AMC Networks CFO: Bigger Is Not Necessarily Better

At an investor conference in London, Sean Sullivan also discussed the weaker ratings for AMC hit show 'The Walking Dead,' saying, "We have absorbed the ratings moderation."

While other entertainment companies are looking for mergers and acquisitions to increase their scale, AMC Networks feels that bigger is not necessarily better, and that its smaller number of well-defined and strong networks is an advantage, CFO Sean Sullivan told an investor conference in London on Tuesday.

"Clearly, there is a view out there by some that in this industry bigger is better," he said at the Bank of America Merrill Lynch 2018 Global Telecom, Media and Technology Conference in a session that was webcast. He argued that recent deals have aspects that go beyond the bigger is better mantra. "For us, I would debunk the theory. I don't think that bigger is necessarily better." He added: "The size, the agility and the assets that we have as a company actually position us quite well in terms of the marketplace."

He said the company has delivered strong financial growth in recent years despite deals on the distribution side of the business. Sullivan also argued that there are "disadvantages to scale," such as the fact that companies increasingly seem to focus on fewer network brands that mean something to consumers. With five core brands, AMC Networks has a "right-sized portfolio," Sullivan said. "The market is almost coming to us in terms of the strategy we have been employing."

On the other hand, he said that AMC Networks feels good about its focus on originals and successful brands, given that many deals involve the takeover of companies that have strong brands and content.

With Disney moving into direct-to-consumer offerings, the Sullivan was asked if that could also make sense for AMC Networks. "It’s something that we think a lot about," he said, but he emphasized that the company has taken "a very thoughtful approach" and focused on a "very efficient economic model" that works for it and its distribution partners.

Asked about the weaker ratings for AMC hit show The Walking Dead, Sullivan reiterated that management was "pleased with the franchise," highlighting that it has maintained "its dominant position."

He also told investors and analysts to look at the company’s strong financial performance. "We have absorbed the ratings moderation of the show," he said.

Discussing the company's original programming strategy in general, he said that while "it’s tough to stand out," mangement is happy that "creatively, the team has done a great job."

Discovery CFO Gunnar Wiedenfels on Tuesday spoke at the same conference, with scale a key topic. He said that recent deals point to the attractiveness of content and content companies, which is positive for his company.

Asked if Discovery has enough scale, he said its recent acquisition of Scripps Networks Interactive "gives us, first and foremost, a lot of flexibility." He said that "over the next 12 months, we know exactly what to do," emphasizing that the acquisition will boost the company's operating cash flow.

Once Discovery reduces the debt the deal brought, "we have full flexibility," including growth investments, possible stock buybacks and the like, he said. The CFO also lauded how the Scripps deal has been working out so far: "The integration is going very well."