AMC Networks Inc (Pre-Reincorporation) (AMCX) 2015 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the AMC Networks third-quarter 2015 earnings conference call.

(Operator Instructions)

Thank you. I would now like to turn today's conference over to Seth Zaslow, Senior Vice President of Investor Relations. Please go ahead.

Thank you. Good morning, and welcome to the AMC Networks third-quarter 2015 earnings conference call. Joining us this morning are members of our executive team, Josh Sapan, President and Chief Executive Officer; Ed Carroll, Chief Operating Officer; and Sean Sullivan, Chief Financial Officer. Following a discussion of the Company's third-quarter 2015 results, we will open the call for questions. If you don't have a copy of today's earnings release, it is available on our website at amcnetworks.com. This call can also be accessed via our website.

Please take note of the following. Today's discussion may contain statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that any such forward-looking statements are not guarantees of the future performance or results, and involve risks and uncertainties that could cause actual results to differ. Please refer to the Company's filings with the Securities and Exchange Commission for a discussion of risks and uncertainties. The Company disclaims any obligation to update the forward-looking statements that may be discussed during this call.

Further, we will discuss non-GAAP financial information. We believe the presentation of non-GAAP results provides you with useful supplemental information concerning the Company's ongoing operations and is appropriate in your evaluation of the Company's performance. Please refer to the Press Release and related footnotes for GAAP information and a reconciliation of GAAP to non- GAAP information, which we'll refer to on this call. With that. I would now like to turn the call over to Josh.

Good morning, and thank you for joining us. AMC Networks had an exceptionally strong third quarter with total revenue and adjusted operating cash flow growth driven by the success of our high-quality content and our ability to monetize it in multiple ways. For a bit of background. Since becoming a public company nearly five years ago, we have consistently delivered strong financial results for our shareholders. Our performance has enabled us to continue to execute on our strategic priorities and pursue initiatives that we believe will help ensure the long-term health and vitality of our business.

We continue to invest in quality content for our five national networks, and we increasingly own and control more of that content, which opens up new growth opportunities that in turn fuel our financial performance as we exploit those opportunities. Last year, as most of you know, we used our strong financial position to acquire a stake in BBC AMERICA, one of TV's strongest brands, and an investment that also provides us access to a new content pipeline through the larger BBC.

Our success has enabled us to expand globally by investing in a collection of international channels, which we now call AMC Networks international. This segment now accounts for approximately 20% of our total revenue, further diversifying our overall revenue makeup.

During this quarter we extended The Walking Dead franchise with a companion series, Fear the Walking Dead, which we premiered simultaneously to AMC viewers on AMC channels and others around the world. In addition to becoming the number one series premier in cable history in the US, the series broke viewership records in key regions outside the US. It helped further establish AMC as a global brand and it drove distributor demand in new territories, including notably the UK, where we launched on the British Telecom platform, a major channel introduction in the hard to crack, fairly mature UK market.

We believe our focus on producing and owning great content, content that viewers really care about most and don't want to miss, is the reason that we continue to create value for our shareholders. And we believe our strategy is what will best position us to deliver sustainable performance over the long-term.

Before I review AMC's third-quarter highlights, I'd like to talk for a minute about The Walking Dead. We continue to be quite pleased with its performance. Last month The Walking Dead returned for a sixth season, and for the fourth consecutive year it holds the top spot as the number one show on TV among the key demo, adults 18 to 49.

The competition for live viewing has been particularly intense this season. The show has gone head-to-head each week against both Sunday Night Football and baseball's playoffs, with delivery modestly down versus the prior year. Yet this season, which we think is one of the most creatively ambitious, is quickly becoming one of the most talked about with growing viewership in the most recent weeks 3 and 4.

Turning to our operational highlights for the third quarter. We're very pleased with the performance of our national networks, which overall achieved strong, year-over-year ratings increases. Along with that growing viewership, we continue to see strong demand for our programming from advertisers. Ad revenue for our national networks was up more than 50% in the quarter, something we're pleased with given broader industry trends.

AMC had a particularly strong third quarter, led by the premier of Fear the Walking Dead, which debuted in August. As I mentioned earlier, the show became the biggest series premier in cable TV history. In addition, Season 1 ended as the highest rated first season of any series in cable history for total viewers and amongst all key demos. We look forward to the show returning next year with 15 episodes, more than twice as many as season 1.

