A media sector squeezed by streaming losses, anemic stocks, layoffs and executive turmoil unveiled its latest casualties Tuesday: 20% of AMC Networks’ U.S. staff, or about 200 people, along with the departure of CEO Christina Spade.
The news follows Bob Chapek’s equally sudden departure last Sunday from Disney after a quarter of hefty streaming losses and months of PR missteps. No reason was given for Spade’s departure, but it kicked off another round of speculation about the potential for the cuts being a preamble to an M&A transaction. AMC Networks declined to comment when contacted by MovieSlay.
Jobs are being axed from Warner Bros Discovery to Paramount Global, Disney and the CW alongside a virtual bloodbath in tech. Today’s staff memo from AMC Networks chairman James Dolan, whose family is the company’s controlling shareholder, was particularly grim, noting that “the mechanisms for the monetization of content are in disarray.”
He said that means “a large-scale layoffs” and substantial “cuts to every operating area” at the company, which is now searching for a new CEO. The board is “confident” the cuts “will enable AMC Networks to come through this period even stronger and to be well positioned to drive future growth over the long term.” He said the company had come to a realization about the streaming business, expressing it with words capable of sending a chill up the collective media spine: “It was our belief that cord cutting losses would be offset by gains in streaming. This has not been the case.”
Wall Street radiated uneasiness about the situation and the lack of clarity about Spade’s exit. Shares fell more than 5%. Her departure was “a complete surprise and leaves the company in need of new leadership, with no apparent successor in the wings,” said analyst Doug Creutz of Cowen & Company.
AMC like others in the space is faced with an ad downturn on top of rising streaming costs and declining linear revenue. “It’s been sort of the same for a while, which is kind of shuffling along on the top line, with linear still under pressure. They have been spending a fair among of money on content and if they can’t grow revenue, it will pressure margins. It’s not unique to them,” Creutz said.
Another company in the Dolan orbit, Madison Square Garden Entertainment, is also in the midst of cost reductions. “We are looking holistically across all of our businesses to ensure all areas continue to be positioned for success in the future,” its CFO said on a recent call.
That’s even as AMC/AMC+ has been on a streak with three new series — Dark Winds, Moonhaven and Interview with a Vampire — all received well and earning Season 2 renewals. The network, whose programming team is led by Dan McDermott, President Entertainment & AMC Studios, also has high hopes for the upcoming Mayfair Witches, which debuts in January, as well as the multiple Walking Dead spinoff series in the works. The layoffs unveiled today and starting this week are said to be across the board and it’s not clear what divisions will be hit the hardest.
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“Ten years ago, we saw that cord-cutting was going to be a thing, and we thought streaming growth would offset it. And streaming has grown. It just required a lot more investment than anyone expected,” said a media fund manager. “There’s been a pretty bad cyclical downturn, and everybody’s had to rethink what they are doing. The same discussions are happening at every media company.”
The question for AMC is how much can be cut before hitting bone, especially at a company much smaller than a WBD or Disney and that already had a major downsizing in 2020. Longtime CEO Josh Sapan left after that, and former Showtime boss Matt Blank came in as interim chief executive. Spade, a former colleague of his at Viacom, CBS and Showtime, was hired as chief financial officer in January 2021, subsequently added the chief operating officer title and then took over as CEO last September 9 — less than three months ago — with a contract running through 2025. “As I begin my new role as CEO of AMC Networks, I am proud to lead the company at one of the most exciting moments in our history,” she said on a third-quarter earnings call November 5.
The quarterly results were discouraging, joining a pile of other media and tech quarterly numbers hit by a broad pullback in advertising. AMC’s ad revenue fell 10% year-over-year to $180 million for the three months.
Addressing shortcomings in the corner office is challenging business. Disney brought Bob Iger back. The Disney board had also reportedly approached former Disney executive Kevin Mayer to replace Chapek and will be looking to identify a worthy Iger successor given that the restored CEO’s contract runs out in two years. It’s a lot harder for AMC to attract a heavy hitter given the Dolans’ ultimate control. “Ultimately, a CEO may not feel like they are calling the shots,” said Creutz. Ad cycles are finite. But no CEO can wave a magical wand if cord cutting keeps revenue shrinking and streaming can’t make it up.
A battered stock market makes it hard to exit — will-they-won’t-they sell being a perpetual question surrounding Dolan family assets. In an already unsettled landscape, with Lionsgate in the process of finding a new configuration for Starz and its studio and the integration of Discovery and WarnerMedia continuing in fits and starts, the immediate question concerns a logical buyer, especially in a high-interest-rate environment.
“I’m not saying it would not be attractive to somebody. But are you going to get a decent price for it? With the state of the market and balance sheets and just the reality of streaming right now. I don’t know who will offer them a good price. This is not the time. The market is in the tank right now. Everyone is worried about a recession,” said one Wall Streeter.
“Ask the smartest people, the ones who sold businesses over the past five years, what they think — Jeff Bewkes, Rupert Murdoch, the Scripps family. Maybe they got lucky, but they sold when the selling was good. Bewkes and Murdoch had high regard for their own ability and recognized that it didn’t matter if you have a terrible hand.”
Bewkes sold Time Warner to AT&T in 2018 for about $85 billion. Murdoch handed most film and TV assets held by 21st Century Fox to Disney in 2019 for $71 billion. Scripps Networks Interactive sold itself to Discovery in 2017 for $14.6 billion. All of those deals, however, were completed in comparatively rosier times.
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