms and third party CTV or fast platforms with the addition of an AD supported tier of our flagship AMC plus streaming service later this year.
Year, our entire distribution ecosystem will be AD supported providing us with important new opportunities to drive revenue and grow our business. This leads to our third major area of focus and I referenced it earlier on the call which is to drive our customer first mindset throughout our company.
This cuts across all the ways, we interact with and serve our audiences from how our shows are delivered and promoted to how our platforms and user interfaces are designed and function.
Again. This is something we did successfully at Cablevision, which at the time was a mature and fully built out service base business, even with that market presence, we reoriented the company around data, which helped enable us to deliver the highest levels of customer service.
At AMC networks, it's essential that we become a more customer centric organization as we establish a direct relationship with an increasing number of viewers. This represents a significant shift in mindset from how we've operated for most of our 40 plus years as a company and it requires a rethink across the organization to ensure we're approaching our business in a way that.
Best serves our viewers, regardless of how where or when they are watching our content.
Our fourth area of focus and the one all closed on is efficiency, we are breaking down remaining walls and silos that divided areas and categories of our business and operating as one focused company, making content and delivering it to viewers across all platforms in so many ways and across so many shows AMC.
Networks has proven its ability to punch above its weight and achieve levels of cultural impact and fan engagement that much larger content companies aspire to it.
As a privilege to have the opportunity to build on this legacy as we prioritize long term growth and subscriber quality focus on optimizing our customer relationships and drive audience engagement across the AMC networks ecosystem.
I'm grateful to work alongside our exceptional leadership team and every one of our employees and colleagues I have every confidence that we have the talent and assets to grow AMC networks into its next chapter with that I'll turn the call over to Patrick.
Thank you Kristen.
Christian highlighted with the strength of our programming our nimble approach to a dynamic marketplace and our continued focus on operating efficiency AMC networks is well positioned to succeed as consumer behaviors continue to evolve.
We took several steps over the past couple of quarters to recalibrate the business for increased monetization and we feel good about the progress we've made to date.
We right sized our investments in content and streamline costs to drive increased free cash flow in 2023 and beyond.
We continue to strengthen our long standing relationships with key distributors as Christian mentioned, we recently completed a multi year renewal with dish networks on sling TV for our linear networks streaming services and fast channels.
Moving onto our first quarter 2023 financial performance.
Consolidated revenue increased 1% from the prior year to $717 million.
<unk> adjusted operating income increased 2% to $216 million, representing a margin of 30%, which reflects our strong focus on operating efficiency.
Adjusted earnings per share was $2 62 sites.
In our domestic operations segment first quarter revenue grew 1% to $612 million.
Subscription revenue of $348 million grew 1% for the quarter.
First quarter streaming revenue was $141 million, representing 29% growth year over year.
We ended the quarter with $11 5 million streaming subscribers representing year over year growth of 22%.
While this represents a sequential decline in subscribers from the $11 8 million, we reported at the end of 2022. The decline in subscribers was largely due to our focus on higher value subscribers and the roll off of holiday promotional subscribers.
The rationalization of our subscriber base, along with pricing actions taken last year increase the average revenue we generate per subscriber.
Sure.
As we remain focused on the overall profitability of the company, we continue to program our services efficiently.
If you look at the top five titles for each of our targeted services in the month of March 18 of the 20 titles cost less than $1 million, an episode and some substantially less than that.
This is a powerful illustration of the economic advantage of our strategic approach to the streaming business.
Moving to domestic affiliate revenue.
Affiliate revenue declined 11, 7% for the quarter.
Affiliate revenue performance was driven by declines in the basic sub universe.
And a 3% impact of the strategic non renewal with <unk> that we discussed on our last call, partially offset by contractual rate increases.
Content licensing revenue grew 69% for the quarter to $103 million.
The increase in content licensing revenue was driven by the timing and availability of deliveries, including the final deliveries of silo, formerly known as wall as series produced by AMC Studios for Apple TV that we spoke about in detail on our last call.
<unk> of Siloed represented approximately $56 million of content licensing revenue for us in the first quarter of 2023.
We do not anticipate any material revenue or expenses associated with this project for the remainder of the year.
First quarter domestic operations advertising revenue decreased 20% to $161 million the decline in.