With Fear the Walking Dead, AMC now is home to three of the top five cable series premieres of all time in live same-day viewing, Along with Better Call Saul, which premiered earlier this year, and The Walking Dead. Although extending franchises is something that has proved to be quite elusive if one takes a look at the overall history of TV, we have navigated it successfully with the broader Walking dead world and Breaking Bad, Better Call Saul and all of its characters. We take pride in that and we take comfort in it because we think it's a delicate creative task, a very important one, and a particularly important one for our success in a changing environment.

AMC also recently renewed a number of other series that will return to the channel, including the critically admired Halt and Catch Fire and Humans, which had a particularly impressive debut over the summer. The network also ordered a 10-episode series for a show called Preacher based on a popular comic book franchise. The excellent creative team behind the series includes Seth Rogen and showrunner Sam Kaplan from Breaking Bad. There's already high anticipation around this show, which will debut next year.

Coming soon on Sunday November 15, AMC will premiere the new martial arts drama called Into The Badlands. The series is quite unique, unlike anything else on TV. And we're pleased to bring a completely new genre to our air.

At BBC AMERICA we continue to have a vital and vibrant programming lineup, and we're pleased with the channel's performance. September marked a new high in audience delivery, driven by the enduring franchise Doctor Who, which returned to more viewers in the key adults 18 to 49 demo than ever before and garnered more social engagement then most broadcast shows. In what is somewhat amazingly its 52nd season, with now 12 doctors now featuring Peter Capaldi wonderfully in the title role, the premier ranks among the top 10 returning cable drama premieres this season.

WE tv continues to perform very well, and achieved an excellent quarter amongst all key demos in prime. While WE tv doesn't always get the critical attention of some of our other networks, the channel has had great success nurturing its core audience, which made it a top 2 and 3 network on Thursday and Friday nights respectively during the quarter. Growing its audience more than 20% year over year, WE tv is bucking industry trends, growing at a faster rate than most competitors.

IFC had ratings gains among its key target demo in the quarter, with widespread critical acclaim and attention for its new series called Documentary Now. The show was among the network's best-performing new series and has been renewed for two more seasons. For those of you not familiar with it, it is produced by and stars some of the biggest names in comedy including Fred Armisen, Bill Hader and Seth Meyers. Looking ahead, IFC is preparing for the return next year of fan favorite Portlandia, as well as returning series called The Increasingly Poor Decisions of Todd Margaret from comedian David Cross.

SundanceTV has its best quarter ever, quite an achievement in prime with programming that resonates with a notably affluent audience. The network has differentiated itself with a lineup of compelling rich dramas, including two very widely acclaimed shows. One called The Return, a French drama, whose second season premiered this past weekend to great notices. And the beautifully crafted and recently renewed original series Rectify, which will return for a fourth season next year.

Our global business continues to perform well. As I mentioned earlier, Fear the Walking Dead was significant for us as it allowed us, through a show that we own, to realize some of the global content plans that we had when we expanded internationally through channel acquisitions. We remain focused on exporting and monetizing our original content overseas, ensuring that our series such as Into the Badlands and Humans and the upcoming miniseries The Night Manager starring Hugh Laurie and Tom Hiddleston are available in a first window to AMC viewers worldwide.

We also continue to grow distribution for those networks. As I mentioned earlier we launched AMC in the UK, and in the quarter we also expanded Sundance channel's distribution in France. So with that overview, I would like to turn the call now over to Sean Sullivan, our CFO.

Thanks, and good morning. As Josh highlighted, our results in the third quarter were strong. The Company delivered healthy revenue, AOCF and free cash flow. We're optimistic about the outlook for the remainder of 2015, and I will touch on that after reviewing the third-quarter results.

In summary, the third quarter delivered total Company revenue growth of 22% and AOCF growth of 34%. Results in the quarter exceeded our expectations, primarily due to favorability in advertising revenue at the national networks. I'll touch on this in more detail as I go through our results. Also as a reminder, the comparability of our results was affected by the BBC AMERICA transaction, which closed in October, 2014.

