AMC Returns to Growth to End 2022; Operational and Strategic Control Taken Over by Dolan Family

AMC Networks AMCX rebounded to post a strong end to a very challenging 2022 on both the operational and personnel sides of the business. Revenue improved by 20%, a strong result after two quarters of decline. Despite the gains, domestic advertising continues to struggle, and we expect a weak first half for linear networks across the board. We maintain our $27 fair value estimate.

AMC installed its second permanent CEO in the last six months and its fourth CEO since the start of 2021 with the appointment of Kristin Dolan—the separated wife of Chairman James Dolan, whose family controls over 79% of voting power in AMC. While Kristin Dolan has a long career in media, primarily with Cablevision, which was also owned by the Dolan family, we don’t expect her to bring a different strategic outlook for AMC than James Dolan.

As James Dolan outlined on the earnings call, AMC’s business model will transition from a wholesaler of content (linear pay TV networks) to a content retailer (direct to consumer). Dolan views this change both in terms of resource allocation and cultural change. While management will examine M&A opportunities, AMC will be run as a stand-alone entity instead of being staged for sale. Multiple news stories have emerged about Dolan rejecting overtures for AMC from Roku, Sony, Lions Gate, and private equity. While AMC continues to produce strong content, the firm does not have the financial resources required to be a strictly DTC business, and the Dolan family should consider a sale or merger in the near to medium future.

Total net revenue jumped to $964 million, as ongoing streaming growth in the U.S. and licensing were more than offset by lower affiliate and ad revenue as well as unfavorable currency movements. Revenue growth and cost reduction efforts more than offset higher production costs, driving the total adjusted EBITDA margin up slightly to 14.2% from 12.8%.