Advertising revenue is primarily due to lower linear ratings softness in the AD market and fewer episodes of original programming.
Partly offset by digital and advanced advertising revenue growth.
For comparison purposes. It is important to note that the first quarter of 2022 was particularly strong with a more robust ad marketplace and content, including episodes of the walking dead and killing Eve.
Our AD supported networks and digital AD platform has continued to experience a similar environment as our peers for the first quarter of 2023 scatter and direct response remained soft given the economic climate with our advertising partners remain conservative with their spending.
Domestic operations adjusted operating income was $219 million for the first quarter with a margin of 36% consistent with the prior year.
Outperformance was largely attributable to increased streaming revenues and lower investment in programming and marketing, partly offset by decreased advertising and affiliate revenues.
Moving to international and other.
For the first quarter revenue decreased 2% to $108 million, but increased 3% on a constant currency basis.
International and other revenues reflect lower advertising revenues due to the impact of the planned wind down of two channels in 2022 and lower ratings in the U K.
Partly offset by increased distribution revenues due to the launch of a new channel in Spain and the <unk>.
Many of productions at $25 seven media.
International and other OE decreased 8% to $21 million for the first quarter, a decrease of 9% on a constant currency basis.
<unk> performance was driven by revenue performance and increased technical and operating expenses, partly offset by lower SG&A expenses.
Moving onto cash flow and the balance sheet.
As discussed on our last call, we updated our free cash flow definition to no longer include distributions to noncontrolling interests.
Consolidated free cash flow for the first quarter was negative $144 million and reflected the timing of certain production related payments as well as the impact of $57 million of cash payments related to our restructuring initiatives.
As we stated on our last call due to the timing of production in 2023, we anticipate net cash outflows during the first half of 2023, and we expect to generate the majority of our free cash flow for the full year closer to year end.
Sure.
We ended the first quarter with net debt and finance leases of approximately $2 1 billion.
And our consolidated net leverage ratio of two eight times.
We have substantial financial flexibility and total liquidity of approximately $1 2 billion, including $764 million of cash on the balance sheet, and our undrawn $400 million revolving credit facility.
We continue to monitor markets and we'll be opportunistic and active in addressing our 2024 and 2025 maturities.
Our capital allocation philosophy remains a disciplined and opportunistic.
We 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 remained focused on the balance sheet and addressing our upcoming maturities.
Further down our priority list.
Our suite of strategic M&A, and returning capital to shareholders.
Moving to our outlook, we are reiterating our 2023 financial guidance today, we continue to expect consolidated net revenue to be approximately $2 9 billion.
Largely due to the well understood dynamics impacting the industry.
We expect moderated growth in our streaming revenue for the full year as compared to 2022, driven by lower gross additions and due to lower levels of marketing spend as we drive marketing efficiencies.
Regarding affiliate revenue, we anticipate that cord cutting trends will continue and our year over year comparison will be incrementally impacted by several percentage points due to the non renewal of the <unk> that occurred at the end of 2022.
We anticipated decrease in content licensing revenues as our year over year comparison is affected by the 2022 deliveries of silo as certain walking dead universe titles.
Which will be partly offset by new international licensing revenues.
Moving to advertising, we expect 2022 trends to continue through 2023, including lower linear ratings and a soft overall ad market par.
Partially offset by digital and advanced advertising revenue growth.
Lower linear ratings for the full year will be partly the result of fewer original hours.
Notwithstanding that the programming cost savings, we expect represent a multiple of the advertising revenue those titles would have generated.
Regarding adjusted operating income we are realizing the benefits of our strategic cost measures, including material year over year reductions in programming marketing staff and other costs.
For the full year of 2023, we continue to expect the consolidated AOI will be in the range of $650 million to $675 million.
We also continue to expect to generate free cash flow in the range of $70 million to $90 million for the full year.
This range represents free cash flow on a reported basis and includes the negative impact of approximately $115 million of one time cash payments associated with our restructuring plan.
Our free cash flow outlook would be in the range of 185 million to $205 million of free cash flow. Excluding these one time items.
Additionally, we believe we can maintain and grow this level of cash flow over time.
Regarding content, we continue to focus on making efficient and highly curated content decisions to super serve our audiences.