With that, let's turn to our operating segments. At the national networks, revenues increased 31%, or $124 million. AOCF increased 45%, or $58 million, versus the prior period to a total of $187 million. Advertising revenues increased 52% for the quarter to a total of $210 million. A portion of this increase related to the inclusion of BBC AMERICA.

Excluding BBCA, advertising growth increased almost 40% over the prior-year period. AMC was the primary driver, as it benefited from the performance of its original programming, most notably Fear the Walking Dead. Results at WE tv, IFC and Sundance were also strong, with each network reporting double-digit growth over the prior-year period.

Distribution revenues at the national networks increased 20%, or $52 million to a total of $311 million versus the third quarter of 2014. Affiliate fee growth for the quarter was approximately 20% on a reported basis. Excluding the BBC AMERICA contribution, growth was in the low double digits. As we've highlighted on our previous calls, the core affiliate fee growth rate benefited from rate resets we achieved in connection with several of our recent renewals.

Distribution revenue growth for the third quarter also reflected a double-digit year-over-year increase in non-affiliate revenues, due principally to ancillary revenues from the digital and international licensing of our scripted, original programs, most notably The Walking Dead and Hell On Wheels on SVOD, as well as the international distribution of Fear the Walking Dead and Halt and Catch Fire. The timing and amount of some these items within our non-affiliate revenue stream resulted in approximately $5 million of upside relative to our expectations.

Moving to expenses. In the aggregate expenses in the third quarter were essentially in line with what we'd anticipated in early August when we reported our second-quarter earnings. Total expenses increased 25%, or $66 million versus the prior-year period. Excluding the impact of BBC AMERICA, expenses increased in the mid-teens compared to the third quarter of 2014.

Technical and operating expenses increased 21%, or $38 million compared to the prior-year period to $224 million. The year-over-year variance principally related to the impact of BBC AMERICA, as well as our continued investment in original programming across all of our networks.

In the quarter we recorded $12 million in charges primarily related to our decision to write off programming at Sundance and WE tv. This amount compares to write offs of $9 million in the third quarter of 2014.

SG&A expenses were $118 million in the quarter, an increase of 32% or $28 million versus the prior-year period. The increase primarily related to the consolidation of BBC AMERICA. As to the other domestic networks, AMC, WE, IFC and Sundance, marketing costs increased year over year due to the timing of originals, notably Fear the Walking Dead on AMC and several new shows on IFC, including Documentary Now.

Moving to our International and Other segment. Consistent with our expectations, revenues for the third quarter decreased $9 million to $114 million. AOCF for the third quarter decreased $6 million to a total of $7 million versus the prior year.

The decrease in revenues primarily reflected a $13 million negative impact from foreign exchange, as well as a year-over-year decline in our IFC Films business. The results at IFC Films reflected the absence of revenue related to the theatrical performance of Boyhood, which benefited the prior-year period. These declines were partially offset by an increase in revenue on a constant currency basis at our International networks. As for AOCF, the results in the third quarter reflected a negative impact of $3 million related to foreign exchange as well as an increase in programming rights amortization at AMC Networks International as compared to the prior-year period.

Moving to net income. Total Company net income from continuing operations for the third quarter was $73 million, or $0.99 per diluted share compared to $54 million, or $0.74 per diluted share in the prior-year period. Adjusted EPS for the third quarter of 2015 was $1.09 per diluted share, excluding the impact of amortization of acquisition-related intangibles. EPS and adjusted EPS for the third quarter 2015 included $8 million in miscellaneous expense related to foreign currency transaction losses and $3 million in restructuring charge.

In terms of free cash flow, the Company reported $252 million in free cash flow for the nine months ended September 2013. For the nine months tax payments were $146 million, cash interest was $98 million and capital expenditures were $49 million. Program rights amortization for the nine-month period was $526 million, and program rights payments were $616 million, resulting in a use-of-cash of $90 million. This compares to a use-of-cash for programming of $52 million for the prior-year period.

Turning to the balance sheet. As of September 30 AMC Networks had a net debt position of $2.4 billion. Our leverage ratio based on LTM, AOCF of $835 million was 2.9 times. When adjusted for consolidated entities that are less than 100% owned such as BBC AMERICA, this ratio increases slightly about 10 basis points.

