Walking Dead Breathes Life Into AMC Networks

Zombie drama helps fuel 31% lift in Q4 ad sales

Powered by the voracious and indefatigable phenomenon that is The Walking Dead, AMC Networks enjoyed a strong fourth quarter, boosting ad sales revenue 31 percent to $205 million.

Advertiser demand for the AMC zombie apocalypse drama and solid distribution gains helped lift the company’s net income by 133 percent to $35.4 million, up from $15.2 million in Q4 2012.

Affiliate fees grew 9 percent in the quarter to $199 million. All told, the domestic networks segment (AMC, IFC, Sundance Channel, WE tv) generated $404 million in overall revenue during the last three months of the calendar year, an improvement of 19 percent versus the year-ago period.

AMC in Q4 aired eight episodes of The Walking Dead, which is now in the midst of its fourth season. The Oct. 13 premiere, “30 Days Without an Accident,” smashed all sorts of cable ratings records, scaring up 16.1 million viewers and a staggering 8.2 in the adults 18-49 demo. (Upon application of seven days of DVR playback, the episode delivered 20.8 million viewers and a gaudy 10.7 rating.)

The one major drag on AMC’s performance was a $52 million write-off primarily related to the cancelation of two original series at the flagship network. “We were not happy with the performance of Low Winter Sun, which ran for one season, and The Killing, a show that ran for three seasons,” said AMC Nets president and CEO Josh Sapan, during a call with investors.

The $52 million charge was much higher than anticipated, according to MoffettNathanson Research analyst Michael Nathanson, who had projected a $15 million write-off. AMC Nets in Q4 2012 reported a $12 million write-off, although the vast majority of that charge ($10.8 million) was related to the extinguishment of a debt.

AMC Nets chief financial officer and evp Sean Sullivan said The Killing accounted for the single largest component of the write-off. “We just looked at the performance of the show, its continued utility and vitality to us as a company, and we made the determination that we should write it off,” Sullivan said.

Per Nielsen live-plus-same-day data, Season 3 of The Killing averaged just 1.51 million viewers and a 0.4 in the dollar demo. Low Winter Sun was similarly feeble in its one-and-done run, eking out an average draw of 1.21 million viewers and a 0.4 rating.

AMC in September canceled The Killing for a second time—the show was given a reprieve six months after it was originally whacked in July 2012—although the second chance came from Netflix, which ordered a final run of six episodes. Low Winter Sun was extinguished in December.

The network closed out the quarter ranked fourth in its competitive set, averaging 941,000 adults 18-49, up 34 percent year-over-year. AMC trailed only TBS (1.1 million), USA Network (956,000) and FX (946,000). 

When the year began, AMC had 97.4 million subscribers, down 2 percent from 98.9 million on Jan. 1, 2013. WE tv saw its distribution rise 3 percent to 84 million, while IFC was flat with 69.9 million subs. Sundance Channel improved its sub count 12 percent to 56.2 million households.