We are past peak content investment and we continue to expect cash content investment to be approximately $1 1 billion for 2023.
Looking out further than that we anticipate that our cash content investment will be in the $1 billion area consistent with our historic pre pandemic levels.
This is more than enough content to drive a strong slate of content and support our businesses and frankly represents a rationalization for a prior period of Overinvestment.
2023 will be a key year for AMC networks, as we execute our differentiated strategy.
We are encouraged by the progress we've made streamlining our organization and optimizing our monetization and we continue to expect to meaningfully grow our free cash flow over time with that operator. Please open the line for questions.
Okay.
Thank you at this time, we will conduct a question and answer session. As a reminder to ask a question you will need to press star one one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby, while we compile the Q&A roster.
Our first question comes from Michael Morris with Guggenheim Securities. Michael. Please go ahead with your question.
Hi, Good morning. This is Charlie <unk> on for Michael Morris.
Just a quick question from me.
On the AMC plus AD supported tier can you share any more details on the anticipated price point unexpected RFP there.
And just kind of your expectations about.
At <unk>, and whether those would offset a lower price point and kind of how youre thinking about consumer choice between the multiple tiers.
As you are making that determination.
Are you considering any AD supported tiers for your other new streaming services. Thank you.
Thanks, Charlie It's Christian as you mentioned, we did announce at our recent upfront AD supported tier for AMC plus we're looking at an October launch for that tier.
We see it as a great opportunity to continue to super serve and expand our audience is giving more choice to consumers and obviously provide a more holistic and robust advertising solution for our current and future advertisers, but I think it will be probably the next call that Ken will give you more details on pricing and expectations on the <unk> front.
Okay.
Great. Thank you.
Alright standby for our next question.
Our next question comes from Tim Nolan with Macquarie.
Tim. Please go ahead with your question.
Hi, guys. This is Ross content.
Thanks for taking the question.
And just given your background and media measurement with 605 and that you guys could discuss.
How youre using alternative measurements to sell ads now in your linear business or to come in the streaming business.
And do you use 605 in addition to other measurement services orders in place and does 600 viable.
Measurement services, TV kind of an advantage and an increase in CPM.
Great. Thanks, Joseph Christian I'll start and then I'll hand, it over to Kim <unk>.
605 provides.
<unk> services to AMC networks on one is a measurement capability that we use internally and the other is for attribution I would say for the bulk of the tenure.
<unk> AD sales team has used the attribution service to really validate and show the level of sophistication that our advertising team has in targeting and segmentation and then delivering results that are probably low.
Most of the time to mobile to be more successful than just a general AD placement. So 605 is really providing the backend capabilities to measure and to.
To show the attribution capabilities, but we're.
We're not currently participating in alternative measurement currencies other than the.
To use them internally to look at our own media spend and how we can maximize that to our agency known but I'll, let Kevin talk a little bit more about the integration of that and our audience plus announcements.
Sure Bill.
<unk> off what Christian was just sharing Ross I'd say, we're very open and willing to partner with clients on an alternative currency measurement in this coming upfront in year.
And we're in ongoing dialogues with all of the various alternative measurement companies, including ISR video at Comscore and of course 605, who we work closely with.
Our standing is where we've been with Nielsen a long time, and we're actively evaluating their new Nielsen one ad products.
Prior to their launch but I.
I think that we are also following along with interest.
Active member on the board and we are a member of the newly formed <unk>. The joint industry Committee and were taking a front row seat.
Samsung witnessing the innovation that comes out in this AD marketplace for certification of unified streaming measurement.
Thanks, guys.
Helpful. Thank you.
Our next question comes from Brett Feldman with Goldman Sachs. Please go ahead with your question.
Great just two questions about the evolution you're streaming strategy. If you don't mind. So the first one is kind of high level Christian you've talked about being a much more customer retail centric oriented business and I was hoping you could maybe elaborate a bit in terms of where you think you are on that journey to being more focused that way so I'm thinking about it operation.
<unk> do you think you actually have the operational structure in place to do that as well as you think the company needs to and as any additional investment needed do you potentially need any partners to do it and maybe even at a higher level. If you just comment on culturally where you think you are in terms of this evolution of the business and then sticking with streaming.