In terms of capital allocation, we expect to continue to delever through a combination of AOCF growth and free cash flow generation. There continues to be no change in our strategy or approach to capital allocation. Primary focus remains investment in our core business, as we believe this will continue to allow us to grow AOCF on a sustainable basis and will generate the greatest return for our shareholders over the long term.

Looking forward, we remain optimistic about the outlook for the Company's performance. With regard to our quarterly performance, we anticipate continued variability as a consequence of the specific timing of our investment in content and the airing of our shows. In addition, as we mentioned on our last call, in the fourth quarter we will begin to lap the impact of the BBC AMERICA transaction.

At the national networks, in terms of advertising we expect solid growth in the fourth quarter on a year-over-year basis, driven by the timing of our programming lineup and increased pricing for our marquee series. With respect to distribution, in the fourth quarter we expect our normalized affiliate growth, that is excluding the impact of BBC AMERICA, to be in the double digits, broadly in line with the rate of growth we experienced in the fourth quarter of the year -- third quarter of year, excuse me. As for the non-affiliate revenue, we anticipate continued year-over-year growth in the fourth quarter, but similar to prior periods we expect a sequential decline in terms of absolute dollars relative to the third quarter, due to the timing of the availability of content.

On the cost side we expect to see an increase in the year-over-year growth rate and expenses as compared to the first nine months of the year, due most notably to an increase in programming and marketing, given the timing of the airing of our shows. These factors in aggregate are expected to impact the AOCF growth at the national networks for the fourth quarter, subject to the current advertising market including scatter, as well as the premier of some of our upcoming originals.

For the full-year 2015 we continue to expect broadly stable AOCF margins at the national networks. At our International and Other segment, fourth-quarter revenue and AOCF are expected to be relatively flat with the prior period, as foreign currency headwinds are anticipated to be largely offset by growth in the underlying business. As for 2016, we'll have more to say on our next call but we feel good about how the business is positioned.

So with that, we'd like to move to the question-and-answer portion of the call. Operator, if you could please open the call for questions?

Certainly.

(Operator Instructions)

Michael Morris, Guggenheim Securities.

Thank you. Good morning, guys. Two questions. First, Josh, you addressed The Walking Dead ratings a bit. But there's clearly some sensitivity in the marketplace about how audience -- perhaps some audience decline could impact the value of the Company. So can you talk a little bit more about maybe how the audience is relative to your initial expectations and your thoughts on the sensitivity of the value of the Company relative to that particular program. And then I have a follow-up on subscribers.

Sure. So we are overall, Mike, pleased with The Walking Dead. Perhaps not surprisingly, it remains the biggest show on television in season 6. We treat The Walking Dead in the broadest sense as a franchise, and although of course it's a TV show, we try to think franchise.

And that has led us to a few things that I think are important. Number one, a insistent focus on creative excellence, which happily all the people involved have, I think, over-delivered on. And I think the world would sort of agree.

And the notion of franchise, I feel just in response to your question, compelled to say that led us to Fear the Walking Dead. And as I mentioned in my prepared remarks, it's sort of delicate to do what is commonly called spinoff in television. They have a checkered history. We tried not to look at it as spinoff. We really tried to respect the world created by the creators and to make it as rich, as sustainable, as enduring, and as character-driven as possible. And I actually think that the groups involved really achieved that. So it broadly -- Walking Dead met our expectations and is meeting our expectations. You're familiar with the numbers.

And Fear the Walking Dead, we were extremely pleased with. We think it's creatively, all I can say is excellent, and its reception was superb, and some of that's reflected in the numbers. So we look forward to treating it with care, with a clear-eyed view toward how things play out in the world. And we had expectations that it has a good life, a very good life. And the important thing for us to do is to treat it as carefully as we can. And so that's my best answer to your question.

Thanks, Josh. And then with respect to the subscriber numbers that you provide in your press release, they come from Nielsen. We know that that may differ from what you're seeing, but can you talk a little more about that? I mean, it looks like AMC Network had a 2% decline in its subscriber base over the past year. Is that consistent with what's driving your financial performance? Thanks.

Mike, the broader subscriber question, if I may, is probably really what you're, I think, asking about. And as you know better than me, this quarter was a better quarter for the MVPD universe writ large than the prior one. We're obviously participants in that. It's a nice change to see in terms of trend.

