Next up, we have AMC Networks, located right here in New York. AMC Networks is an entertainment company that produces and distributes content globally across a portfolio of cable networks and streaming services, as well as distributes through licensing agreements. The company's produced hit shows like The Walking Dead and Better Call Saul, that many of you are probably familiar with. The stock trades on the Nasdaq under the ticker AMCX, and has about 40 million shares, trading around $13 for about a $500 million market cap, $2.1 billion in net debt, for about a $2.6 billion total enterprise value. I'm pleased to introduce Patrick O'Connell, the CFO of AMC Networks. Patrick joined the company last summer. He was previously at CBS and Goldman Sachs. Welcome, Patrick, and thanks for joining us today. Great to be here. Maybe just to get started, you're coming up on your one-year anniversary at AMC Networks. It seems like a lot has changed in the world over that short period of time. Maybe the streaming business is starting to realize there's a need for some rationalization, so maybe you could comment on initial learnings over the course of the first year at AMC, and you know, how you see the streaming market specifically evolving. Sure, yeah. I think rationalization is the right word for it. You know, listen, I think when we look out over the next couple of years, I think we're likely to see kind of the convergence of two trends. One is obviously on the consumption side of the business. Consumers will consume content via streaming, right? That is clear, that is unambiguous. I think on the economic side of the business, the streaming business, I think, is gonna start to feel a little bit more like the linear business in terms of how people set up the monetization of content. It's very clear that the streaming bucket can't fulfill all of the monetization needs of any media company. And so, at AMC, we are taking very much a back-to-basics approach to monetization. So we were set up differently strategically in terms of not trying to super-serve everyone with something for everyone in the household. There's a lot of people in that space. It's very crowded, it's very expensive, it's very capital-intensive. We took more of a targeted approach to our streaming services, so we've got AMC+ and a handful of other targeted services that really seek to super-serve their core audiences. But from a monetization standpoint, streaming for us is just one tool in the toolkit. So we have a studio, AMC Studios. We produce for ourselves, we produce for others, and so we take a traditional approach to monetization. So we obviously, and when we produce for ourselves, we've got the first window, we monetize that ourselves. We can license content internationally. We can, you know, kind of utilize library content to extend the value of IP. We can window content, so it's very much sort of what's old is new again, and I think you'll see a lot more of that from us and from other streamers. How do you think about making investments across those, various distribution channels, whether it's your cable networks or streaming or licensing? How do you prioritize, and how do you think about, generating returns in each of those buckets? I think over the last couple of years, AMC, to a lesser degree, but the industry broadly, overspent on programming, overspent on marketing as well. If you go back and you look at AMC Networks' programming spend pre-pandemic, it averaged between $950 million and $1 billion of cash content spend. That ramped up to closer to $1.3 billion in the most recent year. We've made a commitment to take that back down to pre-pandemic levels. It'll be closer to $1.1 billion this year, and it'll likely float down even further, closer to the billion-dollar range going forward. We think that's the right level of investment that strikes a balance between continuing to invest in existing IP, developing a new IP. So the examples of that would be Walking Dead is obviously IP we're very well known for. We're extending that franchise. We've got a number of spin-offs, you know, set to launch this year. We're building new IP in the context of the Anne Rice universe. We have an amazing library of characters to work with and develop storylines around. And we're balancing the need to do that with, obviously, sort of the clear and present need to monetize content today and produce cash flow. We have additional levers we can pull over time, should we need to, you know, reduce the amount of programming spend. But for now, we think this is an appropriate level, and we'll monitor the monetization markets, as they say, closely. Yeah. You mentioned franchises, and I think that's been a strength of yours for some time. Obviously, you had Better Call Saul that wrapped up, and you've done, I think, a pretty good job extending The Walking Dead universe, and you mentioned a couple potential franchises you have in the pipeline. How do you think about continuing to develop those new franchises, and is your own distribution better for building them, or can you build them through other distribution channels? So from a distribution standpoint, we have owned and operated networks, is the way I think about it. We've got traditional cable networks on the linear side. We've got owned and operated streaming businesses. But those can't service the full monetization needs of the content, so we obviously license content internationally. We'll license it second window