We've seen a lot of your peers in the media space begin to consolidate their streaming services into flagship platforms. You came to market with a portfolio of niche streaming services that have done very well in their demos, but you've really started to have a lot of traction with your own flagship, which is AMC plus and I'm wondering if you can.
Elaborate a bit around your thoughts on continuing to maintain this diverse portfolio of streaming products versus maybe potentially consolidating all of it into AMC plus.
I'm not going to ask you to repeat the question.
So operationally our Ed I'll start there so I'm an operator, that's why I was brought into this role at a time when the industry is shifting in the company.
<unk> was in the midst of a lot of moving and moving pieces right between the transition from linear to digital the new different ways that we are looking at advertising and then just having a 40 year old company and so for me coming in.
We took a lot of pain in the fourth quarter last year, we said goodbye to a lot of colleagues that had been with us for many years and we really needed to reorient the business. So we've.
We've moved past that we're looking forward to new opportunities and a lot of them do involve streamlining the operation not from a head count perspective, because we've done the bulk of that work, but more from looking at how we service our customers both our distribution partners as well as our direct to consumer customers. So re imaging.
Our call center, and our customer service functions in general, which is something I have a lot of experience with.
Re imagining the backend as most people know there is not really a straight out off the shelf solution for streaming and because we acquired certain streamers and others rebuilt ourselves we need to unify that back end and figure out what the most efficient and effective sort of future proof technology, we can put in place to facilitate as our streaming business.
This growth. So those are two big areas really the customer service function and the backend infrastructure.
As far as additional investment we don't see anything dramatic in either of those areas, but I would leave that to Patrick to speak to.
And then the other thing I think that's really important is just overall morale here at the company and as we said in the opening remarks, eliminating some of the silos.
Re imagining how we interact with each other we had setup.
Different swim lanes, he had linear as one bucket of employees you had streaming is another and then the brands. We're also bifurcated and trifurcate. It. So we've kind of eliminated all of that sort of major CS and now put stuff into a more streamline approach where people on the brands and the platforms that they are delivered on and then we have what's been I think.
A very forward looking advertising sales group for the last three and a half years under Cam So having a sales team that came from digital that understands cross platform measurement attribution in sales has been really beneficial. So we're in good shape there.
On the distribution side, we don't again I'm a cable operator at heart I would not that against the Mvpds and the virtual mvpds to find new and unique ways to solve the customer management question of multiple services and streaming versus linear and really providing a great user experience across the board.
So I love. The fact that we have longstanding relationships with these distributors from a multiplatform perspective. So I think their success will be our success and our goal is to have our brands front and center everywhere, we possibly can so that's a good piece and then on the consolidation.
As you said we have.
Our transactional services, which are transactional bonds, which are.
Unique in their approach and any what they deliver but we also do you have the more broad based AMC plus which.
It does well for us and now includes Sundance IFC and shutter as sub brands within AMC plus so.
We don't anticipate any other combinations at this point, but AMC plus I think would be our broadest general service and the others continue to be targeted so Kim you want to anything else to.
The only thing I would add is I think we're well positioned for the emergence of the bundling that we are going to be seeing which actually really meet the consumer need for for choice and you can see you can see bundling as being part of our strategy going forward.
If you wouldn't mind, if I could squeeze in a question on a different topic, we're starting to get asked about the writer's strike and I'm curious your take on at what point. This could end up affecting the business, particularly in terms of a series of orders and deliveries.
Yeah. Thank you I would say, we're very well positioned for all of this year and into next year. So we have no real concerns about the writer's strike at this point.
Thank you for taking the questions.
Thank you.
Our next question comes from Douglas crude with TD Cohen.
Doug go ahead with your question. Thank you.
I noticed your SG&A costs in the quarter were the lowest that I think since.
Two Q3 or so of 2020.
Is this a good level to use.
Thinking about SG&A costs going forward anything anything sort of noteworthy in the quarter you call out that might make it abnormal.
Hey, Doug it's Patrick Thanks for the question.
Over the last quarter or so we've taken significant steps to take costs out of the business that starts with <unk>.
Good programming and marketing those are the two kind of biggest cost levers that we've had so we've we've sort of done what we said we're going to do in that regard.