The specifics for each of our channels differ a bit. The each have differing levels of penetration against what is commonly called the full available basic universe. And so we're pleased with the trend that was stabilized over the past 90 days. It is important to us, and we have of course views of it as we go forward and we try to make those views conservative, reasonable and to invest appropriately against them.

Thank you, Josh.

Anthony DiClemente, Nomura Securities.

Hi, thanks a lot. Good morning. Hope you guys are doing well, better than we are after a week like this. I have two questions for Josh -- one for Josh and one for Sean. Josh, just a follow-up on those subscriber numbers.

I presume that Sling TV and Sony PlayStation View that those online video distributor subscribers are not included in the Nielsen numbers? Can you guys just maybe confirm that?

And then just more broadly, can you talk about your learnings in terms of your participation in Sling TV and PlayStation View, and what you see in terms of the future of online video distribution or online bundles, if you will? And then I'll follow up with Sean after. Thanks.

Sure, Anthony. So on the second part of your question first, we are participants in both Sling and Sony's activities. We think that they are adjacent to and ultimately consistent with a bundled approach to the video world that we're in, and so we did choose to participate in them. And our view is to continue to participate in like-minded and like-structured multi-channel video offerings from our current distributors and potentially from new ones, depending upon their effectiveness. So we like that.

I actually -- I am going to refer you to Nielsen to give you a defined answer on their sampling, their count, their methodology and their manner. I would not want to be a surrogate and speak for their methodologies. So we, like everyone else, participates in Nielsen calculations. And I just would refer you to them for questions about methodology, projection, inclusion and exclusion, if you don't mind.

Will do. Very fair enough. And then for Sean. The Company and you have done an excellent job in delivering those broadly stable margins that you talk about this year in 2015. Of course, investors care about that trajectory as we start to think about 2016. And so I wonder what you can tell us about that at this early stage?

And as part of the question, my assumption on The Walking Dead is that because it's an AMC-owned property, the amortization of that is matched on an accounting basis with the revenue generated from Walking Dead. So as opposed to straight-line amortization, it would be accelerated, which I think even in the case of a revenue decline for Walking Dead, would argue for margin stability into 2016 and 2017. So can you help us and investors with, or clarify or confirm that assumption? Thanks, Sean.

Sure, Anthony. So on the second part of your question, yes, The Walking Dead, just like Fear The Walking Dead, are owned. We do do the ultimate method of accounting on owned originals, as articulated in our public filings. So the matching of the revenue and the amortization of that is occurring in those shows. So I'll allow you to conclude, as you may, I think the trends, the historical trends, shouldn't necessarily differ from the future. But again, there is a revenue attribution element to it.

As it relates to, again, the broadly stable margins. I commented about the fourth quarter. I think this management team has been consistent in our articulation of how we view the business, how we view the investment in content, and the impact of the timing and premier of shows. And how that may impact any margin in a particular 90-day period. I think that should inform your view of 2016. But I'm certainly not going to comment further about what it looks like at this point.

Great. Thank you very much.

Michael Nathanson, MofettNathanson.

I have two for Josh on strategy. Josh, I know how much you enjoy Rectify and you've talked about Rectify. When you look at it, how it debuts on Sundance, the ratings are pretty low given the quality of the show. So I know your strategy about building other networks, but do you ever rethink the strategy of launching shows on AMC main network, kind of build awareness, and then put them down to Sundance? Because it seems like you're not getting the lift on shows like that that they probably deserve?

Yes. I think I'll respond and Ed can too because he has engineered some unique things between our shows, and actually we have -- it's a good question. It is, of course, a challenge that we deal with. We have shows that we think are extremely strong. And some of them don't, frankly, meet our ratings expectations and it does provoke questions about platform, platform strength, exposure.

I will just say broadly, and I'll turn it over to Ed, we have thought that it is very wise, at minimum, to experiment and actually go further and try and do everything from premiering online to utilizing our other channels for simultaneous premieres in order to boost exposure and sampling and create opportunity. Ed has actually engineered a couple of things that you may want to hear about.

Yes, Michael. I'll just add we did develop Rectify with Sundance Channel in mind, frankly. We're not sure that Rectify would be deemed a broad enough show for AMC's audience. And the cost structure of Rectify complemented that thinking.