domestically. We also leverage our studio to produce third party as well. We recently did a big show for Apple called Silo. We can talk about that kind of more later. So it's very much a balanced approach. You talk about investing in IP. On there, you know, we think about sort of the risk-adjusted returns, right? So when we have an existing piece of IP, The Walking Dead, we know there's a built-in audience for it, we know people are gonna show up and watch it. So, you know, while the cost per episode may be a little bit higher, it still behooves us to make that, to make that show, because the risk-adjusted returns are there. With a new piece of IP, obviously, we need to be taking at-bats. We need to be producing kind of the next hit show. Hopefully, we're producing those at slightly lower kind of price points, earlier in the show's life. So it's striking a balance between the two. Okay. Got it. Maybe just to switch gears a little bit, and talk about streaming bundling. It's something that you've discussed in the past, and you and I have talked about. How do you think about the opportunity for your your niche services to be bundling partners, and how do you see that evolving more broadly across the industry? So I think fundamentally, bundling worked in the linear landscape. It worked for consumers, I think, mostly, and it worked for media companies, certainly. I think for the same economic reasons, bundling works on the streaming side of the business. I think we're seeing, you know, kinda early movement towards that. We've obviously got a lot of technology companies that are keen to become, you know, kinda aggregators or bundlers of various streaming services. We're also having conversations with other media companies to kind of bundle our products together. We think it works from a consumer standpoint because one of the most painful pain points is trying to figure out where the show is you wanna watch. There's so many streaming services, it's hard to find content. That's especially true if you're a fan of sports, and toggling back between watching a game or multiple games or a game and a show is kludgy at best. We think there's a strong value proposition on the consumer side to have a broader array of content, you know, within a bundle at a lower price point. We think it works for consumers on that end of this equation, and we think it works for programmers and media companies as well. It allows us to access a broader market. It allows us to, you know, we make our marketing work harder, so it's a more efficient kind of marketing tool for us. And it generally reduces churn for both partners, whether it's two media companies partnering on streaming services or whether it's a media company or programmer partnering with, you know, most likely, a communications partner. So it could be a wireless company, it could be an existing MVPD partner, et cetera. That reduced churn is critically important, and it's worth a lot of money. I guess, who do you think is best positioned to lead the charge in bundling? Is it the tech companies? Is it the telecom companies? Is it a consortium of media companies? How do you see that playing out? I think the world's a little bit messy right now. You know, from our standpoint, we're small. We've got targeted services, which we believe are highly complementary to virtually all the products that are out there. So we're not in the game of picking winners or losers and tying our streaming services to any one bundle or any one platform, whether it be existing MVPDs or the new technology emerging, you know, the Amazons and Googles of the world, others looking to aggregate content or media companies. For us, it's very much an all-of-the-above type approach, so we wanna maintain as much flexibility as possible. We recognize that we're, you know, smaller than most, but that gives us certain advantages in being flexible. I'd also point out that from a cost perspective, we are very cheap. We are cheap on an absolute basis, and we are cheap on a relative basis. And so when we have discussions with our MVPD partners, usually those go, you know, reasonably smoothly. For that reason, we recently renewed Dish. We've renewed Charter in recently as well. And so having that low kind of wholesale price point on the linear side of the business gives us not just a lot of value to our partners, but it also gives us a lot of flexibility. 'Cause when you're selling the same product in different markets, you've gotta maintain sort of price discipline, sort of retail, wholesale price discipline. Having that very low wholesale price on the linear side of the business gives us significant degrees of flexibility to go out and push on other distribution avenues, whether they be technology companies or whether they be other media companies, et cetera. Yeah. Within your own portfolio of streaming services, do you see an opportunity to potentially combine any of them? You see Paramount and Showtime coming together, Paramount+ and Showtime coming together, HBO Max and Discovery +, and then Hulu and Disney + kinda coming together. So, how do you see that potential there? So we think all our brands, you know, kind of stand alone, right? They target specific audiences. They're designed to super-serve those audiences, so we like the brands that we have. That being said, we think it probably does make sense over time, you know, to sort of self-bundle, I'll call. You know, whether that leads to actually collapsing, you know, I