A part of that to Christians point earlier was having to say goodbye to a number of our colleagues in Q4, and so you see the results of that kind of flowing through into the Q1 numbers here.
So I would say yes.
That's a reasonable number to use going forward here.
And I think more broadly what you should understand from US is that we are very much driving this business for margin.
And so.
As a result of some of the cost actions, we've taken both on the programming side and on the marketing side, we're seeing those those reductions.
Yield.
Margin in Hawaii, and this quarter and we expect that to continue on through the balance of the year. So while we recognize its a balancing act between investing in the business.
And having kind of growth levers to continue to attract the audiences and the partners that we have that.
But theres also an imperative here to drive the business for free cash flow today. So.
That's kind of in summary, where we stand from a from an overall kind of cost.
Kind of apparatus.
Okay. Thank you.
Okay.
Yes.
Our next question comes from Robert Fishman of <unk>.
<unk> Nathan.
Robert go ahead with your question.
Good morning, everyone can you provide some more detail behind the strategic non renewal at the end of 'twenty two that impacted the affiliate fees and whether we should expect more of these decisions going forward and then on the international strategy just given the focus on cash flow does it make sense to pull back on investing outside the U S and even.
And sell some of these international linear networks. Thank you.
Yeah, Hey, Robert it's Patrick on on the strategic.
<unk> non renewal, we have identified that as <unk> I consider that we consider that to be a one off and <unk> had a strategic imperative to drive their business more towards live sports programming.
Under the last remaining.
Entertainment bundles that they carry obviously, we have an imperative to maintain price discipline in the market as well so.
As sorry, as we work to see them go it didn't make sense to continue the relationship.
Given the economics that were that were on offer.
And I would just add to that this is Kim Robert I'd just add obviously.
Chris and Patrick's remarks around dish we are.
We are well into conversations with all of our key partners and anticipate long and successful partnership.
Great and on the International plan I would just say international is really interesting we serve a variety of different regions and they have very different constructs in the U S. Right now So for example, northern Europe .
Is very Hungary, and Romania, and those areas basic cable is 20% to $22. A month there continues to be healthy margins coming from the international businesses that we have Spain, we just had.
Some.
A major renewal in Spain that sorry, I just wanted to confirm on allowed to speak about that so we're widely distributed throughout Spain, and we will grow some streaming there the U K is a little bit different so we're working through that but overall, even though it's a small percentage of our business international is very healthy it throws off very reasonable margin.
And we continue to plan on spending time and energy there.
As appropriate.
Thank you.
Our next question comes from David Karnofsky with J P. Morgan.
David Go ahead with your question just on domestic advertising wanted to see if there is any color you can give on how demand trended through the quarter or into April and then Chris didn't wanted to good.
You're viewing the content direction of the company.
Youre arguably at a time of transition with walking dead, ending and some spin off series beginning so I guess first what gives you confidence in the health of that franchise and then secondly.
Other areas from a program programming perspective.
How do you see room for improvement.
Yeah, Hey, David It's Patrick I'll start on the AD side and throw it to Kim for some additional color.
Obviously the DD.
The decline in this quarter was.
Expected on our part it was due to lower linear ratings softness of the AD market, which you've spoken to.
And few episodes of of some of our tent pole franchises, including the walking dead.
In particular, we are lapping a tough comp in Q1, and 22, I would say with both walking dead and better call Saul.
These were these were anticipated and frankly, we did a little bit better than we expected. So we feel good we feel actually pretty good about it and as I said earlier. There is an immediate return on these reductions in programming that is significantly in excess of the foregone AD revenue so clear.
Clearly driving the business for near term ROI balanced against continued prudent investment call. It can talk to the.
Color, David I would just building off what Patrick just shared I'd say, yes.
Yes, we are seeing.
Similar environments to competitors in our space.
Soft scatter and marketers really being conservative with their spending right now because of the economics of that.
Being said, we are seeing real category strength in both health and pharmaceutical spending as well as telecom personal care.
And to your point about early April we're seeing signs of life.
<unk> spending from automotive coming coming back so a trend we very much hope to see continue the only other thing I. Just mentioned is we're also seeing very strong growth from our automated programmatic partnerships, which is enabling us to capture.
Many more advertisers, which is giving our business more predictability and a solid foundation on the digital side.