The other point I will make is one that you raise, which is cross-promoting on our networks is something we look to do. You probably don't recall, but we premiered Rectify, we dual-premiered it on AMC and on Sundance, actually coming out of an episode of Mad Men. And we have since stunted episodes of Rectify on AMC for just that purpose, to raise its profile and to bring audience over to sample Sundance Channel.

But the ratings didn't hold up as much as you probably thought over the summer given that, right? It is strange how it ended, given the quality of the show.

Yes. Look, I think the ratings for Rectify, Sundance has a smaller universe but the ratings for Rectify are strong enough to justify a season 4. We think it does a lot to raise the channel's profile. It's a very upscale show. We know advertisers like it. And it's really, when you see Sundance included in the list of top 10 -- Rectify included in the list of top 10 series for the year on many critical lists, it's really done a lot to raise the profile of the Sundance Channel.

Okay.

It's interesting, Michael, not to take up too much -- it's a subject we like. So we -- I hope we don't bore you and everyone else with a long response to it. But it is -- I will answer slightly more broadly. The sort of -- a little bit of the history of TV has sometimes shows that have a life that pops when it is least expected. It is not common, but it does occur. There are examples of shows that in their secondary life become revered and actually live more greatly than their first life.

I can point to nothing on our air, but I think Friday Night Lights when it went into its odd sharing arrangement on network television and DirecTV probably got more attention. And I don't know exactly what happened to the ratings, but it sort of had a resurgence of interest.

So we continue to toy with what we can do when we have quality material and how we can boost it. And it does inform a lot of where we think opportunities go as people view on, I mean it, new devices, new ways. As things that are in a so-called digital library for the increasing on-demand capability of cable television can be meaningful, as well as SVOD.

It's a rich area -- I'm going to take up too much time and irritate everybody on the call with too much on this, except to say it's a subject we like a lot. We think about, and we think that great content probably has more upside than it may even be -- then the system may be acknowledging today.

Thank you, Josh. Thank you, Ed.

Todd Juenger, Sanford Bernstein.

Hi, good morning. I suspect the question I am going to tee up may also elicit a longer than usual response, so I'll probably just keep it to this one. The topic of SVOD, which you just mentioned, has been an important and much debated topic for many years. As I'm sure you're aware, it's back front and center this week and especially yesterday. There are those who hold a philosophy that says maybe the industry should rethink about how quickly they are willing to put shows onto that window or platform and that maybe thinking about creating a longer delay, if those shows show up there at all, in an effort to, I think, increase the perceived or actual value of the linear view.

On the other hand, your particular franchises and networks, I think, can point as evidence that in your case, I think you believe that SVOD has in many cases helped the performance of your shows in your linear network. So given this change and given changes made by big strategic players this week, I would love your current thoughts on how you think about the SVOD window. How you think about the trade-offs between putting content there soon versus later versus putting content in other on-demand places. I told you it'd be a long answer. It was actually a very long question. Sorry about that. I would love to hear your thoughts. Thanks.

So thanks. Obviously it's a good question, Todd. And we have been fairly consistent in our thinking since we engaged in SVOD exploitation. When we first considered it, we thought it was wise to balance, to say it's simply time and money. And so we created a year, more or less, delay between our linear premier and SVOD availability. At the time that was considered very conservative. A number of our brethren were making material available 24 hours later, seven days later, two weeks later.

We resisted that and we were steadfast in insisting on that year, to some degree to our detriment perhaps economically. Because we thought it was highly appropriate and strategic to balance time, availability and money. So we think that what we arrived at was largely right in an environment and against a backdrop that was clearly emerging and was unknowable. And what we saw was that in some instances we think we got a benefit in terms of increased exposure, which resulted in increased linear ratings. And one could have a long discussion about every other effect that may have occurred or be occurring.

Our view today is that our approach was a measured one and an appropriate one. I don't know if perfect is an available answer. And I like to think that we resisted some of the activities of others, which included a lot of rapid movement from one day, to a week. To no, I am not doing it. To no, I am doing it. To no, I am only doing library. To no, I'm not doing library. I'm not doing new. And we've been consistent in what we've done, and we've watched the data. And we think our approach is appropriate.

We'll obviously continue to monitor it. People's behavior is -- and their perceptions, and their perceptions of value are emerging as SVOD proliferates, as cable TV so-called prices and packaging change. And we'll monitor it. But we think for today we are engaging in it appropriately.