think TBD on that. No immediate plans on that front right now. But actually, kind of self-bundling our own services, we think could make sense. And so for the same reason, it makes sense, you know, in the linear halcyon days and sort of today amongst the other streamers, you know, it's something that we're looking into on our side, too. Okay, that's great. And then maybe you've recently made an announcement that you'll be launching an ad-supported tier for AMC+. Mm-hmm. How do you think about the potential there, you know? A lot of other streamers have added those tiers, whether it's Netflix or Disney + in the last six, call it six months. And do you think, you know, a hybrid ad-supported subscription service model is part of the future? Yeah. So we announced that we were gonna add an ad-supported product to AMC+ in Q4, so we're super excited about that. We think it's gonna open up a broader market, you know, kind of top of funnel for folks that, you know, maybe didn't wanna pay, you know, kinda $8 or $9, but, you know, for a lower price point, it makes sense, so we think it opens up the market. We'll be mindful of pricing there, obviously from a cannibalization standpoint, so you're always walking that line. But we think it makes sense for consumers. We also think it makes sense for our advertising partners. You know, one of the things that AMC has always done remarkably well is advertising and the sort of innovation that we've brought to the market there. So being able to serve our existing advertising clients with an advertising platform that cuts across, you know, linear and digital, whether that be FAST channels or streaming products, et cetera, is really important and allows us to, and our partners to access a younger demographic, and allows us to access higher CPMs and allows us to implement a lot of the digital technology in terms of targeted advertising kind of across our universe. We can talk more about that later, but for all of those reasons, we're very excited about the ad-supported product. Yeah, maybe just staying on the ad business. Obviously, there's been a lot of discussion here today, and more broadly, about just the ad recession that maybe we're experiencing. And from your perspective, how bad is it, and what's your outlook on when things will start to look up? Ad market's tough. The ad market's tough. You know, it's always a knife fight, but it continues to be a tough market. I think people are cautious in their spend right now. We had a fantastic upfront. You know, we've got a full slate of programming for the back half of this year. We will not be impacted by the strike in that regard, so we're in good shape. So we've got product to sell, but it's kinda early days in terms of wrapping up the upfront, so more to come on that. But yeah, I think it's challenging. I think I've... In my career, I've never seen sort of as much dispersion around sort of the macro picture, you know, kind of six months out as I have today. You've got people who are calling for a recession and people who are, you know, think there's gonna be kind of a reflation coming in the next couple quarters. So, there's some schizophrenia out there, and that, you know, I think engenders kind of caution in many people, so we're seeing some of that. Where do you fall on that spectrum? I'm not a macroeconomist. We didn't bake in a specific call in on the macro side to our guide, so I'll leave it at that. Okay, that's fair. We've talked a little today about FAST channels and how that's growing. I believe you have 15 or 16 FAST channels out there now. How have they performed, and how do you see the opportunity in that channel? Really excited about the FAST business, so we're up to 17 channels across seven different platforms. You know, I think we're unique in many respects in that we don't own, you know, Pluto. We don't own a platform ourselves, so we can play across all the platforms. What we also do, I think in contrast to some others, is we don't do rev shares. You know, we have sales rights to that inventory in most cases, and so we're really able to drive real pricing power across that inventory, partly due to the targeted advertising capabilities we have internally. So those have been kind of great growth drivers for us. You know, we also benefit from what I would call maybe a little bit of the rationalization in terms of the number of channels that are on some of those services. So they really are looking for, you know, high-quality, premium content with high levels of engagement and maybe cutting off some of the longer tail of content as those businesses look to mature, and so I think that puts us in a good position to continue to grow those businesses. You've announced the new Audience+ service, and I think you alluded to it a bit earlier, and I'm not sure if the market fully appreciates the opportunity there, so maybe if you could help put a little color around that for us. Sure. So what Audience + is, it's really about combining what is sort of best about digital and linear. So it's designed to give advertisers the benefit of targetability that is, for the most part, inherent in much of digital advertising these days but with the benefit of the scale of the linear business. So it's really bringing those two things together. That's the best way to understand it. Okay, that's, that's helpful. You know, maybe just talking about the linear business, obviously, we, there's been a lot of discussion for a long time about