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Netflix and AMC have very different business models, and Netflix' business would cannibalize AMC's. AMC makes a small amount of premium content on a continuous

by hapless 13y ago

Netflix and AMC have very different business models, and Netflix' business would cannibalize AMC's. AMC makes a small amount of premium content on a continuous basis, and forces cable companies to carry a mixture of paid channels and advertising. AMC is also vastly more profitable, both in terms of P/E ratio (18 vs 300) and gross earnings (200MM vs 40MM), so it's not as if their "legacy" model is hurting them. Netflix makes a small amount of premium content and sells itself as an alternative to cable, undercutting the traditional AMC model. Their core goal in making content is just to have a library they don't have to license from outside. It doesn't have to be current or ongoing, just big. It's true that both of them rely on premium content as a loss leader but they have very different ways of earning money and capturing an audience. It would be hard to reconcile one with the other.

tptacek 13y ago
First, a lower P/E also says the market has lower expectations about future profitability. It doesn't make a whole lot of sense to compare the profits of a company extracting profits from an existing cash cow to those of a company in the middle of a market share race. I think AMCX's P/E tells the opposite of the story you're trying to tell. Second, AMC doesn't make any content. They fund it via production companies, just like Netflix. Third, I don't understand your point about "forcing cable companies to carry a mixture". Cable companies pay AMCX for the right to carry AMC channels (AMC, Sundance, IFC, &c); that's a little more than half AMC's revenue. The other half of AMC's revenue comes from the ad inventory AMC sells on its channel. These are probably nits, because ultimately your point about incompatible business models is correct.
- hapless 13y ago
  Cable companies pay for AMC. They are compelled to take IFC and the others as a condition of showing AMC. This is how AMCX, the firm, maintains its ad inventory. It doesn't matter if the content on AMC can't pay for itself as long as the suite of channels in combination can.

by hapless 13y ago

tptacek 13y ago

First, a lower P/E also says the market has lower expectations about future profitability. It doesn't make a whole lot of sense to compare the profits of a company extracting profits from an existing cash cow to those of a company in the middle of a market share race. I think AMCX's P/E tells the opposite of the story you're trying to tell. Second, AMC doesn't make any content. They fund it via production companies, just like Netflix. Third, I don't understand your point about "forcing cable companies to carry a mixture". Cable companies pay AMCX for the right to carry AMC channels (AMC, Sundance, IFC, &c); that's a little more than half AMC's revenue. The other half of AMC's revenue comes from the ad inventory AMC sells on its channel. These are probably nits, because ultimately your point about incompatible business models is correct.

hapless 13y ago
Cable companies pay for AMC. They are compelled to take IFC and the others as a condition of showing AMC. This is how AMCX, the firm, maintains its ad inventory. It doesn't matter if the content on AMC can't pay for itself as long as the suite of channels in combination can.