Thanks. If you don't mind, I do have a very quick follow-up. If you could just remind us, the new output deal with Hulu Plus, I guess I'll call it new. Remind us what you've said about how long that lasts and what is defined in that in terms of content availability and windowing? I am sure it's rather complicated, but a simplified answer, if you can give one, would be great. Thanks.

I would just say broadly there was a window and hold-backs are consistent with what they were in the Netflix deal. And we won't say, and we've never said, how long the deal lasts. We did say that Fear of The Walking Dead is the first show in it. And then a number of the scripted series that come from the networks will fall into it as well.

Excellent. Thank you, guys.

Vasily Karasyov, CLSA.

Thank you. Good morning. I think my question is for Ed and Sean. Can you please help us understand the correlation with your ratings, especially for you marquee shows, and advertising revenue growth? I don't think you ever had to call out [made-goods] since you became a public company. And yet you benefit from ratings that one would say are higher than base case assumptions going into it. So how correlated those revenues are? And, say 10%, 20% decline in life plus [end day] for a couple of episodes of The Walking Dead, how impactful is it on the top line?

This is Ed. It's hard to directly correlate. I would say we've done a pretty good job of estimating our shows. There is an art to it and we have a model, and we look at a high end and a midrange and a low end in terms of new premieres and in terms of returning series. And I think our track record has been pretty good.

One of the things that's very helpful, and we look at the BBC acquisition, is we now have a stable of more scripted shows. Many of them appeal to affluent audiences. And we're able to work with advertisers to move impressions around. And I think we've done a good job at that.

And then the last point I would make is on CPMs. I think our sales force has done an excellent job of growing CPMs. And you mentioned The Walking Dead. Its unique appeal to 18 to 49s, and a subset of that 18- to 34-year-old males looks much, much stronger by comparison, as other networks have had trouble appealing to and holding that audience. So that's the best indication of the factors I can give you that correlate.

And if you look at the past quarter, the September quarter, would you be willing to give us color on volume versus pricing, growth drivers for advertising revenue in the quarter?

I don't think we'll get into one factor versus another in specifics.

Yes, I didn't -- well, thank you very much.

Ben Mogil, Stifel.

Thank you for taking my question. One on a follow-up on Todd, and then new question. The follow-up to Todd's question was about the holdback and the windowing. I'm curious, when you look that has the ad supported and you at Netflix that's not, I see which ones you have a preference for. I'm curious you reviews on how you think about different shows on different of those two services and retraining the customer to see advertising.

And as a follow-up to that, you have had -- FX has been out there saying there's almost too much TV out there. There's obviously a ton of scripted programming out there on all the platforms. Curious how you think when you look into 2016 and the new shows your launching, how you cut through the clutter, if you will? Thanks.

So I think I can answer it, that I think as Ed mentioned, I think we think broadly of Netflix and Hulu similarly in that they're SVOD services. They have different, obviously, United States distribution. Netflix being substantially bigger and the moment. And that itself has potential implications that we'll monitor over time that are probably obvious. It's bigger and more widely available. You could argue that that will be good or bad, depending upon what you're trying to accomplish.

The nature of the services, I don't thin, have, in terms of their construction have by themselves necessarily meaningful impact on who and what they are and how it affects our channels. So I think probably distribution size or degrees of ubiquity or lack of it are probably more important.

On the subject of the so-called landscape, and being meaningful in the landscape, which is somewhat different than it was, for instance 8 or 10 years ago when we launched open-ended scripted programming, and we were among the first, if not the first to do it on basic cable in the manner that we did. Indeed, there are more entrants in it. And that does cause everyone, including ourselves, to think about what matters and how you get found and how you're meaningful, and what makes you attractive.

It's an interesting question because it -- at it's -- a spasmodic reaction is to retreat and to go with the familiar. And that probably has a degree of merit, meaning if you are extending a franchise, as we are, you begin with a leg up because the characters or the world is known and you can take advantage of that. And indeed, we have. And indeed, we do and indeed we will. We did it with Walking Dead, Fear the Walking Dead and Better Call Saul.

I think at the same time these increasingly selective consumers are very aware, they're smart and they're talking more and more and more about what's good on TV. And so a liability is that you're up against more entrants and a benefit is that you've got a tuned-up consumer population that's discussing it more in social conversation than they might have been in the past. And that's a damn rich opportunity.