the decline there, and then obviously, you know, renewed speculation in the last few weeks about ESPN coming over the top and what that means for the, for the cable bundle. How do you think about the trajectory for the, for the cable business, and, you know, how do you manage that business as a result? Yeah. So the cable business being in decline isn't news. You know, that trend's been apparent for a long time. So, you know, we've baked that into our current plans. Obviously, it's sort of interesting and fascinating to speculate on ESPN. You know, my sort of commentary from the cheap seats there would be that, you know, ESPN is a beneficiary of the bundle, right? The bundle is a highly symbiotic kind of set of relationships between live sports and news and the entertainment programming there. So again, from the cheap seats, I think ESPN would look to stay in the bundle as long as possible, but obviously make plans to you know to leave kinda when it makes sense for them. So and in terms of do I see a step function down when that happens, if it's a few years away? Unclear. I think it's unclear. I think obviously there are negotiations with a lot of their distribution partners right now. You could imagine you know them being required to price that at you know say at levels that are multiples of what they currently get today, which is probably about $10 for ESPN and ESPN2. So I would guess, this is rank speculation here, but you know, that product over the top would have to cost at least $20, you know, for them to have license to do that, and they may get tiered, et cetera. It actually could be a silver lining here for some of the entertainment programmers, because if that does leave, and then it leaves a smaller core of entertainment product that could be priced differently, that could benefit us. You know, we're seeing some signs of that. I would point to a product that Comcast has right now called NOW TV, which is a, you know, for $20, a smaller bundle of about 40 entertainment, you know, channels, including all of our linear channels, without ESPN, without a lot of the expensive sports programming, without any of the broadcast nets that had that sports programming. So there is an appetite out there, and there'll be ways for consumers at much lower price points than currently exist in the bundle to get that sort of, that sort of like skinnier bundle of programming. Got it. Maybe just changing gears a little bit and talk about the cost side of the business. This fall, you announced some cost-cutting and restructuring. Kristin Dolan took over in, I believe, February as CEO, and you guys have been making a lot of changes to the cost structure. Maybe if you could just talk us through a little bit on where that process stands and how much room you have to reduce your costs. Yeah. So the three biggest costs in the business are, number one, programming. You know, that's essentially half the cost structure of the business. Number two, marketing. We were spending a tremendous amount of money on marketing and really trying to drive top-line growth on the streaming subscribers. And then, you know, third, you know, people and systems and everything else. So, in rank order, we took the biggest whack at marketing from a percentage basis. So we withdrew our subscriber guidance and are very much driving the streaming businesses for lower growth, but higher profitability. And then secondly, on the programming side, as I talked about earlier, you know, we took... I'll cap the numbers here, but you know, kinda roughly a 20% cut on the programming side of the business. I would also kind of implore folks here on the investor side, you know, pay attention to the cash, you know, not the amortization. You know, I think when times were good, and there wasn't as much of a delta between those two, I think people got kinda lulled into a false sense of security there. But we are very much focused on cash content spend, and so we've, you know, I think kind of again in a prudent way, trying to balance the need to invest in the business, but also, you know, kind of make sure we're harvesting an appropriate kind of margin and amount of cash flow out of the business annually. You know, that was the second big bucket, and then as painful as it was, yes, we did take some headcount reductions and other sort of like general corporate kind of cost reductions. So, I think, you know, for now, I think we feel well-situated. Obviously, if the universe changes, we'll have to, you know, continue to evaluate. Yeah, that makes sense. Maybe I'll just pause here for any questions from the audience before I move on. You opened the door on the cash content. What are you spending in 2024 versus 2022? And then the amortization, just why not just write it all off? Forget the amortization, just cash. Cash content spend, yeah. So cash content spend last year was about $1.35 billion. It'll be about $1.1 billion this year. We've told the market that it's likely to float down a little bit and be in the $1 billion range on a go-forward basis. But we'll monitor, you know, the kind of the monetization markets, both on the linear and on the streaming side. Remember, a lot of the content on the AMC side of the business does double duty, right? So we monetize it both on the linear network and on the streaming service, and that streaming service, you know, whilst it has a meaningful kinda cohort of exclusive programming, Shudder, et cetera, you know, that AMC content that