The shadow of the impending Dish Network lawsuit loomed large over AMC's earnings call this morning. The cable network company is suing Dish for $2.5 billion in damages and has received several favorable rulings, including one against Dish for destroying evidence. "We believe that as a direct result of the litigation, and in an attempt to create leverage for itself in that litigation, Dish ended carriage of AMC networks," CEO Josh Sapan said on the call. "Its users are basically pawns."
The company said that its originals, especially Breaking Bad, now in its final season, are still raking in the viewers "even more than they did in aggregate when we were being carried on the Dish platform last year," according to Sapan. He and other execs also praised the company's strategy on over-the-top content, saying that services like Netflix were "accretive to our business without disturbing the current model."
Net revenues increased 12.2 percent year over year for the company's second quarter, with earnings at $0.57 per share on $328 million—ahead of Wall Street predictions, which had revenues at $324.5 million. AMC saw a 13.4 percent uptick in advertising—$130 million, all told—although Sapan declined to break out exactly how the company fared in the upfront, saying merely that it "was very good for us—driven particularly by our originals. Very strong demand. And we saw it happily in both volume and price."
But for all that, the Dish Network battle was still at the forefront of everyone's mind. Sapan cautioned investors that while other high-profile carriage disputes were making headlines with noisy rate debates, "this dispute with Dish is quite different. It is not about rate; in fact, Dish has not discussed rate with us at all."
AMC said that investors should prepare for a rocky second half. "We do not think that we will see any mitigation of ad impact on our other channels," Sapan said. "Perhaps the opposite because they perform, in our experience, quite well on the platform (Dish)."
Meanwhile, AMC is working to get its customers back any way it can. Third-party media buys and direct-market initiatives were two of the methods mentioned on the call, and earlier this week, Dish launched a video contest among viewers called "Hey, Dish, Where's My AMC?" Dish, meanwhile, came in under expected numbers for its share price when it reported earnings yesterday.
Still, that may not be enough to undo all the damage. "We do not expect our free cash flow to mirror the levels in the first half of the year," Sapan said.