What if AMC took the plunge and unbundled from cable?

Wednesday, May 14th, 2014

Right now, AMC is much like most other cable networks, getting its revenue from advertising and fees, but what if AMC took the plunge and unbundled from cable?

On the other side of the spectrum is Netflix, which shows that you can deliver a compelling service for $8 to $10 a month without forcing consumers to buy into a cable bundle. Industry insiders have long argued that TV networks can’t follow the same economics — that unbundling isn’t possible because it would raise the price of individual TV networks so much that a $100 cable bundle would look cheap in comparison.

This begs the question: How much of that $100 bill goes to each and every network? The answer is that these numbers vary widely depending on the audience a network draws as well as the leverage it has. ESPN for example is a must-have network that can ask for a premium because of the many popular sporting events it carries. It is estimated that ESPN as the most expensive network charges TV providers $6 per month for every subscriber, whether they watch sports or not (to ESPN’s defense, almost half of them do).

The math is starting to look a little different when you are talking about a network like AMC. Mind you, none of these contracts are public, but the analysts at SNL Kagan recently estimated that TV operators pay an average of $0.33 per subscriber for AMC, which makes it not only cheaper than the sports networks, but also puts it behind TNT ($1.33 per subscriber), the Disney channel ($1.15 per subscriber) and USA Networks ($0.71 per subscriber).

AMC is currently in 99 million U.S. households, which means that the network makes about $32.6 million per month from retransmission fees. So if 3.2 million people paid $10 a month for a Netflix-style AMC subscription, it could ditch the retransmission revenue stream entirely. Mind you, the Breaking Bad series finale was watched by 10.2 million people, and the recent Walking Dead season 4 finale attracted 15.7 million viewers.

Of course, this is extremely simplified back-of-the-envelope math, and doesn’t account for a whole bunch of factors. For instance, subscribers of such a service presumably wouldn’t want to see ads, and AMC Networks currently makes about 45 percent of its money with advertising.

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