is at the higher price point does do double duty. Given your background in M&A and all of that, why not have the shareholders do a buyout of the company by rolling their equity into NewCo? Never mind. Don't answer that one. Thanks. Ask Jim. I guess as a.. We got a microphone here. Mm-hmm. I'd say as an investor, being in the business also a little bit... Oh, as an investor and also being in the business and a fan, just a little bit of a, I guess maybe a little bit of a fun question. I hear Paramount and a number of the other organizations in the media industry talking about tent -poling and really having these franchising franchises driving the business. Mm-hmm. Curious, just a longtime fan of Mad Men, if that's something that you guys are looking at, doing any sort of spin-offs or, licensing deals, and maybe just franchises like that as well- Yeah ... how you guys are viewing how that can drive profitability? Yeah. So I think it's, I think the watchword there is balance, right? I think, you know, we need to extend existing franchises, like I talked about, sort of taking kind of a risk-adjusted approach to programming spend. So The Walking Dead, we know there's an audience, and so we push that. But at the same time, we've got to be creating the next Mad Men, the next Walking Dead, the next... And so, you know, I think what you've seen of late, over the last twelve months or so, you mentioned Paramount, they're a perfect example in terms of, you know, what they're doing, push extraordinarily hard in this regard, right? And I think almost to the- maybe to the frustration of some viewers, maybe to the frustration of some talent. You know, is there franchise fatigue? You know, maybe, I think. But again, we need to be mindful of the net economics of this business, right? We need to be making profits today and not just, you know, driving streaming subs that might be profitable tomorrow. Thank you. You mentioned through the upfronts that you're pretty much set, insulated from risk from the writers' strike, at least for now. Mm-hmm. Obviously, you have the... It seems like the directors worked it out- Mm-hmm ... but you might have some issues with the actors, Mm-hmm At the end of the month. So, just looking out, how do you think about when you might start to see an impact, and when do you start to get concerned about some of the labor issues in the industry? From our standpoint, this is just part of the natural ebb and flow of business. Unfortunately, you know, as you know, these contracts came up at an inopportune time, if you were on the talent side of the table. But we recognize that these are long-term relationships. They're not just like, you know, economic relationships amongst you know, unions and studios, but they're personal relationships, et cetera. So, I really don't- we don't spend a lot of time worrying about, you know, there not being a deal in the reasonably near future. Might it take a little bit longer? You know, because many of the studios are, you know, reasonably well-stocked and have a lot of food on their shelf, maybe, but ultimately, there'll be a deal. So it's not gonna impact us in a material way, we don't think, for the balance of this year and probably well into next even. And I would expect the same is mostly true for our peers. Okay. Maybe just in the last couple of minutes we have, just pivoting to the balance sheet, how you think about your capital allocation priorities, and just any thoughts on the balance sheet more broadly and potential refinancings you might have to do? Yep. So we've been, I think, very clear with the markets, you know, that the balance sheet is a strength of this business. We've got some long-dated debt at a very low cost of capital, so we like being in that position. We've got a lot of cash on the balance sheet. From a leverage perspective, we are focused on our kind of near-term maturities in 2024 and 2025. We've got cash to defease the 2024s. We were in the market earlier this year with a potential transaction. Things got pretty choppy. We had a regional banking crisis in the midst of some pre-marketing we were doing. We decided to shelve the deal, save the interest cost, and, you know, can use the cash on the balance sheet to defease the 2024s, like I said, when it makes sense. One thing we did do in the context of that activity, though, was avail ourselves and lock in $1.2 billion of secured capacity with our current bank group, so we'll likely be tapping that in any refinancing transaction going forward here. So, but broadly, in terms of capital allocation, very much focused on delevering this business both on a gross and on a net basis. And so I think you'll see that being the real priority here above, you know, M&A or any, you know, returns of capital to equity at this point. Great. I think we're just about out of time, but any closing comments or anything you want to say before we wrap up? You know, I'll say this: There's one show I'm sort of particularly looking sort of forward to. It's gonna come on AMC likely in 2024, but it's not, it's not sort of, determined yet. But it's, it's a show called Monsieur Spade. It's, you know, based on the kind of the iconic, Maltese Falcon, novel. And, Clive Owen is playing the detective Sam Spade, set in the South of France. So that's the show I'm most looking forward to, and, I would invite everyone else to watch as well. All right. I'll keep an eye out for it. Thanks for coming, Patrick. Appreciate it. Thanks, Paul.