Great and then I will take the content question you know David that the walking dead continues to be a very popular universe and I just to watch side to screen. The two density the first two.
That will be primary next month and Thats. The one Thats features New York City in the background and the show is as compelling and engaging and dramatic as as it's ever been so we're excited to continue that franchise I will say, we were really really pleased with the performance of interview with the vampire and particularly Mayfair, which is and we have very high hopes.
For continuing to activate the Anne Rice universe, and grow and holding other franchise through that acquisition of all of that IP and then looking at the slate coming up that we spoke about in opening comments <unk> speed with Clive Owen is killer.
Paris with John Carlo is amazing, it's another New Orleans set kind of fast action really interesting drama and then Lucky Hank which we had our final episode last Friday did incredibly well and actually grew audiences week over week as people became more enamored, particularly for those of you that watch it.
After episode, five which is like the pivotal point.
The series and then on the other on the streaming services, we have some great films that we've acquired so corsage the loss King and I think a lot of people read and heard about skin <unk>, which was sort of breakout higher film that we acquired this year that didn't really well.
Between that and just as we mentioned you know some of the anime content like <unk> and some of those shows we're feeling really strong.
The other great Premier that's coming up later this month is on Acorn, which is happy valley, which is season three of our really good British crime drama that was like the top of the conversation when seasons III premiered in the UK a couple months ago. So I feel really good about our slate as Patrick mentioned like really settling down at around 1 billion.
Market investment is where we were successful throughout the teens and into the early 20th still like we feel very comfortable that that's an appropriate level that we can maintain and still present everything that really speaks to our success in the past is creating great franchising.
And really delivering excellent high quality breakout content, so feeling really good about the content.
Our next question comes from Orion graphic with UBS Ryan.
Brian . Please go ahead with your question.
Thank you.
Just on the licensing business.
You mentioned that it would be down this year given the deliveries that you had.
Towards the end of 2022, but just curious how youre thinking about.
Approaching licensing in 'twenty, three and beyond especially with some of your big franchise IP coming back in.
I guess do you see more opportunities to leverage your production capabilities.
Good for the Apple TV series.
I think that's like a three parter, so I'll start overall.
We're definitely sort of.
Walking the line between we don't want to be an arms dealer, we have very strong brands and very strong franchises. So what we're doing I think is looking at optimizing the distribution of our franchises and our films everywhere that we can in a way that still allows us to preserve the brand equity that's associated with each of those series. So youll know it's coming from <unk>.
<unk> no it's coming from any of our brands because we will make the effort.
And particularly with franchises that we already own that are visibly AMC content like the walking dead, we will continue.
To distribute them and.
And monetize them as much as possible but.
I think the main thing is to preserve the brand equity and to keep doing what we're doing on linear and also on our streaming services.
The only thing I'd add to Christians point as we're thinking.
With our portfolio of content, we think show by show and what is the best way to monetize that and making sure that it is in front of the fandom and the viewers that want to see it so at the international level that means going region by region more so than globally.
Right now, but we are open to those conversations on certain shows domestically. It's very much. The same approach we consider each show and map a plan to to how we're going to distribute and perhaps license that show so while it's down year over year with the silo comps, which Patrick will talk to you in a second I actually feel like we are.
Sure, we are optimizing and maximizing the yield in our in our content licensing strategy.
Yeah, Hey.
Hey, Ryan it's Patrick the only thing I'd add there in terms of.
Our tactical approach to the market.
Vis vis being quote unquote arms dealer is that.
We will take a I was out.
Characterize it as highly tactical approach there is no project that we have to do right we program our own networks.
That gives us a fantastic sort of perch in web of relationships that we can monetize.
Our production of silo, which premiered a couple of days ago is evidence of that if there's an economic equation that makes sense and we can earn a reasonable margin at a reasonable risk. We will we will take those swings, but we don't have to be in the market chasing deals to generate revenue.
Because we produce for ourselves so.
Again highly tactical the economics have to make sense.
Great. Thank you all.
This concludes our question and answer period, I would now like to turn it back over to Nick Seaberg for closing remarks.
Thank you everyone for your time today. This concludes the call.
Thank you for your participation in today's conference. This does conclude our program you may now disconnect.
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