So we premiered Humans -- so Doctors Who comes back superstrong, The Walking Dead is doing extremely well. Fear the Walking Dead premiers very strong. Better Call Saul surpasses many people's expectations. And Humans comes into the fray and does extremely well. What does that mean? It means it's good. It probably means it has points of accessibility, but it means it's good.

So we look at it as both a challenge and a huge opportunity because you're playing to an extremely interested audience. And you've got to get it right. And so we spend an awful lot of time, attention and energy getting it right in source material, in creative development, in the manner in which we market and introduce material. And in its perception of distinctiveness. Sorry, that's a vague answer. That's just how we approach it. But I will tell you, there's as much upside as there is challenge in the environment.

No, that's a very fair answer. I think your comments on the engagement are very interesting. Thanks again, Josh.

Yes.

Alexia Quadrani JPMorgan.

Thank you. Just a quick question for -- maybe not quite, but for Josh. I know you -- no one has a crystal ball, but you obviously have a lot more insights than we have here.

If you were to fast-forward a few years out, how do you see your revenue mix differently in the sense that do you think a notably larger amount comes from nontraditional subscription fees, such as a Sony or the Sling, et cetera, the over-the-top providers versus traditional cable? Or are you in the more on the camp where you don't see the ecosystem really changing that quickly?

I guess Alexia, the first thing I might say is to point to the past, if I may just for a second, and point out we did in my prepared remarks, that a dramatically increased percentage of our revenue now comes compared to the past, not from United States advertising or affiliate fees at all. It comes from international channels that we operate around the globe. And it comes from the exploitation of content that we now operate, which effectively makes us, the common word is studio.

So we have diversified our revenue mix dramatically over the past 24 and 36 months. It actually does look at all like it used to look.

In terms of the more specific question you asked about, I think you meant -- you were talking about domestic conventional, if you want to call them, MVPDs by which we might include satellite, cable and telco versus the newer entrants. It's a little hard to know. If your time frame is two years, I would say it's not dramatically different from how it looks today. We'll learn an awful lot from the entrants who are extending, who are incumbent and extending their distribution outside of their current format, and from the new entrants. I think to date it probably looks like it's slightly additive, but not moving all that fast.

All right. Thank you very much.

Operator, why don't we take one last question, please?

Ryan Fiftal, Morgan Stanley.

Thank you. Good morning. I have one for Josh and one for Sean, if I can squeeze them here at the end. Josh, going back following up on The Walking Dead. Lives plus three ratings have been down double-digits, but Nielsen doesn't capture all of the monetized viewing. So is there anything else you could share on performance of any other types of monetized viewing outside of those first three days that we might be missing as outside of the servers?

And in the same vein, maybe rough order of magnitude, how should we think about how monetization fades as you go from the first three days to seven to maybe later VOD viewing?

I'm not sure that it is -- I'm going to offer you any incremental insight beyond what is available today. You have all the statistics. We see meaningful viewership in the three days afterwards.

You see the relationship between live same day and C3. You see the relationship between live same day and C7. Increasingly some of the broadcasters and others are paying a lot of attention to that. So that's what's in evidence. So really, you see what we see. It is certainly a strong show in every regard. And all of that benefits its strength and its momentum and its monetization.

Okay, thank you. And then Sean, I think you reiterated a broadly stable margin guide for a national networks. I guess, I'm just bluntly -- I mean, how broad is broad? I think year-to-date margins are up 400 basis points. And you sounded positive about top-line growth in 4Q. So I'm struggling to understand how margins could be stable this year. Thank you.

Right. So Ryan, I think, I'll guide you back to the comments I made. As you know, or just to reinforce, we have a new show premiering in the fourth quarter, Into the Badlands. And obviously some meaningful marketing spend against that as we launch the show. So that's what I'm guiding to.

There's variability quarter to quarter based on the timing and the dollars relative to it. So I think our past experience and our past results, hopefully are guiding how we're managing the business, how you should be viewing our financial results and the variability that will occur.

Thank you.

Well, thank you everyone for joining us on today's call and for your interest in AMC Networks. Operator, you can now conclude the call.

Thank you for participating in today's conference. You may now disconnect.