Time Warner Inc (TWX), DISH Network Corp. (DISH): Will The Walking Dead Spin-off Boost AMC Networks Inc (AMCX) Further?

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Just as new content ideas seemed to be in question at AMC Networks Inc (NASDAQ:AMCX), management for the cable television leader recently announced a companion/spin-off series for the monster hit The Walking Dead. While much is still unknown about the drama series at this point, the potential implications for investors are huge and should not be ignored.

Historical success

In order to fully digest the impact that a new series based on The Walking Dead universe could have on AMC Networks Inc (NASDAQ:AMCX), investors first need to understand the massive success of the original zombie hit. To put it bluntly, The Walking Dead is the most watched show in the history of cable television, as the last episode aired to a record-breaking 12.4 million viewers in April. The only drama series that recorded higher viewing numbers was Time Warner Inc (NYSE:TWX)’s HBO program The Sopranos, which generated in excess of 13 million viewers on stand-alone episodes. However, it is important to recognize that HBO is considered a premium cable and satellite television network while AMC is considered basic cable.

AMC Networks (AMCX)

The success of The Walking Dead has been extremely beneficial to AMC Networks Inc (NASDAQ:AMCX). The series, along with current favorites Breaking Bad and Mad Men, has increased the popularity of the AMC channel significantly and made it a go-to destination for original, scripted drama. This is important mainly because it gives AMC Networks leverage when negotiating with cable/satellite providers, essentially allowing the company to bundle its weaker channels like IFC and Sundance with its much stronger channels AMC and WE tv.

The importance of this leverage cannot be overstated, as the company’s dispute with pay-television provider DISH Network Corp. (NASDAQ:DISH), which represents approximately 13%  of AMC Networks Inc (NASDAQ:AMCX)’s total subscriber base, illustrated last year. Although the companies did reach an agreement, the blackout of channels took several months to resolve and affected millions of customers across the nation, all while pressuring shares of AMCX and creating a great deal of uncertainty for investors. The fact that the settlement ended up costing DISH Network Corp. (NASDAQ:DISH) $700 million  likely means another blackout will try to be avoided going forward.

However, the dispute demonstrates just how much power the cable/satellite providers wield over content-creators like AMC Networks Inc (NASDAQ:AMCX) and Time Warner Inc (NYSE:TWX). Therefore, any strengthening of the company’s premium network brands means added protection for investors and extra ammunition for management in the event of any future legal disputes.

New content, same effect

While spinning off a popular series in hopes of duplicating its success may seem like a creative sell-out to some, the move should be celebrated by investors. The new show will compound the success of the original series, expand the zombie universe to include new viewers and reduce the company’s dependence on the original show.

The series spin-off is being produced by Robert Kirkman, who wrote the comic that inspired The Walking Dead and has been behind the scenes of the show ever since. His involvement should help AMC develop another successful zombie-based series and also help incorporate the new show with the original in unique and inventive ways. Additionally, a new set of characters and a change in location will undoubtedly allow the series to appeal to new viewers. However, an equally important aspect of a new entry into The Walking Dead universe is that it would take some of the pressure off of the original show. Despite managing to still perform incredibly, the show is also entering its fourth season and could be getting a bit long in the tooth.

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